<PAGE>
As filed with the Securities and Exchange Commission on September 10, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 7375 51-0384117
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
Stefan-George-Ring 19-23
D-81929 Munich
Germany
+49-89-993-150
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Andreas Eder
Chairman of the Board of Directors,
President and Chief Executive Officer
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
81929 Munich, Germany
+49-89-993-150
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
Copies To:
Michael H. Chanin, Esq.
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Ave., NW
Washington, DC 20004
(202) 347-0066
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Title of each class of Amount maximum maximum Amount of
securities to be to be offering price aggregate registration
registered registered per note offering price fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14.0% Senior Notes due
2009.................. $150,000,000 100% $150,000,000 $41,700
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f) under the Securities Act of 1933, as amended.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in the prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED SEPTEMBER __, 1999
[CYBERNET LOGO APPEARS HERE]
OFFER TO EXCHANGE
any and all outstanding
14.0% Senior Notes due 2009
($150,000,000 aggregate principal amount outstanding)
for
14.0% Senior Notes due 2009
of
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
-----------
TERMS OF EXCHANGE OFFER
. Expires 5:00 p.m., New York City time, , 1999, unless extended.
. Not subject to any other condition other than that the Exchange Offer does
not violate applicable law or any applicable interpretation of the Staff
of the Securities and Exchange Commission.
. All Outstanding Notes that are validly tendered and not validly withdrawn
will be exchanged.
. Tenders of Outstanding Notes may be withdrawn any time prior to 5:00 p.m.,
New York City time, on the date of the expiration of the Exchange Offer.
. The exchange of Notes will not be a taxable exchange for U.S. federal
income tax purposes.
. We will not receive any proceeds from the Exchange Offer.
. The terms of the Exchange Notes to be issued are substantially similar to
the Outstanding Notes, except for transfer restrictions and registration
rights relating to the Outstanding Notes.
. We intend to list the Exchange Notes on the Luxembourg Stock Exchange.
-----------
See "Risk Factors" beginning on page 18 for a discussion of certain matters
that should be considered by prospective investors.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or passed upon the adequacy
or accuracy of the disclosures in this prospectus. Any representation to the
contrary is a criminal offense.
-----------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Currency and Financial Statement Presentation............................ ii
Information Regarding Forward-Looking Statements......................... ii
Summary.................................................................. 1
Risk Factors............................................................. 18
Use of Proceeds.......................................................... 38
Exchange Rate Information................................................ 39
Price Range of Common Stock and Dividend Policy.......................... 40
The Exchange Offer....................................................... 41
Capitalization........................................................... 48
Selected Consolidated Financial and Operating Data....................... 49
Unaudited Pro Forma Consolidated Financial Statements.................... 51
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 56
Quantitative and Qualitative Disclosures About Market Risk............... 72
Business................................................................. 73
Information Regarding Significant Subsidiaries........................... 90
Management............................................................... 91
Related Party Transactions............................................... 98
Stock Ownership of Principal Beneficial Owners and Management............ 99
Description of the Exchange Notes........................................ 101
Description of Material Indebtedness..................................... 136
Certain United States Federal Income Tax Consequences.................... 137
Plan of Distribution..................................................... 142
Legal Matters............................................................ 143
Independent Accountants.................................................. 143
Available Information.................................................... 143
Listing and General Information.......................................... 144
Glossary of Terms........................................................ 146
Index to Financial Statements............................................ F-1
</TABLE>
The Exchange Offer is not being made to, nor will we accept surrenders for
exchange from, holders of Outstanding Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
No dealer, salesperson or other individual has been authorized to give any
information or make any representation not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Company. This prospectus does not constitute an offer or a solicitation
in any jurisdiction where, or to any person to whom, it is unlawful to make
such offer or solicitation. Neither the delivery of this prospectus, nor any
distribution of securities made hereunder shall under any circumstances, create
any implication that there has not been any change in the facts set forth in
this prospectus or in the affairs of the Company since the date hereof.
The securities may not be offered or sold in or into the United Kingdom
except in circumstances that do not constitute an offer to the public within
the meaning of the Public Offers of Securities Regulations 1995. All applicable
provisions of the Financial Services Act 1986 must be complied with in respect
of anything done in relation to securities in, from or otherwise involving the
United Kingdom.
We confirm, having made all reasonable inquiries, that this prospectus
contains all information which is material in the context of the exchange of
the Notes, that the information contained herein is true and accurate in all
material respects and is not misleading in any material respect, that the
opinions and intentions expressed herein are honestly held and that there are
no other facts the omission of which would make any of such information or the
expression of any such opinions or intentions misleading in any material
respect. The Company accepts responsibility accordingly.
i
<PAGE>
CURRENCY AND FINANCIAL STATEMENT PRESENTATION
In this prospectus, unless otherwise specified or unless the context
otherwise requires, all references to "Deutsche Marks," "DM" and "Pfennigs" are
to the lawful currency of the Federal Republic of Germany, all references to
"Lire," "Lira" and "Lit." are to the lawful currency of Italy, all references
to "Austrian Schillings" and "ATS" are to the lawful currency of Austria, all
references to "Euro" and "(Euro)" are to the lawful currency of the countries
of the European Monetary Union, and all references to "U.S. dollars," "dollars"
and "$" are to the lawful currency of the United States. Amounts stated in
dollars, unless otherwise indicated, have been translated from Deutsche Marks,
Lire, Austrian Schillings or Euro at assumed rates solely for convenience and
should not be construed as representations that the Deutsche Mark, Lira,
Austrian Schilling or Euro amounts actually represent such dollar amounts or
could be converted into dollars at the rate indicated or any other rate. Except
as otherwise indicated in this prospectus, such dollar amounts have been
translated from Euro to Deutsche Marks at the rate of (Euro)1.00 = DM 1.9558,
from Euro to Lire at the rate of (Euro)1.00 = Lit. 1,936.27, from Euro to
Austrian Schillings at the rate of (Euro)1.00 = ATS 13.7603 and from dollars to
Euro at the rate of $1.00 = (Euro)0.9363, the noon buying rate in The City of
New York for cable transfers in foreign currencies as certified by the Federal
Reserve Bank of New York for customs purposes (the "Noon Buying Rate") on
August 3, 1999. You should read "Exchange Rate Information" for information
regarding recent rates of exchange between the U.S. dollar and the Deutsche
Mark, between the U.S. dollar and the Austrian Schilling, between the U.S.
dollar and the Lira and between the U.S. dollar and the Euro.
Unless otherwise indicated, financial information in this prospectus has been
prepared in accordance with generally accepted accounting principles in the
United States.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements. These statements can often be identified by the use of forward-
looking terminology such as "estimate," "project," "believe," "expect," or
"anticipate" or the negative of such terms or other variations on such or
comparable terms, or by discussions of strategy that involve risks and
uncertainties. These forward-looking statements include statements concerning:
(1) the strategies for our business;
(2) our anticipated growth of the communications and information services
industry;
(3) our plans to devote significant management time and capital resources
to our business;
(4) our expectations as to funding capital requirements;
(5) our anticipated dates on which we will begin to provide certain
services or reach specific milestones in our business strategies; and
(6) other expectations, beliefs, future plans, anticipated development and
other matters that are not historical facts.
You should be aware that these forward-looking statements are not historical
facts and are subject to risks and uncertainties, including financial,
regulatory environment, changes and growth in the Internet and
telecommunications industry and the general economy, changes in product and
services offerings, risks associated with our limited operating history,
managing rapid growth, acquisitions and strategic investments, dependence on
effective information and billing systems and trend projections. Any of these
factors could cause actual events or results to differ materially from those
expressed or implied by the statements. We cannot assure that such results
expressed or implied by the statements will be achieved, or that, if achieved,
such results will be indicative of the results in subsequent periods. The most
important factors that could prevent us from achieving our stated goals include
the risks that we will not:
(1) achieve and sustain profitability from the creation and implementation
of our Internet Protocol based communications network;
ii
<PAGE>
(2) overcome significant early operating losses;
(3) produce sufficient capital to fund our business strategies;
(4) enhance financial and management controls;
(5) attract and retain additional qualified management and other personnel;
(6) negotiate peering agreements; and
(7) make acquisitions necessary to expand our network, products and
services and to implement our strategies.
For a discussion of certain of these factors, see Risk Factors beginning on
page 18.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED HEREBY,
THROUGH PORTAL OR OTHERWISE, AT LEVELS WHICH MIGHT NOT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
YOU SHOULD READ "PLAN OF DISTRIBUTION" FOR A DESCRIPTION OF THESE ACTIVITIES.
GLOSSARY
This prospectus contains a number of technical and industry-related terms
that may not be easily understandable by all readers. We have provided
definitions for certain of these terms in a glossary which begins on page 146
of this prospectus.
iii
<PAGE>
SUMMARY
This summary highlights some information from this prospectus. It may not
contain all of the information that may be important to you. For a more
complete understanding of the Exchange Offer, we encourage you to read the
entire prospectus and the documents we have referred you to.
We began our operations with the formation of Cybernet Internet
Dienstleistungen AG ("Cybernet AG"), a privately held German stock company.
Cybernet AG was organized in December 1995, and commenced significant
operations in 1996. On September 17, 1997, Cybernet AG was acquired by Cybernet
Internet Services International, Inc., a Utah corporation, organized on
September 27, 1983 ("Cybernet Utah"). At the time that it acquired Cybernet AG,
Cybernet Utah had no material business activities, assets or liabilities.
Effective November 18, 1998, Cybernet Utah was merged into Cybernet Internet
Services International, Inc., a Delaware corporation ("Cybernet Delaware"), and
the Delaware corporation is the surviving entity of the merger. On June 30,
1999, we consummated our acquisition of all of the issued and outstanding
capital stock of Flashnet S.p.A. ("Flashnet"), a leading Internet Service
Provider ("ISP") based in Rome, Italy. The terms "Company," "Cybernet," "we,"
"us" and "our," as used in this prospectus, refer to Cybernet Delaware and its
subsidiaries as a combined entity, except where its use is such that it is
clear that such term means only Cybernet Delaware.
The Exchange Offer
On July 8, 1999 we completed a private offering of 150,000 Units (the
"Units"), each consisting of $1,000 principal amount of our 14.0% Senior Notes
due 2009 (the "Outstanding Notes" or "Senior Notes") and one Warrant (a
"Warrant") to purchase 30.2310693 shares of our common stock (the "Unit
Offering"). On the same day, we entered into a registration rights agreement
with the initial purchasers in the Unit Offering in which we agreed, among
other things, to deliver to you this prospectus and to complete this Exchange
Offer within 180 days of the issuance of the Outstanding Notes. You cannot
tender the Warrants issued as part of the Unit Offering for exchange. You
should read the discussion under the heading "Summary Description of the
Exchange Notes" and "Description of the Exchanges Notes" for further
information regarding the registered notes.
We believe that the notes issued in this Exchange Offer (the "Exchange Notes"
and, together with the Outstanding Notes, the "Notes") may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, as amended, subject to certain conditions. You
should read the discussion under the headings "Summary of the Terms of Exchange
Offer" and "The Exchange Offer" for further information regarding the Exchange
Offer and resale of the Notes.
The Company
Through our subsidiaries, we are a leading provider of Internet
communications services and solutions in Germany, Austria, Italy and
Switzerland targeting small- and medium-sized enterprises. Our Internet
protocol ("IP") solutions are based on a core product offering consisting of
Internet connectivity and value-added services. Such value-added services
include virtual private networks ("VPNs"), web-hosting, co-location, security
solutions, electronic commerce, Intranet/Extranet and workflow solutions. We
offer consulting, design and installation, training, technical support, and
operation and monitoring of IP-based systems. We market our products and
services primarily to small- and medium-sized enterprises in Europe because we
believe that they represent an underserved and sizeable market. Companies in
this market are characterized by a lack of internal technical resources,
rapidly expanding communications needs and a high propensity to utilize third-
party outsourcing. We are recognized as a provider of high quality Internet
connectivity services and solutions to
1
<PAGE>
enterprises and as one of Germany's leading Internet access providers.
Recently, IT Services, a leading German computer magazine, ranked us number one
among German ISPs in terms of infrastructure, international outlook and
customer service.
Our mission is to become a leading European provider of IP-based
communications services and network-based business solutions. We intend to
continue to focus on small- and medium-sized enterprises in Europe,
offering a full portfolio of advanced communications products, including
Internet access and value-added services.
We believe that our capabilities in Internet, telecommunications and systems
integration services differentiate us from many of our competitors who offer
some, but not all, of the products and services that we offer. We approach and
win business customers by offering and designing a full range of services and
solutions for mission critical communications needs, such as electronic
commerce solutions, Intranets and VPNs. This enables us to work directly with
different levels of our customers' organizations, to participate in the design
of customers' systems and to offer additional network and communications
services as our customers' businesses grow and their needs change. By basing
our solutions upon product modules, we are able to meet our customers'
individual needs at competitive prices, while realizing higher margins by
reducing costs through standardization. Also, as a result of the high quality
of our services and the value-added nature of our solutions, we believe that we
experience higher customer retention rates and that we are less vulnerable to
pricing pressures than many of our competitors in the telecommunications and
Internet industries.
We sell our services and solutions primarily through our direct sales force.
Most of our sales people are based in regional offices and are supported by
specialized technical and commercial assistance from our customer care centers
in Munich, Vienna, Zurich and Trento. We complement our direct sales effort
with an extensive reseller and referral network of over 100 companies and by
forming marketing alliances with technology leaders such as Hewlett-Packard,
Microsoft, Network Associates and Sun Microsystems. While our reseller
arrangements begin with sales of our basic product offerings, such as
connectivity, they can lead to direct sales by us of more complex solutions,
such as security solutions or VPNs.
We operate a geographically distributed IP network based upon leased lines.
Our network is spread over six countries and consists of network nodes equipped
primarily with Cisco and Ascend routers connected to a redundant high-
performance backbone infrastructure. We help corporate customers reduce
telecommunications costs by offering Internet connectivity through dedicated
lines at more than 56 directly owned Points of Presence ("POPs"). We also offer
a system of dial-in nodes with ISDN or analog modem ports to smaller
enterprises, employees and affiliates of corporate customers. These nodes
permit local dial-in access throughout Germany, Italy and Switzerland and most
of Austria. Flashnet owns 20 of these POPs for dedicated lines (which can also
accommodate dial-in traffic) and has access to more than 300 dial-in access
nodes. Recently, we reorganized our dial-in network in Germany by concentrating
multiple dial-in access nodes into larger access points called "Virtual POPs,"
which use a Public Switched Telephone Network ("PSTN") to aggregate traffic. We
expect this will generate operating efficiencies, in that there will be fewer
overall nodes to service. We are expanding our network across Germany, Austria,
Italy and Switzerland by installing additional POPs and replacing dial-in
access nodes with Virtual POPs.
We also plan to add digital circuit switching capabilities to our network to
offer voice telecommunications services to our customers, capture more revenues
from dial-in traffic and provide termination services to other carriers.
We have increased our revenues from $0.3 million in 1996 to $8.6 million in
1998 ($17.4 million pro forma for acquisitions, including Flashnet). As of
March 31, we provided services to approximately 10,800 business customers, an
increase from approximately 200 customers at December 31, 1996. The majority of
these customers are small- to medium-sized enterprises. We also provide
services to larger
2
<PAGE>
companies and organizations such as BASF Corporation, German Parcel,
Commerzbank, Hewlett-Packard, Start Media Plus, DaimlerChrysler Aerospace
Dornier, BMW Financial Services, Raiffeisenbank, Zuegg, Honeywell, Lauda Air,
Modern Times, Amadeus, Lufthansa and News. As of March 31, 1999, including
customers obtained through resellers, Flashnet had approximately 1,600 business
customers and 38,000 residential customers, including large organizations such
as Nokia Italia, ERG, Avis, Ferrovie dello Stato (Italian Railways) and the
Italian Parliament.
Our management team consists of individuals with extensive Internet,
Information Technology ("IT") and telecommunications expertise. Andreas Eder,
co-founder and Chief Executive Officer, previously held various positions at
Siemens-Nixdorf Information Systems and The Boston Consulting Group. Dr.
Alessandro Giacalone, Chief Operating Officer, previously headed the European-
Industry Computer Research Center and established it as a leading German ISP.
He was also a Professor of Computer Science at the State University of New York
at Stony Brook. Robert Eckert, our Chief Financial Officer, was previously with
Netsource A/S, Swisscom International, and General Electric (USA). Walter
Franz, who is principally responsible for our network, was director of network
operations for MCI/WorldCom in Germany and also worked for MFS
Telecommunications and Motorola. In addition, we have recruited individuals at
various managerial levels from leading industry participants such as
AT&T/Unisource, British Telecommunications and Deutsche Telekom. Our policy is
to retain the key executives of the companies we acquire. To this end, we
typically structure our acquisitions to give such executives an equity
participation in the future success of our Company. We have retained most of
the key managers in our acquisitions.
Business Strategy
Our objective is to become a leading provider of communications services and
network-based business solutions to small- to medium-sized enterprises in
Europe. We currently offer a full-service portfolio of advanced communications
products including Internet access and value-added services, as well as
switched voice services. The principal elements of our business strategy are as
follows:
Target Small- to Medium-Sized Business Enterprises. We focus on small- to
medium-sized enterprises. In Germany, we focus on companies that typically have
revenues between (Euro)25 million and (Euro)500 million. According to
Statistisches Bundesamt, a German government agency, such companies generate
45% of Germany's total corporate revenues. In other countries, the revenues of
small- to medium-sized enterprises as a portion of total corporate revenues
vary. We believe that this customer segment is underserved and has substantial
and increasing communications needs. Small- to medium-sized enterprises
typically lack the technical resources to build and maintain extensive
communications systems and, as a consequence, they outsource many services and
solutions to third parties. We focus in particular on network intensive
industries, such as IT, tourism, retail, finance, government, media and
advertising. For many of these industries, utilization of the Internet has
become essential. In certain markets, we also serve high-end residential
customers.
Initiate Long-Term Relationships with Customers Through Local Coverage and at
an Early Stage. Unlike some of our competitors, we use strong local management
teams to address the needs of our customers. Most of our sales people are based
in regional offices and are supported by specialized technical and commercial
assistance from our offices in Munich, Vienna, Zurich and Trento. This strategy
allows us to initiate close relationships with our customers at an early stage
of their Internet service requirements, engage in strategic discussions with
senior management about their communications requirements, participate in the
design of their systems, services and solutions, and establish the basis for
long-term relationships at different levels of our customers' organizations. We
are then in a position to provide our customers with additional services as
their requirements increase or change over time. This also enables us to offer
additional solutions to our customers without having to compete primarily on
price.
Develop Total Communications Offering. We currently offer both Internet
connectivity services and modular Internet business solutions to our customers.
Our modular solutions include web-hosting and -housing,
3
<PAGE>
VPNs, security solutions, electronic commerce solutions and Intranet and
workflow solutions. As technology evolves, we intend to broaden our product
offering to include additional services, solutions and innovations that have
proven reliable and effective. In June 1999, we started offering voice
services. Our ability to offer voice services will allow us to provide one-stop
shopping for integrated voice and data solutions. We believe IP technology and
IP applications will be the primary platform and interface for business, data
and voice communications in the future.
Expand Sales Channels. We are currently pursuing growth opportunities through
various sales channels. These include trained direct sales representatives with
strong technical backgrounds, an extensive reseller program and marketing
alliances with technology leaders like Hewlett-Packard, Microsoft, Network
Associates, and Sun Microsystems. We are expanding our direct sales force and
regional offices to increase our local coverage. We currently have 19 sales
offices (seven in Germany, one in Austria, nine in Italy and two in
Switzerland), and we plan to increase this number. We intend to expand our
reseller and referral arrangements to increase sales of our basic connectivity
services and to enhance our marketing alliances to obtain more potential
customer contacts.
Control Our Network. We consider it strategically important to control and
operate our own network infrastructure. This will enable us to: (i) maximize
revenues by offering total communications services, including broad band and
voice services; (ii) achieve the highest levels of service quality and
reliability; and (iii) reduce transmission costs. This involves:
. optimizing the configuration of our IP network by concentrating
international access at a few select locations where the cost of global
access can be minimized; concentrating network planning and management
in one central location; and planning the network's redundancy on a pan-
European basis rather than on a local basis;
. establishing up to nine large-scale data centers to enhance our co-
location and housing service offering;
. acquiring up to nine carrier grade digital circuit switches to be
installed in key cities; and
. leasing transmission capacity on a long-term basis, acquiring backbone
capacity or constructing our own infrastructure in selected locations to
transport high bandwidth data and voice services over all available
transmission protocols (including alternative long-haul transmission
such as microwave).
Accelerate Growth in Europe Through Targeted Acquisitions. To date, we have
successfully integrated three acquisitions. We have recently acquired three
additional companies which we are in the process of integrating. We will seek
to acquire additional Internet-related companies to strengthen our presence in
other European countries while continuing to grow internally. We look for
strategically and culturally compatible companies to add to our strong
management, enhance our technical expertise and enhance our customer base in
our current coverage area and bordering countries.
Acquisitions
Since we began business in 1996, we have acquired six companies, through
which we have expanded our technical capabilities, attracted additional talent,
entered new markets and increased our customer base:
. Cybernet E-Commerce. In September 1997, we acquired 100% of Artwise GmbH
("Artwise") which was later renamed Cybernet E-Commerce GmbH & Co.
("Cybernet E-Commerce"), a German company which has provided us with
expertise in Intranet messaging and workflow solutions and established
our presence in the Ulm region of Germany;
. Eclipse. In December 1997, we acquired 66% of Eclipse s.r.l.
("Eclipse"), an ISP based in Trento, Italy, through which we established
our presence in Northern Italy;
4
<PAGE>
. Open:Net. In August 1998, we acquired 100% of Open:Net Internet
Solutions GmbH ("Open:Net"), an ISP through which we increased our
penetration of the southwest German market serviced by Cybernet E-
Commerce;
. Vianet. In December 1998, we acquired 100% of Vianet Telekommunikations
A.G. ("Vianet"), a leading Austrian ISP through which we entered the
Austrian market and significantly increased our customer base;
. Sunweb. In May 1999, we acquired 51% and an option to purchase the
remaining 49% of Sunweb Internet Services SIS AG ("Sunweb"), through
which we established a presence in Switzerland and acquired substantial
additional expertise in switched voice services; and
. Flashnet. In June 1999, we acquired 100% of Flashnet, a leading Italian
ISP, through which we gained access to all major business centers in
Italy.
Recent Developments
Flashnet Acquisition. On June 30, 1999, we purchased all of the issued and
outstanding capital stock of Flashnet for a purchase price consisting of Lit.
41.0 billion ($22.6 million) in cash and 301,290 newly issued shares of our
common stock, a total purchase price valued at Lit. 54.2 billion ($29.9
million) as of May 14, 1999, the contract date. The selling stockholders
consisted of: (i) two affiliates of 3i, an English investment group, which
together owned 42.6% of Flashnet's stock, on a fully diluted basis, and which
received their portion of the purchase price in cash; and (ii) members of
Flashnet's management and their affiliates who owned the remaining stock and
received a combination of Cybernet stock and cash. Among this latter group of
selling stockholders were the President, Managing Director, Sales Director and
two technical directors, all of whom have agreed to continue as employees under
long-term contracts with customary covenants not to compete.
Headquartered in Rome, Flashnet is the third largest ISP in Italy, offering
business and residential customers dedicated lines, dial-in and satellite
access to the Internet, web-hosting, co-location services, electronic commerce,
VPNs and a variety of other services. It maintains a customer care center which
is available 24 hours per day to business customers and 18 hours per day to
residential customers. In 1998, Flashnet had revenues of Lit. 8.3 billion ($4.6
million).
Founded in 1994 as a division of a computer distribution group, Flashnet
originally focused on the residential market and built a clientele which
totaled approximately 38,000 residential customers as of March 31, 1999. Over
the last 20 months, it has shifted its marketing focus to businesses and has
already developed a business customer base consisting of approximately 1,600
customers as of March 31, 1999.
Flashnet owns 20 POPs for dedicated lines and has access to more than 300
dial-in access nodes which can also accommodate dial-in traffic. The POPs
interconnect with each other through leased lines. In Rome, Flashnet has
international access through primary links with MCI/WorldCom, Global One and
Ebone. Most of Flashnet's network equipment is manufactured by Cisco.
The table below summarizes certain operating and financial results of
Flashnet:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ---------
<S> <C> <C>
Operating Data
Residential Customers(/1/)............................... 31,556 38,269
Business Customers(/1/).................................. 1,096 1,625
------ ------
Total Customers........................................ 32,652 39,894
</TABLE>
- --------
(1)Including customers obtained through resellers.
5
<PAGE>
<TABLE>
<CAPTION>
Year or Six Months Ended
-------------------------------------------
December 31, June 30, December 31, June 30,
1998 1999 1998 1999
------------ -------- ------------ --------
Lit. Lit. $ $
------------ -------- ------------ --------
(millions) (thousands)
<S> <C> <C> <C> <C>
Financial Data (US GAAP)
Net Sales.......................... 8,334 7,662 4,597 4,352
EBITDA............................. (2,354) (101) (1,298) (57)
EBIT............................... (3,011) (543) (1,661) (308)
Net Income......................... (2,366) (850) (1,305) (483)
Stockholders' deficit/(1)/......... (533) 417 (294) 251
</TABLE>
- --------
(1) At period end.
Unit Offering. On July 8, 1999, we sold 150,000 Units consisting of 14.0%
Senior Notes due 2009 and Warrants to purchase an aggregate of 4,534,604 shares
of our common stock (representing approximately 15% of our issued and
outstanding capital stock on a fully diluted basis at that time). The net
proceeds of the Unit Offering were $145,500,000. Of that amount, $57,466,076
was used to purchase U.S. government securities pledged to an escrow agent to
secure payment of the first six interest payments on the Senior Notes, and
$22,374,264 was used to repay an interim loan (the "Interim Loan") incurred to
finance the cash portion of the acquisition price for Flashnet.
Discount Notes Offering. On August 26, 1999, we sold (the "Discount Notes
Offering") $50,002,183 in aggregate initial accreted value of our 13.0%
Convertible Senior Subordinated Discount Notes due 2009 (the "Discount Notes").
Each Discount Note was sold at an initial accreted value of $534.78, a
substantial discount from its principal amount at maturity of $1,000. There
will not be any accrual of cash interest on the Discount Notes prior to August
15, 2004 or payment of cash interest prior to February 15, 2005. Holders of the
Discount Notes may convert the Discount Notes at their option into our common
stock at any time after August 26, 2000. The number of shares of our common
stock issuable upon conversion of the Discount Notes is equal to the accreted
value of the Discount Notes being converted on the date of conversion divided
by $25.00, subject to adjustment under certain events. If the market price of
our common stock exceeds certain prices at any time after August 26, 2000, the
Discount Notes will automatically convert into shares of our common stock at
the same conversion ratio. The net proceeds of the Discount Notes Offering were
$47,502,074, which we intend to use for capital expenditures and general
corporate purposes.
PIK Notes Offering. On August 26, 1999, we sold (the "PIK Notes Offering")
(Euro)25 million aggregate principal amount of our 13.0% Convertible Senior
Subordinated Pay-In-Kind Notes due 2009 (the "PIK Notes"). We will pay interest
on the PIK Notes in the form of additional notes issued under the pay-in-kind
feature through August 15, 2004. From that date to maturity interest will
accrue and will be paid in cash. Holders of the PIK Notes and any additional
notes issued under the pay-in-kind feature may convert both types of notes at
their option into our common stock at any time after August 26, 2000. The
number of shares of our common stock issuable upon conversion of these notes is
equal to the principal value of the notes being converted divided by $25.00,
subject to adjustment under certain circumstances. The net proceeds of the PIK
Notes Offering were (Euro)23,750,000, which we intend to use for capital
expenditures and general corporate purposes.
General Information
Our principal executive offices are located at Stefan-George-Ring 19-23,
81929 Munich, Germany, telephone number: +49-89-993-150, and our registered
address in the United States is Corporation Services Company, 1013 Centre Road,
Wilmington, Delaware 19805.
6
<PAGE>
Summary of the Terms of the Exchange Offer
This Exchange Offer relates to the exchange of up to $150,000,000 aggregate
principal amount of Outstanding Notes for an equal aggregate principal amount
of Exchange Notes. The Exchange Notes will be our obligations and are entitled
to the benefits of the indenture relating to the Outstanding Notes. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Outstanding Notes except that the Exchange Notes have
been registered under the Securities Act of 1933, and therefore are not subject
to restrictions on transfer and are not entitled to the benefits of the
registration rights granted under the registration rights agreement, executed
as a part of the Unit Offering, dated July 8, 1999, among our Company and the
initial purchasers set forth therein.
Registration Rights..... On July 8, 1999, we and the initial purchasers agreed
that you, as a holder of the Outstanding Notes, would
be entitled to exchange your Outstanding Notes for
registered Exchange Notes with substantially
identical terms. This Exchange Offer is intended to
fulfill that agreement. After the Exchange Offer is
complete, you will no longer be entitled to any
exchange or registration rights with respect to your
Outstanding Notes (unless certain conditions are
met). See "The Exchange Offer--General." In such
event, you will continue to hold the Outstanding
Notes and will be entitled to all the rights and
subject to all the limitations applicable to the
Outstanding Notes under the indenture governing the
Outstanding Notes, except to the extent such rights
or limitations by their terms terminate or cease to
have further effectiveness as a result of the
Exchange Offer. All Outstanding Notes will continue
to be subject to certain restrictions on transfer.
The Exchange Offer...... We are offering to exchange $1,000 principal amount
of 14.0% Senior Notes due 2009 which have been
registered under the Securities Act of 1933 for each
$1,000 principal amount of our 14.0% Senior Notes due
2009 which were issued in the Unit Offering. In order
to be exchanged, an Outstanding Note must be properly
tendered and accepted. All Outstanding Notes that are
validly tendered and not validly withdrawn will be
exchanged.
As of this date, there are $150 million in aggregate
principal amount of Senior Notes outstanding.
We will issue registered Exchange Notes on or
promptly after the expiration of the Exchange Offer.
Resale of the Exchange
Notes.................. Based on an interpretation by the Staff of the
Securities and Exchange Commission set forth in no-
action letters issued to third parties, including
"Exxon Capital Holdings Corporation" (available
May 13, 1988), "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), "Mary Kay Cosmetics, Inc."
(available June 5, 1991) and "Warnaco, Inc."
(available October 11, 1991), we believe that the
Exchange Notes issued in the Exchange Offer may be
offered for resale, resold and otherwise transferred
by you without compliance with the registration and
prospectus delivery provisions of the Securities Act
of 1933 provided that:
7
<PAGE>
. you are acquiring the Exchange Notes issued in the
Exchange Offer in the ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Notes issued to
you in the Exchange Offer;
. you are not a broker-dealer who purchased such
Outstanding Notes directly from us for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933; and
. you are not an "affiliate" (as such term is
defined in Rule 405 of the Securities Act of 1933)
of our Company.
If our belief is inaccurate and you transfer any
Exchange Note issued to you in the Exchange Offer
without delivering a prospectus meeting the
requirements of the Securities Act of 1933 or without
an exemption from registration of your Exchange Notes
from such requirements, you may incur liability under
the Securities Act of 1933. We do not assume or
indemnify you against such liability, but we do not
believe that any such liability should exist.
Each broker-dealer that is issued Exchange Notes in
the Exchange Offer for its own account in exchange
for Notes which were acquired by such broker-dealer
as a result of market-making or other trading
activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities
Act of 1933, in connection with any resale of the
Exchange Notes issued in the Exchange Offer. The
letter of transmittal states that by so acknowledging
and by delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities
Act of 1933. A broker-dealer may use this prospectus
for an offer to resell, resale or other retransfer of
the Exchange Notes issued to it in the Exchange
Offer. We have agreed that, for a period of 180 days
after the consummation of the Exchange Offer, we will
make this prospectus and any amendment or supplement
to this prospectus available to any such broker-
dealer for use in connection with any such resales.
We believe that no registered holder of the
Outstanding Notes is an "affiliate" (as such term is
defined in Rule 405 of the Securities Act of 1933) of
our Company.
Expiration of Exchange
Offer.................. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1999, unless we decide to extend
the expiration date in which case the term
"expiration date" means the latest date and time to
which the Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and the
Outstanding Notes...... The Exchange Notes will bear interest from July 8,
1999. Holders of Outstanding Notes whose Notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such Outstanding Notes accrued from July
8, 1999 to the date of the issuance of the Exchange
Notes. Consequently, holders who exchange their
Outstanding Notes for Exchange Notes will receive the
same interest payment on January 1, 2000 (the first
interest payment date
8
<PAGE>
with respect to the Outstanding Notes and the
Exchange Notes) that they would have received had
they not accepted the Exchange Offer.
Termination of the
Exchange Offer......... We may terminate the Exchange Offer if we determine
that our ability to proceed with the Exchange Offer
could be materially impaired due to any legal or
governmental action, new law, statute, rule or
regulation or any interpretation of the Staff of the
Securities and Exchange Commission of any existing
law, statute, rule or regulation. We do not expect
any of the foregoing conditions to occur, although
there can be no assurance that such conditions will
not occur. Holders of Outstanding Notes will have
certain rights against our Company under the
registration rights agreement executed as part of the
Unit Offering should we fail to consummate the
Exchange Offer.
Procedure for Tendering
Outstanding Notes...... If you are a holder of an Outstanding Note and you
wish to tender your Note for exchange pursuant to the
Exchange Offer, you must transmit to The Bank of New
York, as exchange agent, on or prior to the
expiration date:
either
. a properly completed and duly executed letter of
transmittal, which accompanies this prospectus, or
a facsimile of the letter of transmittal, together
with the Outstanding Notes and all other documents
required by the letter of transmittal, to the
exchange agent at the address set forth on the
cover page of the letter of transmittal; or
. a computer-generated message transmitted by means
of the Automated Tender Offer Program system of
The Depository Trust Company ("DTC") and received
by the exchange agent and forming a part of a
confirmation of book entry transfer in which you
acknowledge and agree to be bound by the terms of
the letter of transmittal;
and, either
. a timely confirmation of book-entry transfer of
your Outstanding Notes into the exchange agent's
account at DTC pursuant to the procedure for book-
entry transfers described in this prospectus under
the heading "The Exchange Offer--Procedures for
Tendering," must be received by the exchange agent
on or prior to the expiration date; or
. the documents necessary for compliance with the
guaranteed delivery procedures described below.
By executing the letter of transmittal, each holder
will represent to us that, among other things, (1)
the Exchange Notes to be issued in the Exchange Offer
are being obtained in the ordinary course of business
of
9
<PAGE>
the person receiving such Exchange Notes whether or
not such person is the holder, (2) neither the holder
nor any such other person has an arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes, and (3) neither
the holder nor any such other person is an
"affiliate" (as such term is defined in Rule 405 of
the Securities Act of 1933) of our Company.
Special Procedures for
Beneficial Owners...... If you are a beneficial owner of Outstanding Notes
that are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
you wish to tender such Outstanding Notes in the
Exchange Offer, you should promptly contact such
person in whose name your Outstanding Notes are
registered and instruct such person to tender on your
behalf. If you, as such beneficial holder, wish to
tender on your own behalf you must, prior to
completing and executing the letter of transmittal
and delivering your Outstanding Notes, either make
appropriate arrangements to register ownership of the
Outstanding Notes in your name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable
time.
Guaranteed Delivery
Procedures............. If you wish to tender your Outstanding Notes and time
will not permit your required documents to reach the
exchange agent by the expiration date, or the
procedure for book-entry transfer cannot be completed
on time or certificates for registered notes cannot
be delivered on time, you may tender your Outstanding
Notes pursuant to the procedures described in this
prospectus under the heading "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights....... You may withdraw the tender of your Outstanding Notes
at any time prior to 5:00 p.m., New York City time,
on the expiration date.
Acceptance of
Outstanding Notes and
Delivery of Exchange
Notes.................. Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described
more fully under "The Exchange Offer--Termination"),
we will accept for exchange any and all Outstanding
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
expiration date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
following the expiration date.
Certain U.S. Federal
Income Tax
Consequences........... The exchange of the Notes will generally not be a
taxable exchange for United States federal income tax
purposes. We believe you will not recognize any
taxable gain or loss or any interest income as a
result of such exchange. You will, however, have to
include interest on the Exchange Notes in gross
income to the same extent as on the Outstanding
Notes.
10
<PAGE>
Use of Proceeds......... We will not receive any proceeds from the issuance of
the Exchange Notes pursuant to the Exchange Offer. We
will pay all expenses incident to the Exchange Offer.
Exchange Agent.......... The Bank of New York is serving as exchange agent in
connection with the Exchange Offer. The exchange
agent can be reached by registered or certified mail,
overnight service or hand delivery at 101 Barclay
Street, Bond Redemption Unit, 7E, New York, New York
10286, Attention: Enrique Lopez, Reorganization
Department. For more information with respect to the
Exchange Offer, the telephone number for the exchange
agent is (212) 815-2742 and the facsimile number for
the exchange agent is (212) 815-6339.
11
<PAGE>
Summary Description of the Exchange Notes
The form and terms of the Exchange Notes will be substantially the same as
the form and terms of the Outstanding Notes except that::
(1) the Exchange Notes have been registered under the Securities Act of
1933 and, therefore, will not bear legends restricting the transfer
thereof; and
(2) the holders of the Exchange Notes, except for limited instances, will
not be entitled to further registration rights under the registration
rights agreement.
The Exchange Notes will evidence the same debt as the Outstanding Notes and
will be entitled to the benefits of the indenture under which the Outstanding
Notes were issued.
Issuer.................. Cybernet Internet Services International, Inc.
Notes Offered........... $150,000,000 aggregate principal amount of 14.0%
Senior Notes due 2009.
Maturity Date........... July 1, 2009.
Interest Payment
Dates.................. January 1 and July 1, beginning on January 1, 2000.
Ranking................. The Exchange Notes will be senior unsecured (except
to the extent described in "Escrow Account" below)
debt. They will rank senior in right of payment to
all our future subordinated debt and equally in right
of payment to all our existing and future senior
debt. Because Cybernet Delaware conducts its business
principally through its subsidiaries, existing and
future debt and other liabilities and commitment of
its subsidiaries, including trade payables, will be
effectively senior to the Exchange Notes.
Escrow Account.......... Concurrently with the completion of the Unit
Offering, we purchased, pledged and transferred to an
escrow agent, for your benefit, U.S. Government
Securities in such amounts as will be sufficient upon
scheduled interest and principal payments of such
securities to provide for the payment in full of the
first six scheduled interest payments on the Notes
(excluding any amount due under tax gross-up
provisions of the Notes). We used approximately $57
million to acquire these government securities. We
pledged these government securities to the escrow
agent for your benefit, as holders of the Notes, and
deposited them into an escrow account held by the
escrow agent for the benefit of the trustee under the
indenture governing the Notes (the "Senior Notes
Indenture") and holders of the Notes, in accordance
with an escrow agreement. We may use the funds in the
escrow account to pay interest payments on the Notes
to you. After payment of the first six interest
payments, if the maturity date of the Notes has not
been accelerated, any amounts remaining in the escrow
account will be returned to us. If the maturity date
of the Notes accelerates before the sixth interest
payment date, the amount remaining in the escrow
account will be paid to the trustee, who can use the
remaining amount to pay any amounts owing on the
Notes as provided in the Senior Notes Indenture.
Before such
12
<PAGE>
disbursement, any uninvested funds contained in the
escrow account will be invested in cash equivalents.
You should read "Description of the Notes--Escrow
Account" for a further discussion of the escrow
arrangement.
Optional Redemption..... We may redeem the Exchange Notes, in whole or in
part, at any time on or after July 1, 2004, at the
redemption prices set forth in this prospectus, plus
accrued and unpaid interest, liquidated damages and
additional amounts due under tax gross-up provisions
of the Exchange Notes, if any, to the redemption
date.
We may also redeem all but not just a portion of the
Exchange Notes at any time, if changes in certain tax
laws impose certain withholding taxes on amounts
payable on the Exchange Notes. If we decide to do
this, we must pay holders a price equal to par value
plus accrued interest and the other amounts described
in the section "Description of the Exchange Notes--
Redemption for Taxation Reasons."
Change of Control....... Upon a change of control, (as defined in the Senior
Notes Indenture) each holder of the Exchange Notes
may require us to repurchase all or a portion of its
Exchange Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued
and unpaid interest thereon, liquidated damages and
additional amounts due under tax gross-up provisions
of the Exchange Notes, if any, to the date of
repurchase. For a discussion of the circumstances
that would constitute a change of control please see
"Description of the Exchange Notes" in this
prospectus.
Withholding Taxes;
Additional Amounts..... Unless required by law, all our payments in respect
of the Exchange Notes will be made without
withholding or deduction for or on account of any
taxes imposed by or within any relevant taxing
jurisdiction. Subject to certain exceptions and
limitations, we will be required to pay any
additional amounts as may be necessary in order that
the net amounts received by you after any withholding
or deduction in respect of any such taxes required by
law shall equal the respective amounts of principal
and interest that would have been received in respect
of the Exchange Notes in the absence of such
withholding or deduction.
Certain Covenants....... The Senior Notes Indenture contains covenants that,
among other things, limit our ability and the ability
of certain of our subsidiaries to:
. incur certain additional indebtedness;
. pay dividends on, redeem or repurchase our capital
stock or make certain investments;
. issue or sell capital stock of certain of our
subsidiaries;
. engage in transactions with affiliates;
. create certain liens;
. sell assets;
. guarantee indebtedness;
13
<PAGE>
. restrict dividend or other payments to us; and
. consolidate, merge or transfer all or
substantially all our assets and the assets of our
subsidiaries on a consolidated basis.
These covenants are subject to important exceptions
and qualifications, which are described under
"Description of the Exchange Notes" in this
prospectus.
Exchange Offering;
Registration Rights.... Under the registration rights agreement executed as
part of the Unit Offering, we have agreed to:
. file a registration statement within 90 days after
the issue date of the Outstanding Notes enabling
noteholders to exchange the privately placed notes
for publicly registered notes with substantially
identical terms;
. use our best efforts to cause the registration
statement to become effective within 150 days
after the issue date of the Outstanding Notes;
. consummate the Exchange Offer within 30 days after
the Securities and Exchange Commission declares
the registration statement effective; and
. use our best efforts to file a shelf registration
statement for the resale of the Notes if we cannot
complete an Exchange Offer within the time periods
listed above in certain other circumstances.
The interest rate on the Notes will increase if we do
not comply with our obligations under the
registration rights agreement. See "The Exchange
Offer."
Trustee, Escrow Agent
and Paying Agent....... The Bank of New York.
Listing................. We expect the Notes to be eligible for trading in the
PORTAL market. We intend to apply to list the
Exchange Notes on the Luxembourg Stock Exchange.
You should read "Description of the Exchange Notes" for additional
information concerning the securities being offered.
14
<PAGE>
Consequences of Failure to Exchange
Untendered Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Notes will continue to be subject to the following restrictions on transfer:
(1) Outstanding Notes may be resold only if registered pursuant to the
Securities Act of 1933, if an exemption from registration is available under
the Securities Act of 1933, or if neither such registration nor an exemption is
required by law; (2) Outstanding Notes shall bear a legend restricting transfer
in the absence of registration or an exemption from registration; and (3) a
holder of Outstanding Notes who desires to sell otherwise dispose of all or any
part of its Outstanding Notes under an exemption from registration under the
Securities Act of 1933, if requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to us, that such an exemption is available.
Risk Factors
See "Risk Factors" for a discussion of factors you should carefully consider
before deciding to invest in the Exchange Notes. Risk Factors begin on page 18.
15
<PAGE>
Summary Consolidated Financial and Operating Information
The summary historical consolidated financial and operating data as of and
for the years ended December 31, 1996, 1997 and 1998 and the six months ended
June 30, 1998 and 1999 have been derived from our audited Consolidated
Financial Statements included elsewhere in this prospectus. The pro forma
consolidated financial data has been derived from our unaudited Pro Forma
Consolidated Financial Statements included elsewhere in this prospectus. The
financial data set forth below has been prepared in accordance with generally
accepted accounting principles in the United States ("US GAAP"). The unaudited
interim financial statements contained in this prospectus include all
adjustments, consisting of normal recurring adjustments, that management
considers necessary for a fair presentation of the financial position and
results of operations for the interim periods.
The historical consolidated financial data set forth below should be read in
conjunction with our Consolidated Financial Statements and the notes thereto
included elsewhere in this prospectus. The pro forma consolidated financial
data set forth below should be read in conjunction with our unaudited Pro Forma
Consolidated Financial Statements and the notes thereto included elsewhere in
this prospectus.
Results of operations for the periods presented are not necessarily
indicative of results of operations for future periods. Our development and
expansion activities, including acquisitions, during the periods shown below,
may significantly affect the comparability of this data from one period to
another. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
--------------------------------- ----------------------------
Pro forma Pro forma
1996 1997 1998 1998/(1)/ 1998 1999 1999/(1)/
----- ------ ------- --------- ------- -------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue
Internet Projects...... $ 217 $1,598 $ 5,139 $ 6,206 $ 1,863 $ 2,459 $ 2,891
Network Services....... 91 716 3,495 11,184 1,489 5,994 9,869
----- ------ ------- -------- ------- -------- --------
Total revenues......... 308 2,314 8,634 17,390 3,352 8,453 12,760
Cost of revenues
Internet Projects...... 237 1,495 4,699 5,500 1,438 2,056 2,369
Network Services....... 119 866 4,067 8,949 1,747 6,534 9,199
Depreciation and
amortization/(2)/..... 7 171 1,674 2,050 332 1,545 1,675
----- ------ ------- -------- ------- -------- --------
Total cost of
revenues.............. 363 2,532 10,440 16,499 3,517 10,135 13,243
Gross profit (loss)..... (55) (218) (1,806) 891 (165) (1,682) (483)
Operating expenses:
General and
administrative
expenses.............. 263 482 1,576 3,512 655 3,770 3,995
Marketing expenses..... 165 1,188 3,844 5,536 1,608 5,147 6,272
Research and
development........... 179 280 2,941 3,858 821 2,146 2,264
Depreciation and
amortization/(3)/..... 22 116 880 5,011 272 1,228 2,733
----- ------ ------- -------- ------- -------- --------
Total operating
expenses.............. 629 2,066 9,241 17,917 3,356 12,291 15,264
----- ------ ------- -------- ------- -------- --------
Operating loss.......... (684) (2,284) (11,047) (17,026) (3,521) (13,973) (15,747)
Interest income
(expense), net......... (2) (39) (43) (267) (94) 319 272
----- ------ ------- -------- ------- -------- --------
Loss before taxes and
minority interest..... (686) (2,323) (11,090) (17,293) (3,615) (13,654) (15,475)
Income tax benefit..... 402 1,339 6,173 6,753 2,008 5,302 5,258
Minority interest...... -- -- 145 145 -- 103 103
----- ------ ------- -------- ------- -------- --------
Net loss................ $(284) $ (984) $(4,772) $(10,395) $(1,607) $ (8,249) $(10,114)
===== ====== ======= ======== ======= ======== ========
Basic and diluted loss
per share............. $(.12) $ (.12) $ (.30) $ (.64) $ (.11) $ (.44) $ (.53)
===== ====== ======= ======== ======= ======== ========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Six months
Years ended December 31, ended June 30,
---------------------------------- ------------------
Pro forma Pro forma
1996 1997 1998 1998/(1)/ 1999 1999/(1)/
----- ------- ------- --------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Other Financial and
Operating Data:
Number of Network
Services
customers/(4)/......... 166 4,061 6,923 42,391 /(5)/ 10,830 50,724 /(5)/
EBITDA/(6)/............. $(655) $(1,997) $(8,493) $(9,965) $(5,898) $(11,339)
Capital
expenditures/(7)/...... 552 1,708 6,034 8,713 6,587 na
Ratio of earnings to
fixed charges/(8)/..... -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
-------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital
(deficiency)/(9)/............ $ 339 $ 891 $37,751 $(4,065) $(11,562)
Total assets................. 2,211 12,617 79,445 19,569 96,786
Long-term debt/(10)/......... -- 42 1,383 40 1,711
Total stockholders' equity... 1,790 8,908 67,359 8,631 58,046
</TABLE>
- --------
(1) Pro forma statement of operations and balance sheet data are based on the
unaudited Pro Forma Consolidated Financial Statements included elsewhere in
this prospectus. The pro forma balance sheet is based on the historical
balance sheet of the Company and reflects the acquisition of Flashnet and
the Interim Loan incurred to fund such acquisition. The pro forma statement
of loss for the year ended December 31, 1998 is based on the historical
statement of loss adjusted as if the Open:Net, Vianet and Flashnet
acquisitions were completed on January 1, 1998, and the pro forma statement
of loss for the six months ended June 30, 1999 is based on the historical
statements of loss adjusted as if the Flashnet acquisition and the Interim
Loan incurred to fund such acquisition had been completed on January 1,
1999. The pro forma data does not purport to represent what our financial
position or results of operations would have been had these acquisitions
been made on such dates.
(2) Represents depreciation and amortization of capitalized costs related to
investments in product development, designing our network (including
related software) and building network capacity (including related
personnel and consulting costs).
(3) Represents depreciation of property and equipment and amortization of
acquired goodwill.
(4) Number of customers as of December 31, 1996, 1997 and 1998; and March 31,
1999.
(5) Includes 32,652 and 39,894 Flashnet customers (of which 1,096 and 1,625
were business customers and 31,556 and 38,269 were residential customers)
as at December 31, 1998 and March 31, 1999, respectively.
(6) We define EBITDA as loss before interest, income taxes, minority interest,
depreciation and amortization. EBITDA is included because management
believes it is a useful indicator of a company's ability to incur and
service debt. EBITDA should not be considered as a substitute for operating
earnings, net income, cash flow or other statements of operations or cash
flow data computed in accordance with US GAAP or as a measure of our
results of operations or liquidity. Funds depicted by this measure may not
be available for management's discretionary use (due to covenant
restrictions, debt service payments and other commitments). Because all
companies do not calculate EBITDA identically, the presentation of EBITDA
contained herein may not be comparable to other similarly entitled measures
of other companies.
(7) Pro forma capital expenditures for the six months ended June 30, 1999 was
not available.
(8) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of losses before income taxes and minority interest, plus fixed
charges. Fixed charges consist of interest expense. Earnings were
insufficient to cover fixed charges by $(684), $(2,284), $(10,893),
$(13,590), $(16,862) and $(15,364) for the years ended December 31, 1996,
1997 and 1998, for the six months ended June 30, 1999, the year ended
December 31, 1998 pro forma and the six months ended June 30, 1999 pro
forma, respectively.
(9) We define working capital as total current assets less total current
liabilities.
(10) Long-term debt includes obligations under capital lease agreements.
17
<PAGE>
RISK FACTORS
You should consider carefully the risks described below and other information
in this prospectus before making an investment decision. The risks and
uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us or that we may currently deem
immaterial may also impair our business operations.
If any of the following events identified in the following risk factors
actually occur, they could materially adversely affect our business, financial
condition and results of operations.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of a variety of
factors, including the risks identified below and elsewhere in this prospectus.
See "Information Regarding Forward-Looking Statements."
We Have a History of Losses and Cannot Be Certain We Will Achieve Positive
Cash Flow
For the years ended December 31, 1996, 1997 and 1998, we had net losses
before taxes of $685,627, $2,323,247 and $11,090,260, respectively. For the six
months ended June 30, 1999, we had a net loss before taxes of approximately
$13,654,000. In addition, we had an accumulated deficit of approximately
$14,685,000 as of June 30, 1999. We are likely to continue to incur significant
additional losses in the intermediate term.
Although we have experienced revenue growth on an annual basis, with revenues
increasing from $307,673 to $2,314,021 and to $8,633,528 for the years ended
December 31, 1996, 1997 and 1998, respectively, and increasing from
approximately $3,332,000 to approximately $8,453,000 for the six months ended
June 30, 1998 and 1999, we cannot be certain that revenues will continue at
their current level or will increase in the future.
We have not achieved profitability on a quarterly or annual basis to date. We
anticipate that we will continue to incur significant additional losses in the
intermediate term while we expend substantial amounts on network
infrastructure, sales and marketing and business development. Even thereafter,
we cannot be certain that we will achieve or sustain positive cash flow or
profitability from our operations. Our net losses and negative cash flow from
operating activities are likely to continue even longer than we currently
anticipate if:
. we do not establish and maintain a customer base that generates
sufficient revenue;
. prices for our products or services decline faster than we have
anticipated;
. we do not remain competitive in the innovation and quality of our
products;
. we do not attract and retain qualified personnel;
. we do not reduce our termination costs as we expand our network by
negotiating competitive interconnection rates and peering arrangements;
or
. we do not obtain necessary governmental approvals, rights-of-way and
operator licenses.
Our ability to achieve our objectives is subject to financial, competitive,
regulatory, legal, technical and other factors, many of which are beyond our
control.
Our Limited Operating History Makes it Difficult to Assess Our Past
Performance and Future Prospects
We commenced significant operations in 1996. Accordingly, you have limited
historical operating and financial information on which to base your evaluation
of our performance and our prospects. Moreover, we have acquired six companies
since we commenced significant operations, which limits the comparability of
our operating and financial information from period to period.
18
<PAGE>
You should consider our prospects in light of the substantial risks,
expenses, uncertainties and difficulties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. Such
risks include the possibility that:
. we will be unable to increase and sustain levels of interest in our
products and services by the small- and medium-sized corporations we are
targeting;
. we will fail to sell our products successfully through our direct sales
force;
. our competitors will develop services or products similar or superior to
our own;
. market prices for our products and services will fall as a result of
competition or other factors;
. we will be unable to identify, attract, motivate and retain qualified
personnel; and
. we will fail to fully integrate with our existing operations the
technology and operations of any of the businesses that we acquire.
As we are currently entering the telecommunications business, you should also
consider the risks that we will fail to, among other things:
. obtain and retain necessary licenses and regulatory approvals to deploy
our network and provide telecommunications services in our target
markets;
. enter into and implement on a timely basis interconnection agreements
with the incumbent operators in our target markets; and
. obtain and use telephone numbers, carrier selection codes and other
rights and privileges necessary to compete effectively.
We cannot be sure that we will be successful in addressing such risks, and
the failure to do so could have a material adverse impact on our business,
financial condition and results of operation and our ability to pay principal
and interest on the Notes when due.
We Are Substantially Leveraged
We have a substantial amount of debt as a result of offering $150 million of
Senior Notes, approximately $50 million of Discount Notes and (Euro) 25 million
of PIK Notes. Subject to restrictions in the Senior Notes Indenture, the
indenture governing the Discount Notes (the "Discount Notes Indenture") and the
indenture governing the PIK Notes (the "PIK Notes Indenture" and collectively
with the Senior Notes Indenture and the Discount Notes Indenture the
"Indentures"), we may borrow even more money for working capital, capital
expenditures, research and development, acquisitions or other general corporate
purposes. We are considering offering additional debt securities in the future.
The following table shows certain important credit statistics and (i)
reflects the acquisition of Flashnet, and (ii) assumes the completion of the
Unit Offering, the Discount Notes Offering and the PIK Notes Offering as of the
date or at the beginning of the period specified below and applied the net
proceeds of the Unit Offering, the Discount Notes Offering and the PIK Notes
Offering as intended all as of June 30, 1999.
<TABLE>
<CAPTION>
At June 30, 1999
(As Adjusted)
----------------
(in thousands
except ratio)
<S> <C>
Total debt..................................................... $176,879
Stockholders equity............................................ $118,036
Total debt to equity ratio..................................... 1.5x
</TABLE>
19
<PAGE>
The following table shows interest expense and the excess of fixed charges
over earnings for the six month period ended June 30, 1999 as if the same
events had occurred on January 1, 1999.
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30, 1999
-------------
(in
thousands)
<S> <C>
Interest expense.................................................. $15,658
Excess of fixed charges over earnings............................. $10,003
</TABLE>
Our high level of debt could have important consequences for you. In
particular, some or all of the following factors may reduce the amount of money
available to us to finance our operations and other business activities, or may
place us at a competitive disadvantage:
. a significant portion of the net proceeds of the Unit Offering has been
set aside for the payment of interest on the Senior Notes;
. beginning in the fourth year following issuance of the Units, we will
need to use a large portion of the money earned by our subsidiaries to
pay interest on the Senior Notes and, beginning in the sixth year
following issuance of the Discount Notes and the PIK Notes, we will need
to use a large portion of the money earned by our subsidiaries to pay
interest on the Discount Notes and the PIK Notes;
. we may have difficulty borrowing money in the future for working
capital, capital expenditures, research and development, acquisitions,
implementation of our business strategies or other purposes;
. the covenants included in the Indentures may restrict our ability to
expand or pursue certain business opportunities;
. we may have more indebtedness than certain of our competitors;
. our debt level may reduce our flexibility to adjust rapidly to changing
market conditions, including increased competition in the Internet
services and telecommunications industries;
. our debt level may reduce our ability to invest in new and developing
technologies; and
. our debt level may make us more vulnerable to downturns in general
economic conditions or in our industries and to changing market
conditions and regulations.
We expect to obtain all or most of the money to pay our expenses and to pay
the principal and interest on the Senior Notes, the Discount Notes and the PIK
Notes, except as described in the paragraph below, from the operations of our
subsidiaries. Our ability to meet our obligations thus depends on the future
performance of our subsidiaries. This in turn depends on successful
implementation of our strategy and on financial, business, economic,
competitive, regulatory, technical and other factors. We cannot control many of
these factors, such as economic conditions in the markets where our
subsidiaries operate, pressure from competitors, regulatory developments and
changes in technology.
We cannot be certain that our subsidiaries will earn enough money to allow us
to pay the principal and interest on the Senior Notes, the Discount Notes and
the PIK Notes, and to meet our other obligations. If we do not have enough
money to do so, we may be required to obtain additional equity capital, to
refinance all or part of our existing debt or to borrow more money. Our ability
to refinance our debt or to borrow more money will depend on our financial
condition at the time, the restrictions in the agreements governing our debt
and other factors, including general market and economic conditions. If such
additional equity or debt financing or refinancing is not possible, we could be
forced to dispose of assets at unfavorable prices. In addition, we could
default on our obligation to make payments on the Senior Notes, the Discount
Notes or the PIK Notes.
We Must Depend on Our Subsidiaries to Repay Our Debts; Ranking of the Senior
Notes, Discount Notes and PIK Notes and Structural Subordination
Cybernet Delaware intends to loan or contribute a portion of the proceeds of
the Unit Offering, the Discount Notes Offering and the PIK Notes Offering
(collectively, the "Private Offerings") to its subsidiaries. Cybernet
Delaware's cash flow and consequent ability to service its debt obligations, is
dependent upon its ability to receive
20
<PAGE>
cash from its subsidiaries. Such subsidiaries are separate legal entities and
have no obligation to pay amounts due under the Senior Notes, the Discount
Notes and PIK Notes or to make funds available for such payments. In addition,
applicable law of the jurisdictions in which these subsidiaries are organized
or contractual or other obligations to which they are subject may limit their
ability to pay dividends or make payments on intercompany loans, including
those made with the proceeds of the Private Offerings. All of Cybernet
Delaware's subsidiaries are restricted from paying dividends unless they meet
the statutory financial requirements in their respective jurisdictions of
organization. Vianet does not currently meet the statutory requirements for
payment of dividends and our other subsidiaries may be similarly restricted.
Although the Indentures currently limit the ability of such subsidiaries to
enter into consensual restrictions on their ability to pay dividends and make
other payments, such limitations are subject to a number of significant
qualifications and exceptions and the subsidiaries may agree to such
restrictions in certain circumstances. Furthermore, the payment of interest and
principal on inter-company loans and advances as well as the payment of
dividends by these subsidiaries may be subject to taxes.
The Discount Notes and the PIK Notes are subordinated to all senior
indebtedness of Cybernet Delaware, including indebtedness under the Senior
Notes. Therefore, in the event of bankruptcy, liquidation or reorganization of
Cybernet Delaware, the assets of Cybernet Delaware will be available to pay
obligations on the Discount Notes and the PIK Notes only after all senior
indebtedness has been paid in full. Creditors of Cybernet Delaware's
subsidiaries will have a prior claim to the assets of such subsidiaries before
claims of holders of Cybernet Delaware's indebtedness, including the Senior
Notes, the Discount Notes and the PIK Notes. Accordingly, the Senior Notes, in
addition to the Discount Notes and the PIK Notes, will effectively be
subordinated in right of payment to all existing and future indebtedness and
other liabilities, including trade payables, of these subsidiaries, except to
the extent that Cybernet Delaware is recognized as a creditor as a result of
any parent-subsidiary loans. Cybernet Delaware may, however, contribute, rather
than loan, all of the proceeds of the Private Offerings to its subsidiaries. If
Cybernet Delaware is recognized as a creditor because it has made one or more
parent-subsidiary loans, its claims would still be subordinated with respect to
any assets of the subsidiary pledged to secure other indebtedness and any
indebtedness of such subsidiary senior to that held by Cybernet Delaware.
Moreover, Cybernet Delaware may decide to contractually subordinate some or all
of any proceeds of the Private Offerings that it loans to its subsidiaries. The
subordinated nature of such loans may have an adverse effect on the ability of
our subsidiaries to pay amounts owed and, therefore, on Cybernet Delaware's
ability to make payment on the Senior Notes, the Discount Notes, and the PIK
Notes. In addition, in the event of a bankruptcy of one or more of such
subsidiaries, we cannot assure you that any of these inter-company loans will
be respected under applicable bankruptcy law. The bankruptcy laws of the
jurisdictions in which our subsidiaries are organized differ significantly from
those applicable in the United States. Although the Indentures currently limit,
the ability of such subsidiaries to incur indebtedness and to issue Preferred
Stock in the future, there are certain significant qualifications and
exceptions to this limitation. Accordingly, the subsidiaries may continue to
incur a substantial amount of indebtedness and issue Preferred Stock under
certain circumstances.
The Indentures Contain Restrictive Covenants
Each of the Indentures contains a number of covenants that will impose
significant operating and financial restrictions on us and limit the discretion
of our management with respect to certain business matters. These covenants,
among other things, will limit or prohibit us from incurring additional debt,
making investments, paying dividends to our stockholders, creating liens,
selling assets, engaging in mergers or consolidations, prepaying subordinated
indebtedness, repurchasing or redeeming capital stock, entering into certain
transactions with affiliates and capitalizing on business opportunities.
The limitations in the Indentures are subject to a number of important
qualifications and exceptions. In particular, while the Indentures restrict our
ability to incur additional indebtedness by requiring compliance with a
specified leverage ratio, each nevertheless permits us and our subsidiaries to
incur substantial additional indebtedness to finance the design, development,
construction, acquisition, transportation, installation or integration of
equipment, inventory or network assets used in our business or the acquisition
of capital stock of a company principally engaged in a similar business.
21
<PAGE>
Failure to comply with the covenants and restrictions in the Indentures or in
any other financing agreements we may execute could trigger defaults under such
agreements even if we are able to pay our debt. Such defaults could result in a
default on the Senior Notes, the Discount Notes or the PIK Notes and could
delay or preclude payment of principal or interest on the Senior Notes, the
Discount Notes or the PIK Notes.
We Will Need Additional Capital in the Future
As we continue to develop and expand our business and deploy our network, we
will require significant capital to fund our capital expenditures and working
capital needs, as well as our debt service requirements and cash flow deficits.
In particular, we expect to incur significant capital expenditures to make
acquisitions and to lease transmission capacity on a long-term basis, acquire
backbone capacity or construct our own infrastructure in selected locations in
order to transport high bandwidth data and voice services over all available
transmission protocols.
The actual amounts and timing of our future capital requirements may vary
significantly from our estimates. In addition, we continually reevaluate our
business plan in our rapidly changing industry. Accordingly, it is likely that
our plan will change in material respects in the intermediate term. Any such
change could result in a need for additional financing. Our revenues and costs
are dependent on factors that are not within our control, such as advances in
technology, increased competition, regulatory development, fluctuation in
interest or currency exchange rates, the demand for our services and various
factors such as the ability to obtain necessary rights-of-way in constructing
the network. Due to the uncertainty of these factors, our actual revenues and
costs may vary from expected amounts, possibly to a material degree, and such
variations are likely to affect our future capital requirements.
We are considering offering additional debt or equity securities in the
future. We may need to seek even more capital sooner than we expect if:
. our development plans or projections change or prove to be inaccurate;
. we cannot achieve a sufficient customer base and level of traffic;
. cost overruns occur in connection with the development of the network;
. we cannot obtain interconnection agreements as we expand our network;
. technological advances render significant portions of our network
investments obsolete or unprofitable; or
. competition reduces prices of our products or services faster than we
expect.
We intend to evaluate acquisition opportunities and strategic alliances on an
ongoing basis as they arise and we may require additional financing if we elect
to pursue any such opportunities. Such additional financing may not be
available on acceptable terms or at all. Moreover, our substantial indebtedness
as a result of the Private Offerings and other possible future debt financings
may adversely affect our ability to raise additional funds. An inability to
obtain financing could require us to delay or abandon plans for parts of our
network, acquisition opportunities, or strategic alliances.
We May Have Difficulty Establishing and Maintaining Interconnection Agreements
and Peering Relationships
If the incumbent operators deny us interconnection or fail to grant us
interconnection for sufficient capacity on acceptable terms, we will have to
use refile or resale agreements to terminate such traffic through other
carriers that have interconnection arrangements with those incumbent operators.
Termination through refile or resale agreements is significantly more expensive
than termination through our own interconnection and could render our services
noncompetitive.
22
<PAGE>
If we are unable to preserve our existing peering arrangements or to obtain
additional ones, this could increase our costs, and limit our ability to
compete effectively with other European IP backbone providers that have better
peering arrangements. The dominance of national ISPs is driving industry
peering practice. The basis on which large national ISPs make peering available
is becoming more limited as the provision of Internet access and related
services expands. Recently, companies that previously offered peering have cut
back by establishing new, more restrictive criteria for peering or have
eliminated peering relationships entirely.
We have negotiated peering arrangements with several IP backbone providers
and several European ISPs. If increasing requirements associated with
maintaining peering with these ISPs develop, we may have to comply with those
additional requirements in order to continue these peering relationships.
Our ability to obtain and maintain peering arrangements with other European
ISPs and with U.S. ISPs is critical to our ability to exchange traffic with
those ISPs without having to pay transit costs. However, we cannot be certain
that we will be able to negotiate additional peer status with U.S. ISPs or with
European IP backbone providers or that we will be able to terminate traffic on
their networks at favorable prices. In particular, major U.S. ISPs require
almost all European ISPs and IP backbone providers to pay a transit fee to
exchange traffic.
We Are Dependent on Our Key Personnel
Our success depends upon the continued efforts of our senior management team
and our technical, marketing and sales personnel. Such employees may
voluntarily terminate their employment with us at any time. We maintain no key
man life insurance policies. Our success also depends on our ability to
attract, train, retain and motivate additional highly skilled and qualified
managerial, technical, marketing and sales personnel. Competition for qualified
employees and personnel in the Internet and telecommunications industries in
Europe is intense. Only a limited number of persons have the required knowledge
and experience in the particular sectors and countries in which we operate. The
process of hiring employees with the combination of skills and attributes
required to carry out our strategy can be extremely challenging and time-
consuming. We cannot assure you that we will be able to retain existing
personnel or to identify and hire new qualified personnel. If we were to lose
the services of our key personnel or were unable to attract additional
qualified personnel, this could materially adversely affect our business,
financial condition and results of operations.
We Are Dependent on Our Suppliers
We are dependent on third-party suppliers for our leased-line connections and
bandwidth. Info AG, a potential competitor, and Deutsche Telekom, a competitor,
are our primary providers of network and switching capacity. We also depend
upon telecommunications carriers, which are often our competitors, to provide
telecommunications services and lease physical space to us for routers, modems
and other equipment. We have few long-term contracts with such suppliers. Most
of these suppliers are not subject to any contractual restrictions that
prohibit them from competing with us. Moreover, any failure or delay of any
network provider to deliver bandwidth to us or to provide operations,
maintenance and other services with respect to such bandwidth on a timely or
adequate basis could adversely affect us. If these suppliers change their
pricing structures, we may be adversely affected.
We are also dependent on certain third-party suppliers of hardware
components. Although we attempt to maintain a number of vendors for each
product, certain components which we use in providing our network services are
currently available from only one source. For example, routers are currently
available only from Cisco. A failure by a supplier to deliver quality products
to us on a timely basis or our inability to develop alternate sources if and as
required could result in delays which could have a material adverse effect on
us. Moreover, we cannot be sure that we will be able to obtain such supplies on
the scale we require at an affordable cost or at all. Neither can we be certain
that our suppliers will not enter into
23
<PAGE>
exclusive arrangements with our competitors or stop selling their products or
components to us at commercially reasonable prices or at all. Any failure of
our sole or limited-source suppliers to provide products or components that
comply with its standards could have a material adverse effect on us. Our
remedies against suppliers who fail to deliver products to us on a timely basis
are restricted by contractual liability limitations in supply agreements and
purchase orders and, in many cases, by practical considerations relating to our
desire to maintain good relationships with suppliers. Finally, as our suppliers
revise and upgrade their equipment technology, we may encounter difficulties in
integrating the new technology into our network.
We Are Subject to Risks as We Make Acquisitions and Engage in Strategic
Alliances
As part of our business strategy, we may acquire, make investments in, or
enter into strategic alliances with companies in complementary businesses, so
as to optimize our market presence in the regions we presently serve and expand
into other European countries. Any such future acquisitions, investments or
strategic alliances would involve risks, such as
. incorrect assessment of the value, strengths and weaknesses of
acquisition and investment opportunities;
. underestimating the difficulty of integrating the operations and
personnel of newly acquired companies;
. the potential disruption of our ongoing business, including possible
diversions of resources and management time;
. the potential inability to maintain uniform standards, controls,
procedures and policies; and
. the threat of impairing relationships with employees and customers as a
result of changes in management or ownership.
We cannot assure you that we will be successful in overcoming these risks.
Moreover, we cannot be certain that any desired acquisition, investment or
strategic alliance could be made in a timely manner or on terms and conditions
acceptable to us. Neither can we assure that we will be successful in
identifying attractive acquisition candidates. We expect that competition for
such acquisitions may be significant. Competition for Internet companies is
based on a number of factors including price, terms and conditions, size,
access to capital, and ability to offer cash, stock or other forms of
consideration. We may compete with other companies with similar acquisition
strategies, many of which may be larger and have greater financial and other
resources than we have.
An additional risk associated with acquisitions is that many attractive
acquisition candidates do not have audited financial statements and have
varying degrees of internal controls. Although we may believe that the
available financial information for a particular business is reliable, we
cannot guarantee that a subsequent audit would not reveal matters of
significance, including with respect to liabilities, contingent or otherwise.
We expect that, from time to time in the future, we will enter into acquisition
agreements, the pro forma effect of which is not known and cannot be predicted.
Our completion of such acquisitions may have a material impact on the financial
information set forth in this prospectus.
We have recently acquired or agreed to acquire a number of Internet-related
companies. Certain of these companies incurred net losses prior to their
acquisition. We believe that after eliminating redundant network architecture
and administrative functions and further integrating the operations of these
companies with our own, we will be able to realize cost savings on our
consolidated operations. However, we cannot assure you that our integration of
the operations of these companies will be accomplished successfully. Our
inability to improve the operating performance of these companies or to
integrate successfully their businesses could have a material adverse effect on
us.
24
<PAGE>
We May Have Difficulty Managing Our Rapid Growth
Our growth strategy has placed and will continue to place a significant
strain on our customer support, sales and marketing, administrative resources,
network and operations and management and billing systems. Such a strain on our
administrative and operational capabilities could adversely affect the quality
of our services and our ability to collect revenues. To manage our growth
effectively, we will have to enhance further the efficiency of our operational
support, other back office systems and financial systems and controls and
expenditures on administrative expenses. Management is currently in the process
of addressing certain weaknesses in our systems of internal controls, which
have been identified by our auditors, and in our customer support services. We
have also recently undertaken measures to address inefficiencies in the control
of our administrative expenditures. We cannot assure you that we will be able
to develop and maintain adequate internal operating, administrative and
financial systems, and procedures and controls or that measures undertaken or
to be undertaken to reduce administrative expenses as a percentage of total
revenues will in fact result in such reductions.
Managing our growth will become even more challenging as we expand our target
markets and our product and service offerings. We believe that establishing and
maintaining brand identity for our products and services is a critical aspect
of attracting and expanding our customer base. Promotion and enhancement of our
brands will depend largely on our success in continuing to provide high quality
Internet communications services, solution and product support. We cannot
guarantee that we will be able to maintain those levels of quality. If we are
unable to do so or otherwise fail to promote and maintain our brands, or if we
incur excessive expenses in an attempt to improve our services or promote and
maintain our brands, then our business, results of operations and financial
condition could be materially and adversely affected.
In addition, as we continue to grow we will have to expand and train our
employee base to handle the increased volume and complexities of our business.
We cannot assure you that we will be able to attract, train and manage
sufficient personnel to keep pace with our growth.
We Have Experienced Difficulties in Collecting Certain Accounts Receivable
We have recently experienced difficulties in collecting some of our accounts
receivable, primarily at Cybernet AG and at Flashnet. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--Working Capital." We have instituted various
measures which we expect will facilitate collection of these receivables,
including realignment of sales force compensation schemes, pre-contract credit
evaluations for both business and residential customers and assignment of
direct responsibility to managers at the subsidiary level for reductions in
receivables balances. However, we cannot assure you that these or other
measures we may take will result in a reduction in receivables balances or that
we will not continue to experience such collection difficulties in the future.
Our inability successfully to collect on such accounts may have a material
adverse impact on our business, results of operations and financial condition.
We Are Subject to Risks as a Result of the International Scope of Our
Operations
We may face certain risks because we conduct an international business
including:
. regulatory restrictions or prohibitions on the provision of our
services;
. tariffs and other trade barriers;
. difficulties in staffing and managing foreign operations;
. longer payment cycles;
. problems in collecting accounts receivable;
. political risks; and
. potentially adverse tax consequences of operating in multiple
jurisdictions, including the imposition or increase in withholding taxes
on remittances and other payments by subsidiaries.
25
<PAGE>
We cannot assure you that such factors will not have an adverse effect on our
future operations and, consequently, on our business, financial condition and
results of operations. In addition, an adverse change in laws or administrative
practices in countries within which we operate could have a material adverse
effect on us.
We Are Subject to Foreign Exchange Rate Risks
The proceeds from the Unit Offering and the Discount Notes Offering were in
U.S. dollars, but many of the costs and expenses of implementing our business
strategies will be in Euros and, to a lesser extent, in Swiss Francs.
Therefore, the extent to which we can apply such proceeds to these costs and
expenses will be subject to currency exchange rate fluctuations.
The principal and interest due on the Senior Notes and the Discount Notes is
payable in U.S. dollars. However, our revenues will largely be in Euros and, to
a lesser extent, in Swiss Francs. Accordingly, our ability to pay the interest
and principal when due on the Senior Notes and the Discount Notes will be
dependent to a significant extent on the future exchange rate of the Euro
against the U.S. dollar.
We May Not Have the Financial Resources to Repurchase the Senior Notes, the
Discount Notes or the PIK Notes as Required on a Change of Control
Upon the occurrence of a change of control (as defined in the Indentures), we
will be required to make an offer to purchase all of the outstanding Senior
Notes, Discount Notes and PIK Notes at a price equal to 101% of the accreted
value or principal amount, as applicable, of the Senior Notes, Discount Notes
and PIK Notes, plus accrued and unpaid interest, if any, to the date of
repurchase. In such an event, we cannot be certain that we would have
sufficient assets to satisfy our obligations under the Senior Notes, Discount
Notes and PIK Notes and any other indebtedness then outstanding. Our failure to
repurchase the Senior Notes, Discount Notes and PIK Notes upon a change of
control due to inadequate financial resources in such instance would result in
a default under the Indentures.
There Are Questions About Certain Actions Taken by Our Predecessor
In 1996, the good standing of our predecessor, Cybernet Utah, was revoked by
the State of Utah for failure to pay excise taxes. This occurred prior to any
transaction with Cybernet AG and at a time when the predecessor company had
officers, directors and management who, with the exception of one individual,
are and were unaffiliated with our officers, directors and management. In 1997,
the State of Utah reinstated our predecessor company's good standing, based
upon certain actions which were taken by its Board of Directors. These actions
were taken without prior approval of shareholders but were ratified by
shareholders before consummation of the transaction with Cybernet AG. There is
a degree of uncertainty as to whether the shareholders' subsequent ratification
suffices to authorize the actions of the predecessor's Board of Directors. We
believe it is unlikely that anyone would challenge these actions of our
predecessor company and our legal counsel has advised us that, even if someone
did, such actions are unlikely to be properly attributable to us, the successor
company, and such actions are unlikely to give anyone the ability to
successfully pursue a remedy against us, in each case in such a way as to have
a material adverse effect on us. Nevertheless, we cannot assure you that such a
challenge will not be made and, if successful, that it would not have a
material adverse effect on our business, results of operations and financial
condition.
There Are Questions About Service of Process and Enforcement of Judgments
We are a Delaware corporation maintaining a registered agent in Delaware, and
process may be served at the address of the registered agent. However, most of
our assets are located outside the United States. Most of our officers and
directors are not residents of the United States, and a substantial portion of
their assets is located outside the United States. As a result, it may not be
possible for investors to effect service of process in the United States upon
such non-resident officers and directors or to enforce in jurisdictions outside
the United
26
<PAGE>
States judgments obtained against us or our directors and officers. This
applies to any action, including civil actions based on the U.S. federal
securities laws. In addition, awards for punitive damages in actions brought in
the United States or elsewhere may be unenforceable in Germany.
There May be Questions About Our Status Under German Law
We are a Delaware corporation in good standing the existence of which is
legally recognized under state and federal law in the United States. Since
incorporating in Delaware in November 1998, our Board of Directors has included
a U.S. resident and we have held shareholders' and directors' meetings in the
United States. In May 1999, we established an office in the United States and
elected a U.S. resident as our Secretary and a U.S. citizen as our Chief
Financial Officer. However, most of our day-to-day activities have been managed
from Europe and we did not maintain a U.S. office before May 1999. The
possibility exists that a German court might view precedents so as to refuse to
recognize our existence as a U.S. corporation in the period between our
November 1998 incorporation and the establishment of our U.S. office on the
grounds that we were required to maintain more contact with the United States
during that period. If such a challenge to our status as a U.S. corporation
were successfully brought under German law, contracts into which we entered
during that period might be void and Cybernet might be treated as if it were a
general partnership under German law. Acting for and on behalf of Cybernet, our
management could be held personally liable for our actions and liabilities and
may, as a consequence, be entitled to be indemnified by Cybernet. We have been
advised by our German counsel that our contacts with the United States were
sufficient at all times and that it is likely that a German court would
conclude that we were at all times recognizable as a Delaware corporation under
German law. However, the possibility exists that a German court might read
certain precedents to the contrary. We cannot assure you that such a challenge
to our status under German law would not be made or that, if made, such
challenge would not be successful. The implications of a successful challenge
are uncertain but would likely have a material adverse effect on our business,
results of operations and financial condition.
Sales of Shares by Our Shareholders Could Depress Our Stock Price.
The market price of our common stock could drop as a result of sales of a
large number of our shares or warrants or a substantial amount of our
convertible debt securities in the public market after the Exchange Offer and
after registration of our convertible debt securities. The perception that such
sales may occur could have the same effect. The price of the Notes would also
likely be adversely affected by decreases in the price of our common stock.
As of August 2, 1999, our executive officers and directors owned, directly or
indirectly, approximately 9% of our common stock and approximately 17% of our
Series A Non-Voting Preferred Stock. Our Series A Non-Voting Preferred Stock is
convertible in various amounts over time into common stock and all of it is
convertible by January 1, 2001. In addition, executive officers and directors
hold options to purchase an aggregate of 300,000 shares of common stock
exercisable starting on December 28, 1999. Assuming conversion of all these
shares and exercise of all these warrants, these officers and directors would
hold approximately 11.14% of our common stock.
In addition, Holger Timm owns, either directly or indirectly through a
company controlled by him, shares of common stock, Series A Non-Voting
Preferred Stock and Series B Voting Preferred Stock which in the aggregate and
assuming conversion of all the Series A Non-Voting Preferred Stock into Voting
Stock, would constitute approximately 27% of our voting shares.
One Shareholder Controls a Large Block of Cybernet Stock and His Interests May
Conflict with Yours
Holger Timm, a former director of Cybernet who resigned on December 2, 1998,
directly or indirectly, holds approximately 12% of the common stock of
Cybernet, 100% of the Series B Voting Preferred Stock and 58.1% of the Series A
Non-Voting Preferred Stock, which is convertible, over time, into our common
stock. As a result, assuming conversion of all the Series A Non-Voting
Preferred Stock into Voting Stock, Mr. Timm
27
<PAGE>
would hold approximately 27% of our voting shares. Mr. Timm is the controlling
shareholder and an executive officer of the company which owns 40% of the
investment bank which served as the underwriter in our December 1998 public
offering of common stock, for which services such investment bank received
approximately $3 million in fees. Mr. Timm is also a principal shareholder and
executive officer of one of our customers, Cybermind, which is itself a
principal shareholder of the Company. Mr. Timm has the power to influence
actions requiring shareholder approval (including amendments to our Certificate
of Incorporation and By-laws and approving mergers and sales of all or
substantially all of our assets). We can offer no assurance that the interests
of Mr. Timm will not conflict with your interests. See "Stock Ownership of
Principal Beneficial Owners and Management."
We Are Subject to Certain Anti-Takeover Provisions Which May Delay or Prevent
a Change of Control
Certain provisions of the Delaware General Corporation Law (the "DGCL") and
our Certificate of Incorporation and By-Laws may delay, discourage or prevent a
future takeover or change in control of Cybernet unless such takeover or change
in control is approved by our Board of Directors. Such provisions may also make
the removal of directors and management more difficult, may discourage bids for
our common stock at a premium over the market price and may adversely affect
the market price, the voting and other rights of the holders of our common
stock.
In particular, we are subject to the anti-takeover provisions of Section 203
of the DGCL, which prohibits us from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder, unless the
business combination is approved in a prescribed manner.
In addition, our Certificate of Incorporation provides that the Board of
Directors must be divided into three classes of directors serving staggered
terms and that all stockholder actions must be effected at a duly called
meeting and not by written consent. Either of these provisions could have the
effect of discouraging a third party from making a tender offer or otherwise
attempting to gain control of Cybernet. Our Certificate of Incorporation also
places certain restrictions on who may call a special meeting of stockholders.
In addition, our Board of Directors has the authority to issue up to
50,000,000 shares of undesignated preferred stock, of which 4,793,440 shares
were issued and outstanding at August 2, 1999, and to determine the price,
rights, preferences, and privileges of those shares without any further vote or
actions by the stockholders. The rights of the holders of our common stock are
subject to, and may be adversely affected by, the rights of all present and any
future holders of Preferred Stock. The issuance of additional shares of
Preferred Stock may provide desirable flexibility in connection with possible
acquisitions and may serve other corporate purposes but such issuance could
make it more difficult for a third party to acquire a majority of the
outstanding voting stock of Cybernet.
The Internet Services Market Is New and Uncertain and It May Be Difficult to
Retain Customers
The market for Internet connectivity services and related software products
and services is in an early stage of growth, particularly in the European
markets in which we operate. As a consequence, current and future competitors
are likely to introduce competing Internet connectivity services, online
services and products, and it is difficult to predict the rate at which the
market will grow or at which new or increased competition will result in market
saturation. For example, certain companies have recently introduced free
Internet access services in support of their other product and service
offerings. If demand for Internet services fails to grow, or grows more slowly
than anticipated, our business, results of operations and financial condition
could be materially adversely affected.
The immature nature of the market for Internet access services may also
adversely affect our ability to retain new customers, as customers may
discontinue our services after an initial trial period. During each fiscal
period we typically acquire new customers for our products and services, while
seeking to renew service
28
<PAGE>
agreements with existing customers. The sales and marketing expenses associated
with attracting new customers are substantial. Our ability to improve operating
margins will depend, in significant part, on our ability to retain customers.
While we continue to invest significant resources in our telecommunication
infrastructure and customer support resources, we cannot be certain that these
investments will improve customer retention. Since the Internet market is new
and the utility of available services is not well understood by many new and
potential customers, we are unable to predict future customer retention rates.
Any deterioration in customer retention rates or increased costs associated
with retaining customers could have a material adverse effect on our business,
results of operations and financial condition.
We Are Dependent on the Internet
Our products and services are targeted toward users of the Internet, which
has experienced rapid growth. Evolving industry standards, frequent new product
and service introductions and demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty, as
is typical in the case of a new and rapidly evolving industry characterized by
quickly changing technology. While we believe that Europeans will adopt this
new technology with the same enthusiasm that the people in the United States
have, we cannot be certain that the European market will develop to the same
extent.
In addition, critical issues concerning the commercial use of the Internet
remain unresolved and may impact the growth of Internet use, especially in the
business and geographic markets we target. Despite growing interest in the many
commercial uses of the Internet, many businesses have been deterred from
purchasing Internet access services for a number of reasons, including, among
others:
. lack of availability of cost-effective, high-speed options;
. inconsistent quality of service;
. a limited number of local access points for corporate users;
. inability to integrate business applications on the Internet;
. the need to deal with multiple and frequently incompatible vendors;
. inadequate protection of the confidentiality of stored data and
information moving across the Internet; and
. a lack of tools to simplify Internet access and use.
In particular, a perceived lack of security of commercial data, such as
credit card numbers, has significantly impeded commercial exploitation of the
Internet to date, and we cannot be certain that encryption or other
technologies will be developed to satisfactorily address these security
concerns. Capacity constraints caused by growth in the use of the Internet may
also, unless resolved, impede further expansion in the use of the Internet to
the extent that users experience delays, transmission errors and other
difficulties. Further, the adoption of the Internet for commerce and
communications replaces more established means of communication and requires
the understanding and acceptance of a new way of conducting business and
exchanging information. Some businesses may be unwilling to commit themselves
to learning this new way of conducting business until it is proved.
We Are Subject to Security and Fraud Risks
Despite our efforts to implement network security measures, such as limiting
physical and network access to our routers, our Internet infrastructure is
vulnerable to computer viruses, break-ins and similar disruptive problems
caused by customers, employees or other Internet users. Computer viruses,
break-ins or other disruptive or security problems could lead to interruptions,
delays or cessation in service to our Internet customers. Further, such
inappropriate or unauthorized use of the Internet could also potentially
jeopardize the security of confidential information stored in the computer
systems of our customers and other parties connected to the Internet, which may
deter potential customers and give rise to uncertain liability to users
29
<PAGE>
whose security or privacy has been violated. The security and privacy concerns
of existing and potential customers may inhibit the growth of the Internet
service industry in general and our customer base and revenues in particular. A
significant security breach could result in a loss of customers, damage to our
reputation, direct damages, costs of repair and detection and other expenses.
In addition, our revenues for any given period may be adversely affected by
fraud or debt collection problems that we experience. The occurrence of any of
the foregoing events could have a material adverse effect on our business,
results of operations and financial condition.
We May Be Hurt by System Failures
Our success is largely dependent upon our ability to deliver high speed,
uninterrupted access to the Internet. Any system failure that causes
interruptions in our operations could have a material adverse effect on us. Our
telecommunications network is carried primarily on lines leased from Deutsche
Telekom. Failures in this or any other telecommunications network we rely on
would result in customers' receiving no or diminished access to the Internet.
We also currently lease the properties where our POPs are located. Any
relocation that may be required as a result of expired or changing lease terms
may result in increased costs or temporary disruption of service. We seek to
upgrade our POPs regularly to reduce congestion and improve efficiency.
However, any such future difficulties could cause a loss of customers or slow
the growth of new customers and could, therefore, have a material adverse
effect on our business, results of operations and financial condition.
Our operations are dependent on our ability to protect our computer equipment
and the information stored in its data centers, access nodes and POPs against
damage by fire, natural disaster, power loss, telecommunications failures,
unauthorized invasion and other catastrophic events. We believe we have taken
appropriate measures to reduce the risk of interruption in our operations.
However, we cannot assure you that these measures are sufficient. Any damage or
failure that causes interruptions in our operations could have a material
adverse effect on our business, results of operations and financial condition.
We Could Be Held Liable for Information Disseminated Over Our Network
The law relating to liability of ISPs for information and materials carried
on or disseminated through their networks is not completely settled. A number
of lawsuits have sought to impose such liability for material deemed to be
socially harmful. In particular, one lower court in Germany, where we presently
have the majority of our operations, recently found the manager of an ISP
liable for the contents of materials transmitted after the ISP failed to remove
the offending material from its news-server, despite requests from government
authorities. The law relating to the regulation and liability of information
carried or disseminated by ISPs is also undergoing a process of development in
other European countries.
The possibility that courts could impose liability for information or
material carried on or disseminated through our network could require us to
take measures to reduce our exposure to such liability. Such measures may
require us to spend substantial resources or to discontinue certain product or
service offerings. Any of these actions could have a material adverse effect on
our business, operating results and financial condition.
Due to the increasing use of the Internet, it is possible that additional
laws and regulations may be adopted with respect to the Internet covering
issues such as user privacy, pricing, taxes, defamation, obscurity,
intellectual property protection, consumer protection technology export and
other controls. Changes in the regulatory environment relating to the Internet
services industry, including regulatory changes that directly or indirectly
affect telecommunication costs or increase the likelihood or scope of
competition, could have a material adverse effect on our business, results of
operations and financial condition.
We Are Subject to Regulation
Currently, few laws or regulations are directly applicable to activities or
commerce on the Internet. However, a number of legislative and regulatory
proposals are under consideration and may be adopted in various jurisdictions
with respect to issues such as Internet user privacy, infringement, pricing,
taxes, quality of
30
<PAGE>
products and services and intellectual property rights. It is uncertain how
existing laws will be applied to the Internet in areas such as intellectual
property (including copyrights, trademarks and trade secrets), obscenity and
defamation. The adoption of new laws or the adaptation of existing laws to the
Internet may decrease the growth in the use of the Internet, which could in
turn decrease the demand for our products and services, increase our cost of
doing business or otherwise have a material adverse effect on our business,
result of operations and financial condition.
The European telecommunications industry, which we plan to enter, is subject
to a significant degree of regulation. Our ability to operate networks and
provide services in Germany, Austria, Italy and Switzerland is dependent upon
our ability to obtain appropriate licenses, registrations and other
authorizations or permissions from governmental authorities in each
jurisdiction in which we operate and on those licenses and other authorizations
remaining in force. Such licenses generally contain clauses pursuant to which
we may be fined or our license may be revoked in certain circumstances. Such
revocation may be on very short notice. The revocation of any of our licenses
would force us to stop operating in the relevant country. In some cases, the
licenses we receive may be of fixed duration and we must comply with
regulations and technical requirements prescribed by the jurisdiction in which
we obtained such licenses in order to maintain them. We have no guarantees that
we will be able to obtain, maintain or renew the licenses, authorizations and
registrations we need to provide telecommunications services or that such
licenses and other authorizations will be issued or renewed on terms or with
fees that are commercially viable. The loss, or substantial limitations of, or
the failure to obtain, licenses, authorizations or registrations could have a
material adverse effect on our business.
The recent liberalization of the European telecommunications market, induced
by legislation of the European Union ("EU") and the introduction of the World
Trade Organization Basic Telecom Agreement, has significantly reduced the
regulatory barriers to entry in the markets in which we operate or intend to
operate. However, national regulatory frameworks which are fully consistent
with the policies and requirements of the EU and the World Trade Organization
have only recently been, or are still being, implemented in certain EU member
states and Switzerland, respectively. These nations are in the early stages of
providing for and adapting to a liberalized telecommunications market. As a
result, in these markets, we and other new entrants may encounter more
protracted and difficult procedures to obtain licenses and negotiate
interconnection agreements. We cannot assure you that further alterations to
the regulatory frameworks, which may place our operations and competitive
position at a disadvantage, will not be made in the future. In particular,
German regulatory authorities have indicated to Deutsche Telekom, the dominant
telecommunications provider in Germany, that it will be allowed to take
additional costs into account when determining fees, subject to regulatory
approval. Although the regulatory authority denied Deutsche Telekom's first
application for higher prices on the basis that Deutsche Telekom had not
demonstrated higher costs, we cannot assure you that the regulatory authorities
will continue to reach such conclusions in the future. We also cannot assure
you that such fees, which tend to be favorable for new entrants providing long
distance and international voice telephony services, will remain at their
current levels. See also "Business--Regulation."
Many of the countries in which we intend to establish facilities and provide
services lack the level of experience the United States has with regulation of
a competitive telecommunications market. In Germany and many of the other
Western European countries in which we operate or intend to operate the markets
for public switched services were virtually closed to competition until January
1, 1998. Prior to that time, few entities other than the incumbent operators
had the right to provide public voice telephony services or installed public
networks. As a result, few pro-competitive regulations and regulators existed
to enforce laws and regulations against the incumbent operators. The limited
experience of legislators, regulators and courts with the implementing of a
competitive regulatory regime, combined with continued full or partial
government ownership of the incumbent operators, as discussed below, could slow
or even undermine the movement to competitive telecommunications markets in
these countries.
As a result, we may be incorrect in our assumptions that:
. each European country where we intend to establish networks and provide
services will enact and enforce, on a timely basis, the measures
necessary to ensure that new entrants such as Cybernet can compete
fairly with the incumbent operators; and
31
<PAGE>
. we will be allowed to provide and expand our services in these European
countries as set forth in our business plans.
We cannot assure you, with respect to any country in which we operate or plan
to operate, that future changes in the law, regulation, or government will not
have a material adverse effect on Cybernet.
We Are Subject to Intellectual Property Risks
Legal standards relating to the validity, enforceability and scope of
protection of intellectual property rights in Internet-related industries are
uncertain and still evolving, and we cannot be certain as to the future
viability or value of any of our intellectual property rights or those of other
companies within the IT industry. We cannot assure you that the steps we have
taken to protect our intellectual property rights will be adequate or that
third parties will not infringe or misappropriate our proprietary rights. Any
such infringement or misappropriation, should it occur, could have a material
adverse effect on our business, results of operations and financial condition.
Furthermore, we cannot be certain that our business activities will not
infringe the proprietary rights of others or that such other parties will not
assert infringement claims against us. We anticipate that we may be subject to
claims in the ordinary course of our business, including claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties due to the dissemination of our content or the provision of access by
our online services to content made available by third parties. Such claims and
any resultant litigation, should it occur, could subject us to significant
liability for damages and could result in invalidation of our proprietary
rights and, even if not meritorious, could be time-consuming and expensive to
defend, and could result in the diversion of management time and attention, any
of which could have a material adverse effect on our business, results of
operations and financial condition.
We regard substantial elements of our products and services as proprietary
and we attempt to protect them by relying on trademark, service mark, trade
dress, copyright and trade secret laws and restrictions on disclosure and
transfer of title. We also enter into confidentiality agreements with our
employees, suppliers, distributors, consultants, vendors and customers and
license agreements with third parties and generally seek to control access to
and distribution of our technology, documentation and other proprietary
information. We are pursuing the registration of our service marks in the EU
but we currently have no patents or applications for patents pending for our
products or services. Effective service mark, copyright and trade secret
protection may not be available in every country in which our products and
services are distributed or made available. We cannot assure you that the steps
we have taken to protect our proprietary rights will be adequate or that third
parties will not infringe or misappropriate our copyrights, service marks,
trade dress and similar proprietary rights.
We Are Dependent on Our Billing and Information Systems
As we add additional services, sophisticated back office information and
processing systems become more and more vital to our growth and our ability to:
. manage and monitor traffic along our network;
. track service provisioning, traffic faults and repairs;
. effect least cost routing;
. achieve operating efficiencies;
. monitor costs;
. bill and receive payments from customers; and
. reduce credit exposure.
We have purchased from Kenan Systems ("Kenan") a new billing system which we
have installed and are integrating into our German operations and which we are
beginning to implement in Italy. We cannot
32
<PAGE>
assure you that this system will be successfully implemented on a timely basis
or at all, or that it will perform as expected. We also cannot assure you that
this transition will not cause delays or interruptions in our monitoring and
billing activities.
The billing system we are acquiring will require enhancements and ongoing
investments, particularly as traffic volume increases. We may encounter
difficulties in enhancing our systems or integrating new technology into our
systems in a timely and cost-effective manner. Implementation of that system in
Germany did cause some delay in our processing of customer invoices and we
cannot assure that its implementation in other countries will not cause similar
delays. Such difficulties could have a material adverse effect on our ability
to operate efficiently and provide adequate customer service.
We Are Subject to Risks Associated with Converting to the Euro
On January 1, 1999, 11 of the 15 EU member countries adopted the Euro as
their common legal currency, at which time their respective individual
currencies became irrevocably fixed at a rate of exchange to the Euro, and the
Euro became a currency in its own right. Presently, the following 11 currencies
are subject to the Euro conversion: the Austrian Shilling, the Belgian Franc,
the Dutch Guilder, the Finnish Markka, the French Franc, the Deutsche Mark, the
Irish Punt, the Italian Lira, the Luxembourg Franc, the Portuguese Escudo and
the Spanish Peseta.
From January 1, 1999, until January 1, 2002, the Euro will exist in
electronic form only and the participating countries' individual currencies
will persist in tangible form as legal tender in fixed denominations of the
Euro. During this transition period, we must manage transactions with our
customers and our third party vendors in both the Euro and the participating
countries' respective individual currencies. This may cause significant
logistical problems. We may incur increased operational costs and may have to
modify or upgrade our information systems in order to:
. convert individual currencies to Euro;
. convert individual currencies of participating countries into each
other;
. execute conversion calculations utilizing six-digit exchange rates and
other prescribed requirements;
. accommodate the new Euro currency symbol; and
. permit pricing, advertising, billing, accounting, internal financial
calculations, sales and other transactions or practices to be effected
simultaneously in Euro and the participating countries' respective
individual currencies.
Changes in pricing denominations for products once sold and advertised in an
individual currency and now sold and advertised in the Euro could cause
material billing errors and complications. Fluctuations in the business cycles
of a participating country or a failure on any participating country's part to
comply with EC directives could have negative economic effects on other
participating countries, including countries in which we operate. Any of the
above could have a material adverse effect on us and our ability to make
payments under the Senior Notes, the Discount Notes and the PIK Notes.
While we believe that our systems have not been adversely impacted by the
Euro conversion, we cannot guarantee that we will be able to avoid the
accounting, billing and logistical difficulties that might result from the
introduction of the Euro. In addition, we cannot be sure that we, our third-
party suppliers or our customers will be able to implement the necessary
protocols successfully. If we, our third-party vendors, customers or any others
with whom we must interact or interconnect, fail to adapt and modify our
procedures and systems to accommodate the Euro conversion, this could
materially adversely affect our results of operations and our ability to meet
our obligations under the Senior Notes, the Discount Notes and the PIK Notes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Conversion to the Euro."
33
<PAGE>
We Are Subject to Certain Risks Associated with the Year 2000
The Year 2000 problem results from the fact that many existing computer
programs and systems have used only two digits to identify the year in the date
field. These programs were designed and developed without considering the
impact of a change in the century designation. If not corrected, computer
applications that use a two-digit format could fail or create erroneous results
in any computer calculation or other process involving the Year 2000 or a later
date.
We have identified two main areas of Year 2000 risk for our IT systems:
. Our internal computer systems or embedded chips could be disrupted or
fail, causing an interruption or decrease in productivity in our
operations; and
. Computer systems or embedded chips of third parties including (without
limitation) financial institutions, suppliers, vendors, landlords,
customers, suppliers of communications services and others could be
disrupted or fail, causing an interruption or decrease in our ability to
continue our operations.
We have recently completed, or are in the process of completing, a number of
acquisitions and have therefore had less of an opportunity to identify and
address any Year 2000 issues such companies may have.
Although we have taken significant steps to identify and remedy the Year 2000
problem, we cannot assure you that our operations will not be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."
We Are Subject to the Risks Associated with Rapid Industry Changes
Changes in the Internet Services Industry
The Internet services industry in which we operate is characterized by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new service, software and other product innovations. We cannot
guarantee that we will be able to identify new service opportunities
successfully and develop and bring new products and services to market in a
timely and cost-effective manner, or that products, software and services or
technologies developed by others will not render our products and services non-
competitive or obsolete. In addition, we cannot provide any assurance that our
product or service developments or enhancements will achieve or sustain market
acceptance or be able to address effectively the compatibility and
interoperability issues raised by technological changes or new industry
standards.
As Internet-related industries evolve, we may be required to develop or
acquire additional technological capabilities. In particular, there is
substantial uncertainty as to the transmission media for future ISPs.
Currently, we provide access to Internet services primarily through analog
telephone lines and ISDN lines. Several companies have recently introduced, on
an experimental basis, delivery of Internet access services through cable
television lines. If the Internet becomes accessible by cable modem, or if
screen based telephones, television or other consumer electronic devices or
customer requirements change the way Internet access is provided, we will need
to develop new services or modify our existing services to accommodate these
developments. This pursuit of technological advances may require substantial
time and expense and we cannot be certain that we will succeed in adapting our
business to handle such requirements. Failure to do so could have a material
adverse effect on our business, results of operations and financial condition.
Changes in the Telecommunications Industry
The European telecommunications industry which we are entering is also
changing rapidly due to, among other factors:
. market liberalization;
. continuing privatization of incumbent operators;
34
<PAGE>
. significant technological advancements;
. introductions of new products and services utilizing new technologies;
. increased availability of transmission capacity;
. expansion of telecommunications infrastructure;
. increased use of the Internet for voice and data transmission; and
. the globalization of economies and trade.
These factors are likely to continue to affect our markets and may have
unforeseen effects which could have a material adverse effect on us. In
particular, if the continued growth we anticipate in the demand for voice and
IP services were not to occur or we were precluded from servicing this
anticipated demand, we might not be able to generate sufficient revenues in the
next few years to fund our working capital requirements. Even if these factors
turn out as anticipated, we cannot be sure that our strategy will be successful
in this rapidly evolving market. In addition, further changes may happen at any
time that could significantly affect our operations.
Our success will depend substantially on our ability to predict which of the
many possible current and future networks, products and services will be
important to finance, establish and maintain. In particular, as we further
expand and develop our network, we will become increasingly exposed to the
risks associated with the relative effectiveness of our technology and
equipment. The cost of implementation of emerging and future technologies could
be significant, and we cannot be certain that we will select appropriate
technology and equipment or that we will obtain such new technology on a timely
basis or on satisfactory terms. We may choose new technologies that prove to be
inadequate or incompatible with technologies of our customers, providers of
transmission capacity or other carriers. As new technologies develop, we may be
forced to implement such new technologies at substantial cost to remain
competitive. In addition, competitors may implement new technologies before we
do, allowing such competitors to provide lower priced or enhanced services and
superior quality compared to those we provide. The failure to obtain effective
technology and equipment may hinder our ability to provide competitive products
and services, and may adversely affect the viability of our operations and
could have a material adverse impact on our business.
The Markets in Which We Operate Are Highly Competitive
Competition in the Internet Services Market
The Internet services market is extremely competitive and we expect
competition in this market to intensify in the future. We believe that our
ability to compete successfully depends on a number of factors including:
. our market presence;
. our image and reputation;
. our technical expertise;
. the capacity, reliability, latency and security of our network
infrastructure;
. the functionality, performance and quality of our services;
. our ability to provide customization and customer support;
. the variety of services we offer;
. the pricing and quality of products and services offered by competitors
and suppliers;
. the timing of our introductions of new products and services and of
those of our competitors;
35
<PAGE>
. our ability to support industry standards; and
. industry and general economic trends.
Many new start-up businesses as well as existing businesses in different
industries have been drawn by the tremendous growth and potential market size
of the Internet services market. Our current and prospective competitors
include:
. ISPs such as European Computer Industry Research Centre, Xlink, PSInet,
UUNet Technologies, EUnet and Nacamar in Germany; EUnet Multimedia
Network Services, Netway Austria and Cybertron in Austria; and I-Net in
Italy; as well as numerous smaller, regional ISPs in each country;
. established online services such as America Online and CompuServe;
. major systems integrators and computer manufacturers such as Andersen
Consulting and IBM;
. telecommunications companies such as Mannesmann Arcor, Deutsche Telekom
and Viag Interkom in Germany; Telekom Austria and United Telecom Austria
in Austria; and Infostrada, Telecom Italia and Wind in Italy;
. cable operators such as Deutsche Telekom and Primacom; and
. value-added resellers of computer, network and peripheral equipment.
Many of these current and prospective competitors have greater market
presence, engineering and marketing capabilities, brand recognition and
financial, technological, personnel and other resources than we do. As a
result, such competitors may be able to develop and expand their communications
and network infrastructures more quickly, to adapt more swiftly to new or
emerging technologies and changes in customer requirements, to take advantage
of acquisition and other opportunities more readily, and to devote greater
resources to the marketing and sale of their products and services than we can.
Prices for IP services are currently relatively high in Europe. However, the
U.S. market for IP services has been experiencing downward pressure on prices
and certain companies have recently introduced free Internet access services in
Europe in support of their other product and service offerings. As competition
increases, we anticipate comparable price decreases in the European IP market
over the next few years. As a result of an increase in the number of
competitors, and vertical and horizontal integration in the industry, we
currently encounter and expect to continue to encounter significant pricing
pressure. We cannot be certain that we will be able to offset the adverse
effect on revenues of any necessary price reductions by increasing the number
of our customers, generating higher revenue from enhanced services, reducing
costs or otherwise. We cannot assure you that IP service prices will not
decline more quickly than our IP transmission or termination costs. If this
were to occur, it could have a material adverse effect on our gross profit
margins.
Competition affects not only the price of our products and services but also
our ability to attract and retain effective, knowledgeable salespeople.
Furthermore, advances in technology as well as changes in the marketplace and
the regulatory environment occur constantly and we cannot predict the effect
that ongoing or future developments may have on us or on the pricing of our
products and services. In addition, we believe that Internet access services
businesses are likely to encounter consolidation in the near future, which
could result in increased price and other competition. This could result in an
erosion of our market share and could prevent us from becoming profitable. In
summary, we cannot be certain that we will have the financial resources,
technical expertise or marketing and support capabilities to compete
successfully in the Internet services market.
Competition in the European Telecommunications Market
Competition in the European telecommunications market, which we are entering,
is intense and is based primarily on price. The opening of the market to
alternative operators, combined with technological advances, has resulted in
significant reductions in retail and wholesale prices for voice services.
Prices declined significantly during 1998 and we expect prices to continue to
decline. While decreasing prices fuel growing demand for bandwidth, they
36
<PAGE>
also narrow gross profit margins on long distance voice traffic. Our ability to
compete successfully in this environment will significantly depend on our
ability to generate high traffic volumes from our customers while keeping our
cost of services low. We cannot assure you that we will be able to do this.
In all of the countries in which Cybernet currently offers its services we
compete with the incumbent operators (Deutsche Telekom in Germany, Austria
Telecom in Austria, Telecom Italia in Italy and Swisscom in Switzerland ). In
all of these countries, the incumbent operators virtually control all access to
local networks and have significant operational economies, including a large
national network and existing operating agreements with other incumbent
operators.
Many of our competitors have greater financial resources and would be in a
better position than we would be to withstand the adverse effect on gross
profit margins caused by price decreases, particularly those competitors that
already own infrastructure and have interconnection or peering arrangements and
thus enjoy a lower cost base than we do. Unless and until we are able to reduce
our cost base, we may not be able to compete on the basis of price if market
prices are reduced below a certain level. Inability to price our services
competitively may in turn cause us to lose customers.
There Is No Established Market for the Senior Notes
The Senior Notes are a new issue of securities for which there is currently
no trading market. We cannot assure you as to:
. the liquidity of any market for the Senior Notes that may develop;
. your ability as a holder of the Senior Notes to sell the Senior Notes;
or
. the price at which you would be able to sell any of your Senior Notes.
The initial purchasers of the Senior Notes have advised us that they intend
to make a market in the Senior Notes. The initial purchasers are not obligated,
however, to make a market, and any such market-making may be discontinued at
any time at the sole discretion of the initial purchasers and without notice.
Moreover, the liquidity of the trading market in the Senior Notes may be
adversely affected by changes in the overall market for high-yield securities
and by changes in our financial performance or prospects or in the prospects
for companies in our industry in general. Accordingly, we cannot assure you as
to the development or liquidity of any market for the Senior Notes. If a market
for any of such securities were to develop, they could trade at prices that may
be higher or lower than those reflected by their offering price depending on
many factors, including prevailing interest rates, our operating results and
the market for similar securities. Historically, the market for such securities
has been subject to disruptions that have caused substantial volatility in the
prices of similar securities. If a market for the Senior Notes were to develop,
we cannot be certain that such a market would not be subject to similar
disruptions.
Dilution
At June 30, 1999, the net tangible book value of our common stock was $0.95
per share. After giving effect to the Private Offerings, and assuming that all
Warrants offered in the Unit Offering were exercised at June 30, 1999 at an
exercise price per share of $22.278, and that all notes offered in the Discount
Notes Offering and in the PIK Notes Offering were converted at June 30, 1999 at
the conversion price of $25.00, the adjusted pro forma net tangible book value
per share would have been $6.71 as of June 30, 1999.
We Do Not Expect to Pay Dividends
The Company does not anticipate paying cash dividends in the foreseeable
future. See "Price Range of Common Stock and Dividend Policy."
37
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the Exchange Notes
offered hereby. In consideration for issuing the Exchange Notes contemplated
herein, we will receive in exchange Outstanding Notes in like principal amount.
The Outstanding Notes surrendered in exchange for the Exchange Notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any change in the Indebtedness (as defined on
page 127) of our Company.
The net proceeds from the Unit Offering were approximately $144,800,000,
after deducting underwriting discounts and commissions and estimated fees and
expenses. We used $57,466,076 of the net proceeds to purchase the U.S.
government securities which have been pledged with the escrow agent to assure
payment of the first six interest payments on the Notes. We also used
$22,374,264 to repay the Company's Interim Loan. We plan to use the remaining
net proceeds of approximately $65 million for capital expenditures and general
corporate purposes. The net proceeds from the Discount Notes Offering and the
PIC Notes Offering were approximately $47,000,000 and (Euro)23,000,000,
respectively.
Although we intend to use the proceeds of the Private Offerings for capital
expenditures and general corporate purposes, the amount of proceeds to be
applied for various purposes is likely to change as our current plans and the
assumption underlying them change or prove to be inaccurate. For example, we
may determine to use a portion of the proceeds to acquire companies that are
complementary to our business, although we currently have no formal commitments
or agreements to do so. Accordingly, we can provide no assurance that the
remaining net proceeds of the Unit Offering will be applied for capital
expenditures and general corporate purposes.
Pending utilization of the remaining net proceeds of the Unit Offering, we
intend to invest such proceeds in short-term investment grade securities and
other financial instruments.
38
<PAGE>
EXCHANGE RATE INFORMATION
The following tables set forth, for the periods indicated, certain
information concerning the Noon Buying Rate for Deutsche Marks, Italian Lire,
Austrian Schillings and Euro, expressed in Deutsche Marks, Italian Lire,
Austrian Schillings and Euro, respectively, per dollar. Such rates are provided
solely for the convenience of the reader and should not be construed as a
representation that Deutsche Marks, Italian Lire, Austrian Schillings or Euro
amounts actually represent such dollar amounts or that such Deutsche Marks,
Italian Lire, Austrian Schillings or Euro amounts could have been, or could be,
converted into dollars at that rate or at any other rate. We did not use such
rates in the preparation of the combined financial statements of the Company
included elsewhere in this prospectus. On the tables for the Deutsche Mark,
Italian Lira and Austrian Schilling, the columns entitled "Average Rate"
represent the average Noon Buying Rates on the last business day of each month
during the relevant period. As of January 1, 1999, the Deutsche Mark, the
Italian Lira and the Austrian Schilling began trading at fixed rates against
the Euro.
<TABLE>
<CAPTION>
Deutsche Mark Exchange Rate Average Period-
Year Ended December 31, Rate High Low End Rate
- --------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1995........................................ 1.4261 1.5612 1.3565 1.4345
1996........................................ 1.5070 1.5655 1.4354 1.5387
1997........................................ 1.7394 1.8810 1.5413 1.7991
1998........................................ 1.7588 1.8542 1.6060 1.6670
<CAPTION>
Italian Lira Exchange Rate Average Period-
Year Ended December 31, Rate High Low End Rate
- -------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1995........................................ 1,628.95 1,736.25 1,569.00 1,584.00
1996........................................ 1,538.37 1,602.00 1,496.00 1,519.00
1997........................................ 1,712.15 1,840.75 1,515.70 1,769.00
1998........................................ 1,737.19 1,827.60 1,592.00 1,654.00
<CAPTION>
Austrian Schilling Exchange Rate Average Period-
Year Ended December 31, Rate High Low End Rate
- -------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1995........................................ 9.8733 10.9845 9.5903 10.0810
1996........................................ 10.6002 11.0070 10.1000 10.8340
1997........................................ 12.2386 13.2330 10.8400 12.6340
1998........................................ 12.1940 13.0160 11.3230 11.6040
<CAPTION>
Euro Exchange Rate Period-
Month End 1999(a) High Low End Rate
- ------------------ -------- -------- --------
<S> <C> <C> <C> <C>
January 31........................................... 0.8794 0.8466 0.8794
February 28.......................................... 0.9114 0.8819 0.9095
March 31............................................. 0.9332 0.9079 0.9252
April 30............................................. 0.9466 0.9223 0.9466
May 28............................................... 0.9595 0.9270 0.9595
June 30.............................................. 0.9713 0.9509 0.9699
July 31.............................................. 0.9863 0.9329 0.9351
August 31............................................ 0.9607 0.9239 0.9486
</TABLE>
- --------
(a) On August 3, 1999, the Noon Buying Rate was $1.00 = (Euro)0.9363 and the
Euro was fixed to the Deutsche Mark at (Euro)1.00 = DM 1.9558, to the
Italian Lira at (Euro)1.00 = Lit. 1,936.27 and to the Austrian Schilling at
(Euro)1.00 = ATS 13.7603.
39
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Price Range Of Common Stock
Our common stock is traded on the OTC Bulletin Board under the symbol "ZNET"
and on the Neuer Markt of the Frankfurt Stock Exchange under the Symbol "CYN."
Our common stock also trades on the Freiverkehr of the Berlin and Munich Stock
Exchanges under the securities identification number WP-Kenn-Nr. 906 623. Our
principal foreign trading market is the Neuer Markt. As of August 2, 1999, the
Company had 169 registered stockholders of record. The closing price of the
common stock on the OTC Bulletin Board and the Neuer Markt on August 18, 1999
was $17.1875 per share and (Euro)17.0000 per share, respectively.
The following tables set forth for the periods indicated the high and low bid
prices for the common stock as reported each quarterly period in 1997 and 1998
and each monthly period in 1999 on the OTC Bulletin Board and the Neuer Markt.
The prices are inter-dealer prices, do not include retail mark up, mark down or
commission and may not necessarily represent actual transactions.
OTC BULLETIN BOARD
<TABLE>
<CAPTION>
High Low
1997 ------------ ------------
<S> <C> <C>
Third Quarter/(1)/............................ $ 11.250 $ 9.310
Fourth Quarter................................ $ 16.250 $ 7.750
<CAPTION>
High Low
1998 ------------ ------------
<S> <C> <C>
First Quarter................................. $ 34.500 $ 11.500
Second Quarter................................ $ 28.750 $ 20.000
Third Quarter................................. $ 29.875 $ 18.000
Fourth Quarter................................ $ 37.250 $ 13.000
<CAPTION>
High Low
1999 ------------ ------------
<S> <C> <C>
January....................................... $ 47.000 $ 29.625
February...................................... $ 43.875 $ 33.500
March......................................... $ 36.000 $ 26.500
April......................................... $ 27.750 $ 23.000
May........................................... $ 24.000 $ 20.000
June.......................................... $ 20.000 $ 16.000
July.......................................... $ 21.750 $ 14.500
August........................................ $ 18.000 $ 14.000
- --------
(1) On September 17, 1997, Cybernet Utah, the Company's predecessor, acquired
Cybernet AG. Prior to that date, Cybernet Utah had no material business
activities, assets or liabilities. Accordingly, stock prices for the period
prior to September 17, 1997, do not relate to the business in which the
Company is presently engaged.
NEUER MARKT OF THE FRANKFURT STOCK EXCHANGE
<CAPTION>
High Low
1998 ------------ ------------
<S> <C> <C>
Fourth Quarter (beginning December 9, 1998)... (Euro)33.029 (Euro)24.900
<CAPTION>
High Low
1999 ------------ ------------
<S> <C> <C>
January....................................... (Euro)41.200 (Euro)26.600
February...................................... (Euro)39.900 (Euro)31.400
March......................................... (Euro)32.500 (Euro)24.500
April......................................... (Euro)24.700 (Euro)21.650
May........................................... (Euro)23.400 (Euro)20.300
June.......................................... (Euro)19.500 (Euro)16.400
July.......................................... (Euro)19.800 (Euro)14.200
August........................................ (Euro)17.450 (Euro)13.300
</TABLE>
Dividend Policy
The Company has never paid dividends on its common stock.
40
<PAGE>
THE EXCHANGE OFFER
General
In connection with the Unit Offering, we entered into a registration rights
agreement with the initial purchases, Lehman Brothers International (Europe)
and Morgan Stanley & Co. International Limited and agreed to (i) file within 90
days, and use our best efforts to cause to be declared effective within 150
days, of the date of the original issuance of the Outstanding Notes a
registration statement of which this prospectus is a part with respect to a
registered offer to exchange the Outstanding Notes for the Exchange Notes with
terms substantially identical in all material respects to the Outstanding
Notes, and (ii) use our reasonable best efforts to cause the Exchange Offer to
be consummated on or before 30 days after the date on which the registration
statement is declared effective by the Securities and Exchange Commission.
In the event that (i) we are not permitted to file the registration statement
or to consummate the Exchange Offer on account of changes in law or the
applicable interpretations of the Staff of the SEC, (ii) any holder that is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act of 1933) notifies our Company at least 20 business days prior to the
consummation of the Exchange Offer that (a) applicable law or SEC policy
prohibits us from participating in the Exchange Offer, (b) such holder may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and that this prospectus is not appropriate or
available for such resales by such holder, or (c) such holder is a broker-
dealer and holds Notes acquired directly from us or one of our affiliates,
(iii) the Exchange Offer is not for any other reason consummated within 180
days after the original issuance of the Outstanding Notes, (iv) any holder
(other than a broker-dealer that is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of Exchange Notes received by
such broker-dealer in the Exchange Offer) is not eligible to participate in the
Exchange Offer, or in the case of any holder that participates in the Exchange
offer, such holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under federal securities laws (other than
due solely to the status of such holder as an affiliate of our Company within
the meaning of the Securities Act or due to the requirement that such holder
deliver a copy of this prospectus in connection with any resale of the Exchange
Notes), or (v) the Exchange Offer has been completed and in the opinion of
counsel for the initial purchasers a registration statement must be filed and a
prospectus must be delivered by the initial purchasers in connection with any
offering or sale of "Transfer Restricted Securities" (as defined in the
registration rights agreement), then we will use our best efforts to file,
within 90 days of the earliest to occur of the preceding events, a shelf
registration statement pursuant to the Securities Act with respect to the
resale of the Outstanding Notes and to keep the shelf registration statement
effective until the second anniversary (unless extended pursuant to the terms
of the registration rights agreement) of the issuance of the Outstanding Notes.
In the event that (i) neither the registration statement of which this
prospectus is a part nor the shelf registration statement is filed with the SEC
on or prior to the 90th day following the date of original issuance of the
Outstanding Notes, (ii) neither the registration statement nor the shelf
registration statement is declared effective on or prior to the 150th day
following the date of original issuance of the Outstanding Notes, (iii) the
Exchange Offer is not consummated on or before 30 days after the 150th day
following the date of original issuance of the Outstanding Notes, or (iv) (a)
the registration statement is filed and declared effective but thereafter,
ceases to be effective or fails to be usable for its intended purpose at any
time prior to the time that the Exchange Offer is consummated and is not
declared effective within 5 business days thereafter, or (b) the shelf
registration statement is filed and declared effective but thereafter ceases to
be effective or fails to be usable for its intended purpose at any time during
the period ending on the second anniversary of the issuance of the Outstanding
Notes (unless extended pursuant to the terms of the registration rights
agreement) and is not declared effective again within five business days
thereafter, the interest rate borne by the Outstanding Notes shall be increased
by one-half of one percent per annum following such 90-day period in the case
of clause (i) above, following such 150-day period in the case of clause (ii)
above, following such 30-day period in the case of clause (iii) above, or
commencing on the day the applicable registration statement ceases to be
effective or usable for its intended purpose without being declared effective
again within 5 business days in the case of
41
<PAGE>
clause (iv) above. The aggregate amount of such increase from the original
interest rate pursuant to these provisions will in no event exceed 1.5 percent
per annum. Upon (w) the filing of the registration statement or the shelf
registration statement for the Exchange Offer after the 90-day period described
in clause (i) above, (x) the effectiveness of the registration statement or
shelf registration statement after the 150-day period described in clause (ii)
above, (y) the consummation of the Exchange Offer after the 30-day period
described in clause (iii) above, or (z) the effectiveness or usability of the
registration statement which had ceased to remain effective or be usable, or
the effectiveness or usability of the shelf registration statement which had
ceased to remain effective or be usable, the interest rate borne by the
Outstanding Notes from the date of such filing, effectiveness, usability or the
day before the date of consummation, as the case may be, will be reduced to the
original interest rate if we are otherwise in compliance with such
requirements.
Upon the terms and subject to the conditions set forth in this prospectus and
in the accompanying letter of transmittal, we will accept all Outstanding Notes
validly tendered prior to 5:00 p.m., New York City time, on the expiration
date. We will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of Outstanding Notes accepted in the Exchange
Offer. Holders may tender some or all of their Outstanding Notes pursuant to
the Exchange Offer in denominations of $1,000 and integral multiples thereof.
Based on no-action letters issued by the Staff of the SEC to third parties,
we believe that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Outstanding Notes directly from us to resell pursuant to Rule 144A or any
other available exemption under the Securities Act, or (ii) a person that is an
"affiliate" (as such term is defined in Rule 405 of the Securities Act) of our
Company) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
Exchange Notes in its ordinary course of business and is not participating and
does not intend to participate, and has no arrangements or understanding with
any person to participate, in the distribution of the Exchange Notes. Holders
of Outstanding Notes wishing to accept the Exchange Offer must represent to us
that such conditions have been met.
Each broker-dealer that receives Exchange Notes in exchange for Outstanding
Notes held for its own account, as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. The letter of transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes. We have agreed that, for a period of 180 days
after the consummation of the Exchange Offer, we will make this prospectus and
any amendment or supplement to this prospectus available to any such broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
As of the date of this prospectus, $150 million aggregate principal amount of
the Outstanding Notes is outstanding. In connection with the issuance of the
Outstanding Notes, we arranged for the Outstanding Notes initially purchased by
qualified institutional buyers to be issued and transferable in book-entry form
through the facilities of DTC, acting as depositary. The Exchange Notes will
also be issuable and transferable in book-entry form through DTC.
This prospectus, together with the accompanying letter of transmittal, is
being sent to all registered holders as of , 1999.
We shall be deemed to have accepted validly tendered Outstanding Notes when,
as and if we have given oral or written notice thereof to the exchange agent.
See "--Exchange Agent." The exchange agent will act as agent for the tendering
holders of Outstanding Notes for the purpose of receiving Exchange Notes from
us and delivering Exchange Notes to such holders.
42
<PAGE>
If any tendered Outstanding Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Outstanding Notes will be returned,
without expenses, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders of Outstanding Notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean _________, 1999 unless we, in our sole
discretion, extend the Exchange Offer, in which case the term "expiration date"
shall mean the latest date to which the Exchange Offer is extended.
In order to extend the expiration date, we will notify the exchange agent of
any extension by oral or written notice and will mail to the record holders of
Outstanding Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date. Such announcement may state that we are extending the Exchange Offer for
a specified period of time.
We reserve the right (i) to delay acceptance of any Outstanding Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Outstanding Notes not previously accepted, if any of the conditions set
forth herein under "--Termination" shall have occurred and shall not have been
waived by us (if permitted to be waived by us), by giving oral or written
notice of such delay, extension or termination to the exchange agent, and (ii)
to amend the terms of the Exchange Offer in any manner deemed by us to be
advantageous to the holders of the Outstanding Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a manner determined by us to constitute a material change, we will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of the Outstanding Notes of such amendment.
Without limiting the manner by which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, we shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
Interest on the Exchange Notes
The Exchange Notes will bear interest from July 8, 1999, payable semiannually
on January 1 and July 1 of each year commencing on January 1, 2000, at the rate
of 14.0% per annum. Holders of Outstanding Notes whose Outstanding Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Outstanding Notes accrued from July 8,
1999 until the date of the issuance of the Exchange Notes. Consequently,
holders who exchange their Outstanding Notes for Exchange Notes will receive
the same interest payment on January 1, 2000 (the first interest payment date
with respect to the Outstanding Notes and the Exchange Notes) that they would
have received had they not accepted the Exchange Offer.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date the
letter of transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the letter of transmittal, and deliver such letter of
transmittal or such facsimile, together with the Outstanding Notes (unless such
43
<PAGE>
tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the exchange agent prior
to 5:00 p.m., New York City time, on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Outstanding Notes by
causing DTC to transfer such Outstanding Notes into the exchange agent's
account in accordance with DTC's Automated Tender Offer Program.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth herein and in the letter of transmittal.
Delivery of all documents must be made to the exchange agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Outstanding Notes and the letters of transmittal
and all other required documents to the exchange agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that
holders use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. No letter of transmittal or
Outstanding Notes should be sent to us.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on our books or any other
person who has obtained a properly completed bond power from the registered
holder, or any person whose Outstanding Notes are held of record by DTC who
desires to deliver such Outstanding Notes by book-entry transfer at DTC.
Any beneficial holder whose Outstanding Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder
wishes to tender on his own behalf, such beneficial holder must, prior to
completing and executing the letter of transmittal and delivering his
Outstanding Notes, either make appropriate arrangements to register ownership
of the Outstanding Notes in such holder's name or obtain a properly completed
bond power from the registered holder. The transfer of record ownership may
take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, unless the Outstanding Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or (ii) for the account of an
eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder of any Outstanding Notes listed therein, such Outstanding Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Outstanding Notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders appears on the
Outstanding Notes.
44
<PAGE>
If the letter of transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
us, evidence satisfactory to us of their authority to so act must be submitted
with the letter of transmittal.
All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by us in our sole discretion, which determinations will be final and
binding. We reserve the absolute right to reject any and all Outstanding Notes
not validly tendered or any Outstanding Notes of which our acceptance would, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to particular Outstanding
Notes. Our interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
we shall determine. Neither our Company, the exchange agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Outstanding Notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the exchange agent to the tendering holder of such Outstanding Notes unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, we reserve the right in our sole discretion to (a) purchase or
make offers for any Outstanding Notes that remain outstanding subsequent to the
expiration date, or, as set forth under "--Termination," to terminate the
Exchange Offer, and (b) to the extent permitted by applicable law, purchase
Outstanding Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ from the terms
of the Exchange Offer.
By tendering, each holder of Outstanding Notes will represent to us that,
among other things, the Exchange Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such Exchange Notes, whether or not such person is the holder, that neither the
holder nor any other person has an arrangement or understanding with any person
to participate in the distribution of the Exchange Notes and that neither the
holder nor any such other person is an "affiliate" (as such term is defined in
Rule 405 of the Securities Act) of our Company.
Guaranteed Delivery Procedures
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available, or (ii) who cannot deliver their
Outstanding Notes, the letter of transmittal, or any other required documents
to the exchange agent prior to the expiration date, or if such holder cannot
complete the procedure for book-entry transfer on a timely basis, may effect a
tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed "notice of
guaranteed delivery" in the form accompanying this prospectus (by facsimile
transmission, mail or hand delivery) or a properly transmitted agent's
message setting forth the name and address of the holder of the Outstanding
Notes, the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within five business days after
the expiration date, the letter of transmittal (or facsimile thereof),
together with the certificate(s) representing the Outstanding Notes to be
tendered in proper form for transfer or a book-entry confirmation and any
other documents required by the letter of transmittal, will be deposited by
the eligible institution with the exchange agent; and
45
<PAGE>
(c) such properly completed and executed letter of transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer (or confirmation of
a book-entry transfer into the exchange agent's account at DTC of
Outstanding Notes delivered electronically) and all other documents
required by the letter of transmittal are received by the exchange agent
within five business days after the expiration date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date unless previously accepted for exchange.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein or holders must comply with the
appropriate procedures of DTC's Automated Tender Offer Program System prior to
5:00 p.m., New York City time, on the expiration date and prior to acceptance
for exchange thereof by us. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Outstanding Notes to be withdrawn, (ii)
identify the Outstanding Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Outstanding Notes), (iii) be
signed by the person depositing the Outstanding Notes in the same manner as the
original signature on the letter of transmittal by which such Outstanding Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfers sufficient to permit the trustee with respect to the
Outstanding Notes to register the transfer of such Outstanding Notes into the
name of the depositor withdrawing the tender, and (iv) specify the name in
which any such Outstanding Notes are to be registered, if different from that
of the depositor. If the Outstanding Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Outstanding Notes and otherwise comply with the procedures of the
facility. All questions as to the validity, form and eligibility (including
time of receipt) for such withdrawal notices will be determined by us, and our
determination shall be final and binding on all parties. Any Outstanding Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Outstanding Notes so withdrawn are validly tendered. Any Outstanding
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder or in the case of
Outstanding Notes tendered by book-entry transfer into the exchange agent's
account at DTC according to the procedures described above, those Outstanding
Notes will be credited to an account maintained with DTC for Outstanding Notes.
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Outstanding Notes may be tendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.
Termination
Notwithstanding any other term of the Exchange Offer, we will not be required
to accept for exchange, or exchange Exchange Notes for, any Outstanding Notes
not therefore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Outstanding Notes if:
(i) any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer, which, in
our reasonable judgment, might materially impair our ability to proceed with
the Exchange Offer, or (ii) any law, statute, rule or regulation is proposed,
adopted or enacted, or any existing law, statute, rule or regulation is
interpreted by the Staff of the SEC or court of competent jurisdiction in a
manner, which, in our reasonable judgment, might materially impair our ability
to proceed with the Exchange Offer.
If we determine that we may terminate the Exchange Offer, as set forth above,
we may (i) refuse to accept any Outstanding Notes and return any Outstanding
Notes that have been tendered to the holders thereof, (ii) extend the Exchange
Offer and retain all Outstanding Notes tendered prior to the expiration of the
46
<PAGE>
Exchange Offer, subject to the rights of such holders of tendered Outstanding
Notes to withdraw their tendered Outstanding Notes, or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Outstanding Notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, we will disclose such
change by means of a supplement to this prospectus that will be distributed to
each registered holder of Outstanding Notes, and we will extend the Exchange
Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Outstanding Notes, if the Exchange Offer would otherwise expire
during such period.
Exchange Agent
The Bank of New York, the trustee under the Senior Notes Indenture, has been
appointed as exchange agent for the Exchange Offer. Questions and requests for
assistance and requests for additional copies of this prospectus or of the
letter of transmittal should be directed to the exchange agent addressed as
follows:
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
Bond Redemption Unit, 7E New York, New
York 10286
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-2742
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by us. The principal solicitation for tenders pursuant to the Exchange
Offer is being made by mail. Additional solicitations may be made by officers
and regular employees of our Company and our affiliates in person, by telegraph
or telephone.
We will not make any payments to brokers, dealers or other persons soliciting
acceptances of the Exchange Offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse the exchange
agent for its reasonable out-of-pocket expenses in connection therewith. We may
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
prospectus, letters of transmittal and related documents to the beneficial
owners of the Outstanding Notes and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the exchange agent and trustee and accounting and legal
fees, will be paid by us.
We will pay all transfer taxes, if any, applicable to the exchange of
Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Outstanding Notes tendered, or if tendered Outstanding Notes are
registered in the name of any person other than the person signing the letter
of transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Outstanding Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
47
<PAGE>
CAPITALIZATION
The following table sets forth our cash and capitalization as of June 30,
1999 (i) on an actual basis, and (ii) as adjusted as if the Unit Offering had
occurred on such date and the maintenance of the net proceeds received from the
Unit Offering (other than the portion thereof used to repay the Interim Loan)
as cash pending application of the proceeds as contemplated in the Unit
Offering offering memorandum and to give effect to the offering of the
$50,002,183 Discount Notes and, the (Euro)25,000,000 PIK Notes, as if they had
occurred on such date and the maintenance of the net proceeds received from the
Discount Notes Offering and the PIK Notes Offering as cash pending application
as described in "Use of Proceeds." See "Description of Material Indebtedness."
This table should be read in conjunction with the Consolidated Financial
Statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Use of Proceeds" included
elsewhere in this prospectus. Other than as described herein, there has been no
material change in the capitalization of the Company since June 30, 1999.
<TABLE>
<CAPTION>
At June 30, 1999
----------------------
As adjusted
for the
Acquisitions,
the Unit
Offering, the
Notes
Actual Offerings
------- -------------
<S> <C> <C>
Cash:
Cash and restricted cash.......................... $14,974 $223,357/(1)/
======= ========
Debt:
Overdrafts and short-term borrowings.............. 23,018 644
Current Portion long-term debt and capital lease
obligations...................................... 1,173 1,173
Long-term debt.................................. 104 104
Capital lease obligations....................... 1,316 1,316
Notes offered in Unit Offering(/2/)............. -- 96,940
Notes offered in August 19, 1999 Notes
Offering....................................... -- 35,000
PIK Notes....................................... 26,700
Notes offered in the August 23 Notes Offerings.. -- 15,002
------- --------
Total debt.................................... $25,611 $176,879
------- --------
Shareholders Equity:
Common Stock $.001 par value, 50,000,000 shares
authorized, 20,729,988 issued and outstanding.. $ 21 $ 21
Preferred stock $.001 par value, 50,000,000
shares authorized, 6,360,000 shares issued and
outstanding.................................... 5 5
Warrants(/2/)................................... -- 53,060
Additional paid in capital...................... 79,335 86,265
Accumulated deficit............................. (14,685) (14,685)
Cumulative translation adjustment............... (6,630) (6,630)
------- --------
Total shareholders equity..................... $58,046 $118,036
------- --------
Total Capitalization.......................... $83,657 $294,915
======= ========
</TABLE>
- --------
(1) Reflects the approximate net proceeds of the Unit Offering of $144,500 less
the $22,374 thereof used to repay the Interim Loan. Restricted cash
reflects $57,466 of the net proceeds of the Unit Offering used to purchase
U.S. Government Securities and fund the first six scheduled interest
payments on the Senior Notes. Also reflects the estimated net proceeds of
$72,361 from the Discount Notes Offering and the PIK Notes Offering.
(2) Approximately $53,060 has been allocated to the Warrants based on a
valuation using the Black-Scholes Option Valuation model.
48
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated financial data as of and for the years ended
December 31, 1996, 1997, and 1998, set forth below, is derived from our audited
Consolidated Financial Statements included elsewhere in this prospectus. The
selected consolidated financial data as of and for the six months ended June
30, 1998 and 1999 set forth below, is derived from our unaudited Interim
Financial Statements included elsewhere in this prospectus. The pro forma
consolidated financial data for the year ended December 31, 1998 and as of and
for the six months ended June 30, 1999, set forth below, is derived from our
unaudited Pro Forma Consolidated Financial Statements included elsewhere in
this prospectus. The financial data set forth below has been prepared in
accordance with US GAAP. The unaudited Interim Financial Statements included in
this prospectus include all adjustments, consisting of normal recurring
adjustments, that management considers necessary for a fair presentation of the
financial position and results of operations for the interim periods.
The information set forth below should be read in conjunction with our
audited Consolidated Financial Statements, our unaudited Interim Financial
Statements and our unaudited Pro Forma Consolidated Financial Statements, and
the related notes thereto included elsewhere in this prospectus. Historical and
pro forma results of operations presented herein are not necessarily indicative
of results of operations for future periods. Our development and expansion
activities, including acquisitions, during the periods set forth below
significantly affect the comparability of this information from one period to
another. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
---------------------------------- ----------------------------
Pro forma Pro forma
1996 1997 1998 1998 /(1)/ 1998 1999 1999 /(1)/
----- ------ ------- ---------- ------- ------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue
Internet Projects...... $ 217 $1,598 $ 5,139 $ 6,206 $ 1,863 $ 2,459 $ 2,891
Network Services....... 91 716 3,495 11,184 1,489 5,994 9,869
----- ------ ------- ------- ------- ------- --------
Total revenue.......... 308 2,314 8,634 17,390 3,352 8,453 12,760
Cost of revenues
Internet Projects...... 237 1,495 4,699 5,500 1,438 2,056 2,369
Network Services....... 119 866 4,067 8,949 1,747 6,534 9,199
Depreciation and
amortization /(2)/.... 7 171 1,674 2,050 332 1,545 1,675
----- ------ ------- ------- ------- ------- --------
Total cost of
revenues.............. 363 2,532 10,440 16,499 3,517 10,135 13,243
Gross profit (loss)..... (55) (218) (1,806) 891 (165) (1,682) (483)
Operating expenses:
General and
administrative
expenses.............. 263 482 1,576 3,512 695 3,770 3,995
Marketing expenses..... 165 1,188 3,844 5,536 1,608 5,147 6,272
Research and
development........... 179 280 2,941 3,858 821 2,146 2,264
Depreciation and
amortization /(3)/.... 22 116 880 5,011 272 1,228 2,733
----- ------ ------- ------- ------- ------- --------
Total operating
expenses.............. 629 2,066 9,241 17,917 3,356 12,291 15,264
----- ------ ------- ------- ------- ------- --------
Operating loss.......... (684) (2,284) (11,047) (17,026) (3,521) (13,973) (15,747)
Interest income
(expense), net......... (2) (39) (43) (267) (94) 319 272
----- ------ ------- ------- ------- ------- --------
Loss before taxes and
minority interest..... (686) (2,323) (11,090) (17,293) (3,615) (13,654) (15,475)
Income tax benefit..... 402 1,339 6,173 6,753 2,008 5,302 5,258
Minority interest...... -- -- 145 145 -- 103 103
----- ------ ------- ------- ------- ------- --------
Net loss................ $(284) $ (984) $(4,772) (10,395) $(1,607) $(8,249) $(10,114)
===== ====== ======= ======= ======= ======= ========
Basic and diluted loss
per share............. $(.12) $ (.12) $ (.30) $ (.64) $ (.11) $ (.44) $ (.53)
===== ====== ======= ======= ======= ======= ========
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Six months ended
Years ended December 31, June 30,
----------------------------------- -------------------
Pro forma Pro forma
1996 1997 1998 1998 /(1)/ 1999 1999 (/1/)
----- ------- ------- ---------- ------- ----------
(in thousands, except number of customers data and
ratios)
<S> <C> <C> <C> <C> <C> <C>
Other Financial and
Operating Data:
Number of Network
Services customers
/(4)/.................. 166 4,061 6,923 42,391 /(5)/ 10,830 50,724 /(5)/
EBITDA /(6)/............ $(655) $(1,997) $(8,493) $(9,965) $(5,898) $(11,339)
Capital expenditures
/(7)/.................. 552 1,708 6,034 8,713 6,587 na
Ratio of earnings to
fixed charges /(8)/.... -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
---------------------- -----------------
1996 1997 1998 1998 1999
------- ------ ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency) /(9)/... $ 339 $ 891 $37,751 $(4,065) $(11,562)
Total assets......................... 2,211 12,617 79,445 19,569 96,786
Long-term debt /(10)/................ -- 42 1,383 40 1,711
Total stockholders' equity........... 1,790 8,908 67,359 8,631 58,046
</TABLE>
- --------
(1) Pro forma statement of operations and balance sheet data are based on the
unaudited Pro Forma Consolidated Financial Statements included elsewhere
in this prospectus. The pro forma balance sheet is based on the historical
balance sheet of the Company adjusted as if the acquisition of Flashnet
and the Interim Loan incurred to fund such acquisition had been completed
on June 30, 1999. The pro forma statement of loss for the year ended
December 31, 1998 is based on the historical statement of loss adjusted as
if the Open:Net, Vianet and Flashnet acquisitions were completed on
January 1, 1998 and the pro forma statement of loss for the six months
ended June 30, 1999 is based on the historical statements of loss adjusted
as if the Flashnet acquisition and the Interim Loan incurred to fund such
acquisition had been completed on January 1, 1999. The pro forma data does
not purport to represent what our financial position or results of
operations would have been had these acquisitions been made on such dates.
(2) Represents depreciation and amortization of capitalized costs related to
investments in product development, designing our network (including
related software) and building network capacity (including related
personnel and consulting costs).
(3) Represents depreciation of property and equipment and amortization of
acquired goodwill.
(4) Number of customers as of December 31, 1996, 1997, and 1998, and March 31,
1999.
(5) Includes 32,652 and 39,894 Flashnet customers (of which 1,096 and 1,625
were business customers and 31,556 and 38,269 were residential customers)
at December 31, 1998 and March 31, 1999, respectively.
(6) We define EBITDA as loss before interest, income taxes, minority interest,
depreciation and amortization. EBITDA is included because management
believes it is a useful indicator of a company's ability to incur and
service debt. EBITDA should not be considered as a substitute for
operating earnings, net income, cash flow or other statements of
operations or cash flow data computed in accordance with US GAAP or as a
measure of our results of operations or liquidity. Funds depicted by this
measure may not be available for management's discretionary use (due to
covenant restrictions, debt service payments and other commitments).
Because all companies do not calculate EBITDA identically, the
presentation of EBITDA contained herein may not be comparable to other
similarly entitled measures of other companies.
(7) Pro forma capital expenditures for the six months ended June 30, 1999 was
not available.
(8) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of losses before income taxes and minority interest, plus fixed
charges. Fixed charges consist of interest expense. Earnings were
insufficient to cover fixed charges by $(684), $(2,284), $(10,893),
$(13,690), $(16,862) and $(15,364) for the years ended December 31, 1996,
1997 and 1998, for the six months ended June 30, 1999, the year ended
December 31, 1998 pro forma and the six months ended June 30, 1999 pro
forma, respectively.
(9) We define working capital as total current assets less total current
liabilities.
(10) Long-term debt includes obligations under capital lease agreements.
50
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Consolidated Financial Statements are based
on our Consolidated Financial Statements contained elsewhere in this
prospectus. The accompanying unaudited Pro Forma Consolidated Statements of
Loss for the year ended December 31, 1998 and the six months ended June 30,
1999, are based on the historical consolidated financial statements of the
Company contained elsewhere in this prospectus, adjusted as if the acquisitions
of Open:Net, Vianet and Flashnet, collectively referred to as the
"Acquisitions," had occurred on January 1, 1998. These unaudited Pro Forma
Consolidated Financial Statements do not include the results of operations of
Sunweb due to the relative insignificance of the amounts involved nor do they
reflect the Discount Notes Offering, the PIK Notes Offering or application of
the proceeds therefrom.
The unaudited Pro Forma Consolidated Financial Statements combine the
historical financial position and results of the Company with the historical
financial position and results of the Acquisitions, prior to the dates the
Company made such acquisitions, using the purchase method of accounting. The
Pro Forma Consolidated Statements of Loss presented are not necessarily
indicative of the operating results that would have been achieved had such
transactions occurred at the dates indicated above. These statements are based
on the assumptions set forth in the notes to such statements and should be read
in conjunction with the related financial statements and notes thereto of the
Company, Open:Net, Vianet and Flashnet included elsewhere in this prospectus.
The accounting adjustments reflected in the accompanying unaudited Pro Forma
Consolidated Financial Statements reflect estimates made by the Company and
assumptions which the Company believes to be reasonable. The Company believes
that no significant uncertainties should affect the pro forma adjustments and
considers the impact of any such uncertainties to be immaterial.
51
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF LOSS
Year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Company Acquisitions as Adjusted
---------- ------------ -----------
(in thousands, except per share
data)
<S> <C> <C> <C>
Revenue
Internet Projects.................. $ 5,139 $ 1,067(a) $ 6,206
Network Services................... 3,495 7,689(a) 11,184
---------- -------- ----------
Total revenues....................... 8,634 8,756 17,390
Cost of revenues
Internet Projects.................. 4,699 801(b) 5,500
Network Services................... 4,067 4,882(b) 8,949
Depreciation and amortization...... 1,674 376(b) 2,050
---------- -------- ----------
Total cost of revenues........... 10,440 6,059 16,499
---------- -------- ----------
Gross profit (loss).................. (1,806) 2,697 891
General and administrative expenses.. 1,576 1,936(c) 3,512
Marketing expenses................... 3,844 1,692(c) 5,536
Research and development expenses.... 2,941 917(c) 3,858
Depreciation and amortization........ 880 4,131(c)(d) 5,011
---------- -------- ----------
Total operating expenses......... 9,241 8,676 17,917
---------- -------- ----------
Operating loss....................... (11,047) (5,979) (17,026)
Interest expense..................... 197 234(e) 431
Interest income...................... 154 10(e) 164
---------- -------- ----------
Loss before taxes and minority inter-
est................................. (11,090) (6,203) (17,293)
Income tax benefit................... 6,173 580(f) 6,753
Minority interest.................... 145 -- 145
---------- -------- ----------
Net loss............................. $ (4,772) $ (5,623) $ (10,395)
========== ======== ==========
Basic and diluted loss per share..... $ (0.30) $ (0.64)
========== ==========
Number of shares used to compute
earnings per share.................. 16,012,653 339,887(g) 16,352,540
========== ======== ==========
</TABLE>
52
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF LOSS
Six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Company Acquisitions as Adjusted
------------- ------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C>
Revenue
Internet Projects......... $ 2,459 $ 432(a) $ 2,891
Network Services.......... 5,994 3,875(a) 9,869
------------- ---------- -------------
Total revenues.............. 8,453 4,307 12,760
Cost of revenues
Internet Projects......... 2,056 313(b) 2,369
Network Services.......... 6,534 2,665(b) 9,199
Depreciation and amortiza-
tion..................... 1,545 130(b) 1,675
------------- ---------- -------------
Total cost of revenues.. 10,135 3,108 13,243
------------- ---------- -------------
Gross (loss)................ (1,682) 1,199 (483)
General and administrative
expenses................... 3,770 225(c) 3,995
Marketing expenses.......... 5,147 1,125(c) 6,272
Research and development ex-
penses..................... 2,146 118(c) 2,264
Depreciation and amortiza-
tion....................... 1,228 1,505(c)(d) 2,733
------------- ---------- -------------
Total operating ex-
penses................. 12,291 2,973 15,264
------------- ---------- -------------
Operating loss.............. (13,973) (1,774) (15,747)
Interest expense............ 64 47 (e) 111
Interest income............. 383 0 383
------------- ---------- -------------
Loss before taxes........... (13,654) (1,821) (15,475)
Minority interest income
(expense).................. 103 0 103
Income tax benefit.......... 5,302 (44)(f) 5,258
------------- ---------- -------------
Net loss.................... $ (8,249) $ (1,865) $ (10,114)
============= ========== =============
Basic and diluted loss per
share...................... $ (.44) $ (.53)
============= =============
Number of shares used to
compute loss per share..... 18,917,582 301,290 (g) 19,218,872
============= ========== =============
</TABLE>
53
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in thousands, unless otherwise indicated)
(a) Includes the revenues of the Acquisitions for the periods prior to their
respective acquisition dates as follows.
<TABLE>
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -----
<S> <C> <C> <C> <C>
1998 Pro Formas
Internet Projects.......................... -- 461 606 1,067
Network Services........................... 3,123 372 4,194 7,689
1999 Pro Formas
Internet Projects.......................... -- -- 432 432
Network Services........................... -- -- 3,875 3,875
(b) Includes the cost of revenues of the Acquisitions for the periods prior to
their respective acquisition dates as follows.
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -----
<S> <C> <C> <C> <C>
1998 Pro Formas
Internet Projects.......................... -- 242 559 801
Network Services........................... 1,682 215 2,985 4,882
Depreciation and amortization.............. 88 22 266 376
1999 Pro Formas
Internet Projects.......................... -- -- 313 313
Network Services........................... -- -- 2,665 2,665
Depreciation and amortization.............. -- -- 130 130
(c) Includes the operating expenses of the Acquisitions for the periods prior
to their respective acquisition dates as follows.
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -----
<S> <C> <C> <C> <C>
1998 Pro Formas
General and administrative expenses........ 420 26 1,490 1,936
Marketing expenses......................... 741 310 641 1,692
Research and development expenses.......... 259 178 480 917
Depreciation and amortization.............. 75 27 112 214
1999 Pro Formas
General and administrative expenses........ -- -- 225 225
Marketing expenses......................... -- -- 1,125 1,125
Research and development expenses.......... -- -- 118 118
Depreciation and amortization.............. -- -- 118 118
</TABLE>
(d)Represents the amortization of goodwill and other intangible assets arising
from the Acquisitions.
<TABLE>
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -----
<S> <C> <C> <C> <C>
1998 Pro Formas
Amortization................................. 766 168 2,983 3,917
1999 Pro Formas
Amortization................................. -- -- 1,387 1,387
</TABLE>
54
<PAGE>
Amortization is calculated on a straight line basis using the following
useful lives.
<TABLE>
<S> <C>
Goodwill.......................................................... 10 years
Customer base..................................................... 5 years
Management contracts.............................................. 3 years
</TABLE>
The calculation and allocation of the purchase price was as follows:
<TABLE>
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -------
<S> <C> <C> <C> <C>
Purchase price....................... $4,483 $2,541 $25,963 $32,987
Less: net assets acquired............ (37) 130 (1,784) (1,691)
------ ------ ------- -------
Excess of purchase price over net as-
sets acquired....................... $4,520 $2,411 $27,747 $34,678
</TABLE>
Allocated to:
<TABLE>
<S> <C> <C> <C> <C>
Goodwill..................................... $2,063 $2,299 $27,747 $32,109
Customer base................................ 1,945 112 -- 2,057
Management contracts......................... 512 -- -- 512
------ ------ ------- -------
$4,520 $2,411 $27,747 $34,678
====== ====== ======= =======
</TABLE>
In addition to the cash of $4,483 (of which $4,125 was paid in the first
quarter of 1999), the purchase price for Vianet includes 225,000 shares of
common stock of the Company which were placed with a trustee to be released
annually over a five year period. Of these shares, 150,000 are to be released
in 30,000 share increments as long as the owner of these shares remains an
employee of the Company. The remaining 75,000 shares are to be released
annually over a five year period in 15,000 share increments. The 150,000 shares
as to which release will be made so long as the owner thereof remains an
employee of the Company are being treated as contingent consideration and,
accordingly, will be recorded as an additional cost of the acquisition when the
shares are released by the trustee.
(e) Includes interest income and expense of the Acquisitions for the periods
prior to their respective acquisition dates as follows:
<TABLE>
<CAPTION>
Vianet Open:Net Flashnet Total
------ -------- -------- -----
<S> <C> <C> <C> <C>
1998 Pro Formas
Interest expense............................ 3 8 223 234
Interest income............................. -- -- 10 10
1999 Pro Formas
Interest expense............................ -- -- 47 47
Interest income............................. -- -- -- --
</TABLE>
(f) The income tax adjustment represents Vianet income tax expense of $4 and
Flashnet income benefit of $584 for 1998 and a Flashnet income tax expense
of $44 for 1999.
(g) Weighted average shares outstanding for the purposes of calculating pro
forma basic and diluted loss per share is as follows:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Historical weighted average shares................. 16,012,653 20,428,698
Shares issued in connection with certain of the
Acquisitions and not reflected in historical
weighted average shares;
Open: Net acquisition............................ 38,597 --
Flashnet acquisition............................. 301,290 301,290
---------- ----------
16,352,540 20,729,988
========== ==========
</TABLE>
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is based on our Consolidated Financial Statements
included elsewhere in this prospectus. The discussion of the results of
operations of Vianet, with respect to the fiscal years ended 1998 and 1997, is
based on financial statements included elsewhere in this prospectus. Such
financial statements have been prepared in accordance with US GAAP. This
section contains forward-looking statements that involve inherent risks and
uncertainties. Actual results may differ materially from those contained in
such forward-looking statements. See "Risk Factors" and "Information Regarding
Forward-Looking Statements."
Overview
General
We have experienced substantial rates of revenue growth since commencing
significant operations in 1996. Our revenues have grown from $307,673 in 1996
to $2,314,021 in 1997 and to $8,633,528 in 1998 (approximately $17,390,000 in
1998 on a pro forma basis). This revenue growth has been generated both
internally, as we have significantly expanded our customer base, and through
acquisitions.
Since 1996, we have acquired six companies:
. Cybernet E-Commerce. In September 1997, we acquired 100% of Artwise,
which was later renamed Cybernet E-Commerce, the financial results of
which are included in our Consolidated Financial Statements from the
date of that acquisition.
. Eclipse. In December 1997, we acquired 66% of Eclipse, but did not
include the financial results of that company's operations in our
Consolidated Financial Statements until 1998 because its 1997 financial
results from the date of that acquisition were immaterial to our
consolidated results.
. Open:Net. In August 1998, we acquired 100% of Open:Net, the financial
results of which are included in our Consolidated Financial Statements
from the date of that acquisition.
. Vianet. In December 1998, we acquired 100% of Vianet but did not include
the financial results of that company's operations in our Consolidated
Financial Statements until the first quarter of 1999 because the 1998
financial results from the date of that acquisition were immaterial to
our consolidated results. We have, however, included below a discussion
of Vianet's results of operations for its fiscal years 1998 and 1997.
. Sunweb. In May 1999, we acquired 51% of Sunweb. Because that acquisition
occurred in May 1999, the financial results of that company's operations
are not included in our Consolidated Financial Statements for 1998 nor
in our results of operations for the three months ended on March 31,
1999.
. Flashnet. In June 1999, we acquired 100% of Flashnet, a leading Italian
ISP through which we gained access to all major business centers in
Italy.
Our recent acquisition history limits the comparability of the historical
financial information discussed herein.
56
<PAGE>
The following table sets forth, for the periods indicated, the items of our
Consolidated Statements of Loss expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
Percent of Total Revenues
------------------------------------------
Six months
Years ended December 31, ended June 30,
-------------------------- ---------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue
Internet Projects.................. 70.6% 69.1% 59.5% 55.6% 29.1%
Network Services................... 29.4% 30.9% 40.5% 44.4% 70.9%
Total Revenues................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Revenues
Internet Projects.................. 77.0% 64.6% 54.4% 42.9% 24.3%
Network Services................... 38.8% 37.4% 47.1% 52.1% 77.3%
Depreciation and amortization...... 2.2% 7.4% 19.4% 9.9% 18.3%
Total cost of revenues........... 118.0% 109.4% 120.9% 104.9% 119.9%
Gross loss......................... -18.0% -9.4% -20.9% -4.9% -19.9%
Operating Expenses
General and administrative
expenses.......................... 85.5% 20.8% 18.3% 19.5% 44.6%
Marketing expenses................. 53.5% 51.4% 44.5% 48.0% 60.9%
Research and development........... 58.2% 12.1% 34.1% 24.5% 25.4%
Depreciation and amortization...... 6.9% 5.0% 10.2% 8.1% 14.5%
Total operating expenses......... 204.1% 89.3% 107.1% 100.1% 145.4%
Operating loss..................... -222.1% -98.7% -128.0% -105.0% -165.3%
Interest expense................... -0.7% -1.7% -2.3% -3.2% -0.8%
Interest income.................... -- -- 1.8% 0.4% 4.5%
Loss before taxes and minority
interest.......................... -222.8% -100.4% -128.5% -107.8% -161.5%
Income tax benefit................. 130.6% 57.9% 71.5% 59.9% 62.7%
Net loss before minority interest.. -92.2% -42.5% -57.0% -47.9% -98.8%
Minority interest.................. -- -- 1.7% -- 1.2%
Net loss........................... -92.2% -42.5% -55.3% -47.9% -97.6%
</TABLE>
Revenues
We classify our revenues into two categories: revenues from Internet Projects
and revenues from Network Services. Internet Project revenues result from
consulting, installation fees, training of our customers' employees and
hardware and software sales resulting from, for example, the installation of
VPNs, websites, e-commerce solutions and customer servers in our data centers.
Internet Project revenues for any particular project depend upon its size and
complexity. An Internet Project is typically completed within three months and
the related revenues are recognized upon completion and customer acceptance of
the related project.
In most cases, after completion of an Internet Project, we derive recurring
revenues from the ongoing management and monitoring of the services and
solutions we have set up. We record these recurring revenues under Network
Services revenues. Network Services revenues are primarily derived from
recurring connectivity charges and include maintenance and usage charges
related to VPNs, co-location and hosting services. Network Services revenues
also result from eight affinity groups with which we have specific contractual
arrangements. These affinity groups act as resellers of our connectivity
services and their members become our customers. The customers who came to us
through affinity groups tend to be smaller customers. The majority of our
Network Services revenues are from connectivity charges. We recognize these
revenues when the services are provided to our customers. Revenues from Network
Services in 1998 constituted 40.5% of our total revenues
57
<PAGE>
compared with 30.9% for 1997. We expect Network Services revenues to continue
to increase as a percentage of total revenues as we grow our customer base and
thereby create a larger portion of recurring revenues. In 1998, Flashnet had
total revenues of Lit. 8,334,043 thousand ($4,597,003). We also expect that our
acquisition of Flashnet, which has relatively less Internet Project revenues,
will contribute to this shift.
We currently encounter and expect to continue to encounter significant
downward pressure on the prices of our products and services. We expect that
these price declines will dampen revenues for the second quarter.
The table below summarizes the revenues and customer evolution for Internet
Projects and Network Services for the years ended December 31, 1996, 1997 and
1998, respectively and the three months ended March 31, 1999:
<TABLE>
<CAPTION>
As at and
for the
As at and for the three
years ended December months
31, ended
--------------------- March 31,
1996 1997 1998 1999
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Internet Projects
Internet Project Customers(a)................ 12 49 122 19
Internet Project Revenues ($'000)............ 217 1,598 5,139 1,392
Average Internet Project Revenue per Customer
($)......................................... 18,108 32,610 42,124 73,274
Network Services
Network Services Business Customers
Number of Customers(b)...................... 166 2,120 3,077 6,095
Average Number of Customers(c).............. 83 1,143 2,599 5,994
Churn Percentage(d)......................... N/A 4.8% 0.8% 0.4%
Revenues ($'000)............................ 91 659 2,680 2,279
Average Revenues per Customer(e)($)......... 1,093 577 1,031 380
Network Services Affinity Group Customers
Number of Customers(b)...................... -- 1,941 3,846 4,735
Average Number of Customers(c).............. -- 971 2,894 4,291
Revenues ($'000)............................ -- 57 814 183
Average Revenues per Customer(e)($)......... -- 58 281 43
Total Network Services Customers
Number of Customers(b)...................... 166 4,061 6,923 10,830
Average Number of Customers(c).............. 83 2,114 5,492 10,285
Revenues ($'000)............................ 91 716 3,494 2,462
Average Revenues per Customer(e)($)......... 1,093 339 636 239
</TABLE>
- --------
(a) Represents aggregate customers during the relevant period.
(b) Number of customers at end of relevant period.
(c) Calculated as the arithmetic average of beginning-of-period and end-of-
period customers. The beginning of period customers for the three months
ended March 31, 1999 include 2,816 Network Services Business Customers of
Vianet (not included in number of customers as of December 31, 1998).
(d) Calculated as the number of customers lost during the period as a
percentage of the average number of customers for the period.
(e) Calculated as revenues for the period divided by average number of
customers for the period.
Cost of Revenues
Cost of revenues consists principally of (i) telecommunications expenses,
(ii) personnel costs, (iii) cost of hardware and software sold, (iv)
amortization of product development costs, (v) depreciation of network
infrastructure, and (vi) service and consulting expenses. Telecommunications
expenses mainly represent the cost of transporting Internet traffic from our
customers' locations through a local telecommunications carrier to
58
<PAGE>
one of our access nodes and the cost of leasing lines to interconnect our
backbone nodes. Like our revenues, we classify our cost of revenues (other than
depreciation and amortization costs) according to whether they are incurred in
connection with Internet Projects or with Network Services. Additionally, we
include in our cost of revenues certain depreciation and amortization of
capitalized costs related to investments in product development, designing our
network (including related software), and building network capacity (including
related personnel and consulting costs). These costs are amortized over a
period not exceeding four years. As we develop our network capacity, we expect
to record increased costs for depreciation and amortization of network
infrastructure.
In 1998, Flashnet's cost of revenues was Lit. 6,615,614 thousand ($3,649,129)
representing 79.4% of its revenues, a lower percentage than our own. We
therefore expect that in 1999 our acquisition of Flashnet will have a positive
effect on our gross margin.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and other
personnel costs for our administrative staff, office rent and utilities. In
1998, Flashnet's general and administrative expenses were Lit. 2,586,000
thousand ($1,426,421), representing approximately 31.0% of revenues. This is
approximately equal to the relationship between our general and administrative
expenses and revenues.
Marketing Expenses
Marketing expenses consist principally of salaries of our sales force and
advertising and communication expenditures. As we continue to grow our sales
force and to increase brand awareness, we anticipate that marketing expenses
will continue to increase. In 1998, Flashnet had marketing expenses of Lit.
1,114,000 thousand ($614,475) representing 13.4% of revenues.
Research and Development
Research and development expenses consist principally of personnel costs of
employees working on the development of new products and services, consulting
costs and certain overhead items associated with these activities. In 1998,
Flashnet had research and development expenses of Lit. 834,000 thousand
($460,029) representing 10.0% of revenues compared to 34.1% for Cybernet.
Depreciation and Amortization
Depreciation and amortization expense consists of depreciation of capital
expenditures for property and equipment purchased to build the corporate
infrastructure necessary to support our anticipated growth as well as
amortization of goodwill related to our acquisitions. Goodwill represents the
excess of the purchase price of companies we purchased over the fair value of
the tangible assets and identifiable intangible assets of those companies and
is amortized over 10 years. This expense in our income statement does not
include the depreciation and amortization described under "--Cost of Revenues"
above.
Interest Expense and Income
Interest expense consists principally of interest associated with capital
lease obligations which we undertook in 1998 to finance the purchase of
computer equipment. Interest income consists of interest earned on excess cash
balances, including those resulting from the proceeds of our 1998 equity
offerings. Our interest expense and income will increase significantly in
future periods as a result of interest accruing on the Senior Notes, the
Discount Notes and the PIK Notes and interest generated by the escrow account
created in connection with the issuance of the Senior Notes, respectively.
Income Taxes
Our income tax benefits result largely from the operating losses of our
German subsidiaries. Under current German law, the tax benefit resulting from
these losses can be carried forward indefinitely.
59
<PAGE>
Other Comprehensive Loss: Foreign Currency Translation Adjustments
Foreign currency translation adjustments result from the translation of the
assets and liabilities of our international subsidiaries from their local
reporting currency into U.S. dollars using current exchange rates at the
balance sheet dates. Statement of operations items are translated at average
exchange rates prevailing during the period. The resulting translation
adjustments are recorded in the foreign currency translation adjustment account
in equity. Accordingly, we recognize unrealized foreign exchange gains with
respect to non-U.S. dollar-denominated assets when the value of the U.S. dollar
decreases with respect to these other currencies and unrealized foreign
exchange losses when the relative value of the U.S. dollar increases.
Results of Operations--Six Months Ended June 30, 1998 Compared to the Six
Months Ended June 30, 1999
Revenues
Total revenues increased 152.1% from $3,352,487 in first half of 1998 to
$8,452,353 in first half of 1999. Internet Project revenues increased 32.0%
from $1,863,075 in the first half of 1998 to $2,458,547 for the same time
period in 1999 while Network Services revenues increased 302.4% from $1,489,412
to $5,993,805. First half Network Services revenues represented 70.9% of total
revenues in 1999, as compared with 44.4% in 1998. The relative higher increase
in revenues from Network Services is partially a result of expansion of our
customer base, which provides us with a stream of recurring revenues. Although
the Company has focused on building these recurring revenues from Network
Services, building relations with Internet Project customers remains a
continuing strategy. In addition, we consolidated $1,901,219 of Vianet revenues
and (for the second quarter only) $120,256 of Sunweb revenues in the first half
of 1999. Vianet's revenues are derived principally from Network Services.
Excluding the impact of consolidating Vianet's, Open:Net's and Sunweb's
revenues, Network Services revenues in the first half of 1999 would have
increased 174.0% from the first half of 1998.
Cost of Revenues
Cost of revenues increased 188.3% from $3,515,654 in the first half of 1998
to $10,134,196 in the first half of 1999. Cost of revenues for Internet
Projects increased 42.9% from $1,438,477 to $2,055,656. Cost of revenues for
Network Services increased 274.3% from $1,745,699 to $6,533,928. A portion of
this increase in Network Services costs reflects the consolidation of Vianet
(even though Vianet's cost of revenues as a percentage of revenues was lower
than our own). Excluding Vianet, our cost of revenues increased approximately
164%, due to expenditures for personnel and expenses associated with the
expansion of our network, including leasing additional lines to provide the
increased capacity we will require as our business grows. The shift in
percentage cost of revenues from Internet Projects to Network Services in the
first half of 1999 is the result of our continued investment in Network
Services infrastructure. This investment included leased line costs, costs of
newly hired personnel for network deployment and management and network
facilities and equipment.
While total revenues increased, increases in cost of revenues caused gross
margins to decline from $(163,167) in the first half of 1998 to $(1,681,843) in
the first half of 1999. Cost of revenues as a percentage of total revenues
increased from 104.9% in the first six months of 1998 to 120.0% in the same
time period for 1999. This is principally due to our investment in Network
Services infrastructure, discussed above. We expect to see improvement in our
gross margin generally and Network Service in particular as we expand our
customer base and increase revenues per account and are thereby able to spread
the costs of product and network development over a larger revenue base. We
also expect our gross margin to improve over time as a result of our strategy
to construct our own infrastructure, including the replacement of leased
transmission facilities with owned facilities and the purchase of domestic and
international transmission capability as a telecommunications operator (rather
than as a purchaser at retail prices).
General and Administrative Expenses
General and administrative expenses increased 475.8% from $654,685 in the
first half of 1998 to $3,769,986 in the first half of 1999. These expenses
constituted 44.6% of revenues in the first half of 1999, compared to 19.5% for
the same period in 1998. Several factors contributed to this increase
including: the
60
<PAGE>
addition of personnel to develop and manage information systems and internal
services as well as the addition of senior management at the Cybernet AG level
to oversee our international operations; the centralizing of our IT group;
general office equipment purchases and relocation expenses at Sunweb; and, to a
lesser extent, certain accounting reallocations and the impact of consolidating
Open:Net, Vianet and Sunweb in the first half of 1999. Open:Net, Vianet and
Sunweb together incurred general and administrative expenses of $507,714. We
have recently undertaken certain measures, including a hiring freeze in our
German operations and at Sunweb
on all non-sales force employee additions until revenues improve, with the
expectation that over the next several fiscal quarters, such measures will help
to decrease the proportion of general and administrative expenses to our total
revenues.
Marketing Expenses
Marketing expenses increased 220.1% from $1,607,852 in the first half of 1998
to $5,147,291 in first half of 1999, principally as a result of substantial
investments in marketing activities, including trade fairs, product literature
and related expenditures. These investments have also included consolidating
the various local brands that we have acquired. This increase also reflects the
impact of consolidating Open:Net, Vianet and Sunweb in the first half of 1999,
which together incurred marketing expenses of $651,584. Although we expect
marketing expenses to decrease as a percentage of revenues over time, we plan
to increase the amount we spend to establish our trade name locally and
internationally.
Research and Development
Research and development expenditures increased 161.4% from $820,921 in the
first half of 1998 to $2,146,090 in the first half of 1999. This reflects an
increase in personnel hired to develop new products and services, especially
our e-commerce solutions for which 19 people were hired in the first half of
1999.
Depreciation and Amortization
Depreciation and amortization increased 351.3% from $272,052 in the first six
months of 1998 to $1,227,757 in the first half of 1999. This increase is
attributable to the additional amortization of the goodwill arising from the
acquisition of Open:Net and Vianet in 1998 and to our investments in computer
hardware and software and facilities and depreciation of our billing system.
Interest Expense and Income
Interest expense decreased 39.3% from $105,584 in the first six months of
1998 to $64,066 in the same period of 1999. Our interest income increased from
$11,701 in the first six months of 1998 to $383,431 in the same period of 1999.
This increase is principally a result of interest earned on cash proceeds from
our December 1998 private equity offering. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Cash Flow."
Other Comprehensive Loss: Foreign Currency Translation Adjustments
Foreign currency translation adjustments resulted in a gain of $12,619 in the
first half of 1998 and a loss of $7,624,064 in the first half of 1999. The
decrease in 1999 over 1998 is a result of the strengthening of the U.S. dollar
in the first six months of 1999 in relation to the Deutsche Mark.
Results of Operations--Year Ended December 31, 1998 As Compared To The Year
Ended December 31, 1997
Revenues
Total revenues increased by 273.1% from $2,314,021 in 1997 to $8,633,528 in
1998. In 1998, Network Services represented 40.5% of total revenues as compared
to 30.9% in 1997. The relative shift from Internet Project revenues to Network
Services revenues is primarily a result of the fact that we have expanded our
customer base and have thereby created a larger recurring revenue base. It also
results from the fact that a larger proportion of the revenues from the
companies we have acquired are Network Services revenues.
61
<PAGE>
Our revenue growth has been generated through our acquisitions as well as
internal growth of our existing business. The chart below sets forth our
revenues from existing operations compared to our revenues from acquired
companies for both Internet Projects and Network Services in 1998, pro forma as
if the acquisitions of Open:Net, Vianet and Flashnet had occurred on January 1,
1998.
Pro Forma for Year Ended December 31, 1998
<TABLE>
<CAPTION>
Revenues from Revenues from
Existing Operations Acquired Companies
------------------- ------------------
<S> <C> <C>
Internet Projects Revenues............ 59.3% 20.9%
Network Services Revenues............. 40.7% 79.1%
</TABLE>
Internet Project revenues increased by 221.6% from $1,597,869 in 1997 to
$5,139,110 in 1998 and represented 69.1% and 59.5% of our total revenues in
1997 and 1998, respectively. Average Internet Project revenues per customer
increased from $32,610 in 1997 to $42,124 in 1998 reflecting our transition
from smaller to medium-sized customers as our reputation and brand awareness
have improved. This has resulted in an increase in average revenues per
customer.
Network Services revenues increased by 387.9% from $716,152 in 1997 to
$3,494,418 in 1998 and represented 30.9% and 40.5% of total revenues in 1997
and 1998, respectively. Our total number of customers increased by 70.5% in
1998 to 6,923 customers from 4,061 in 1997. No single customer accounted for
more than 6% of our revenues in 1998. A substantial number of our smaller
Network Services customers belongs to affinity groups with which we began
forming relationships in our prior years. Excluding affinity group members, we
provided Network Services to 3,077 customers as of December 31, 1998, compared
to 2,120 customers as of December 31, 1997. The addition of 977 new customers
(which includes affinity group customers) produced 55.9% of Network Services
revenues. We derived the remaining 44.1% from existing customers. Average
revenues per Network Services customer increased from $339 in 1997 to $636 in
1998 (from $577 to $1,031, excluding affinity group customers) reflecting the
transition of our customer base to larger enterprises and the provision of
services in addition to connectivity.
We derived $7,692,555 or 89.1% of total revenues in 1998 from our operations
in Germany and $940,973 or 10.9% of total revenues from our operations in
Italy. Vianet, our Austrian subsidiary, which we acquired on December 28, 1998,
and whose results are not included in the Company's results of operations for
the year ended December 31, 1998, had revenues of approximately $3.2 million in
1998.
Cost of Revenues
Total cost of revenues increased by 312.4% from $2,531,787 in 1997 to
$10,440,008 in 1998. Cost of revenues as a percentage of revenues increased
from 109.4% in 1997 to 120.9% in 1998.
The costs of our Internet Project revenues increased by 214.2% from
$1,495,234 in 1997 to $4,698,557 in 1998. This increase primarily resulted from
increased purchases of hardware and software and the costs of additional
personnel. Costs of Internet Projects as a percentage of Internet Project
revenues decreased from 93.6% in 1997 to 91.4% in 1998. This decrease is
primarily attributable to a reduction in training and seminar expenditures,
partially offset by the increase in purchases of hardware and software.
The costs of our Network Services revenues increased by 370.0% from $865,357
in 1997 to $4,067,513 in 1998. This increase primarily consisted of additional
leased line expenses to provide the increased capacity we will require as our
business grows. Costs of Network Services revenues as a percentage of related
revenues decreased from 120.8% in 1997 to 116.4% in 1998. This decrease is
primarily attributable to a decline in personnel costs associated with these
revenues and a reduction in purchased Internet services due to the development
of our own network.
62
<PAGE>
Depreciation and amortization included in cost of revenues increased by
877.8% from $171,196 in 1997 to $1,673,938 in 1998 as a result of new
investments in project development from year to year. We have capitalized
certain investments associated with designing the network (including related
software) and with building network capacity (including related personnel and
consulting costs) and 1998 was the first year to include a full year of
depreciation for these investments.
General and Administrative Expenses
General and administrative expenses increased by 227.1% from $481,700 in 1997
to $1,575,758 in 1998. The increase in our general and administrative expenses
reflects not only the costs of building a corporate infrastructure to support
our anticipated growth but also the impact of the addition of general and
administrative expenses of companies acquired in 1997 and 1998. As a percentage
of total revenues, general and administrative expenses decreased from 20.8% in
1997 to 18.3% in 1998.
Marketing Expenses
Marketing expenses increased by 223.4% from $1,188,634 in 1997 to $3,844,232
in 1998. These higher marketing expenses reflect an increase in salary expense
resulting from our larger sales force and an increase in advertising and
communication expenses reflecting our drive to improve local and international
awareness of our brand. As a percentage of total revenues, our marketing
expenses decreased from 51.4% in 1997 to 44.5% in 1998.
Research and Development
Research and development expenses increased by 951.4% from $279,698 in 1997
to $2,940,865 in 1998. The development of our modular products and the related
pricing research which we conducted in 1998 is reflected in the higher
personnel costs included in research and development. The personnel utilized
for this purpose include not only members of our research and development
staff, but also members of our marketing force, and we include in research and
development expenses the portion of our marketing force personnel's time
devoted to product development. We also incurred consulting expenses in 1998
not incurred in 1997 while researching the viability of certain
telecommunications services that we plan to offer in the future. These
consulting expenses amounted to $554,005. As a percentage of revenues, research
and development expenses increased from 12.1% in 1997 to 34.1% in 1998.
Depreciation and Amortization
Depreciation and amortization expense increased by 659.3% from $115,899 in
1997 to $879,978 in 1998. This increase reflects increased depreciation of
capital expenditures on property and equipment purchased in order to build the
corporate infrastructure necessary to support our anticipated growth. This
expense also reflects increased amortization of goodwill related to our 1997
and 1998 acquisitions. Most of these investments were not capitalized until
1997, and because we had a full year of depreciation for 1998, depreciation and
amortization expenses for 1998 are significantly greater than they were in
1997.
Net goodwill in connection with the 1997 acquisitions of Cybernet E-Commerce
and Eclipse amounted to $1,322,566 at December 31, 1997 and net goodwill
including the 1998 acquisitions of Open:Net and Vianet amounted to $6,504,576
at December 31, 1998. We amortize goodwill over 10 years. In 1999, we will
begin depreciating additional goodwill of approximately $30 million which will
be added to our balance sheet as a result of the Flashnet acquisition.
Interest Expense and Income
Interest expense increased by 398.7% from $39,550 in 1997 to $197,243 in 1998
as a result of new capital lease obligations, which we undertook in 1998 to
finance acquisitions of computer equipment. We earned
63
<PAGE>
interest income in 1998 of $154,296 on excess cash balances resulting from the
proceeds of our 1998 equity offering. We had no interest income in 1997.
Income Taxes
We recorded income tax benefits of $1,339,407 in 1997 and $6,172,645 in 1998,
arising principally from incurred operating losses from our operating
subsidiaries in Germany. Under the current German tax code, these net operating
losses may be carried forward indefinitely and used to offset our future
taxable earnings.
Other Comprehensive Loss: Foreign Currency Translation Adjustments
Foreign currency translation adjustments resulted in a gain in 1998 of
$1,204,589 and a loss in 1997 of $210,211 in 1997. The 1998 gain is a result of
the weakening of the U.S. dollar in 1998 in relation to the Deutsche Mark.
Results of Operations--Year Ended December 31, 1997 As Compared To The Year
Ended December 31, 1996
Revenues
Total revenues increased by 652.1% from $307,673 in 1996 to $2,314,021 in
1997. This revenue growth is primarily a result of the fact that 1997 was a
full year of operations while 1996 was primarily devoted to start-up and
initial marketing activities.
Revenues from Internet Projects increased by 635.3% from $217,296 in 1996 to
$1,597,869 in 1997 and represented 70.6% and 69.1% of total revenues in 1996
and 1997, respectively. Average revenues per customer increased from $18,108 in
1996 to $32,610 in 1997. The increase in average revenues per customer reflects
our transition from small- to medium-sized customers.
Revenues from Network Services increased by 692.4% from $90,377 in 1996 to
$716,152 in 1997 and represented 29.4% and 30.9% of total revenues in 1996 and
1997, respectively. Our total number of customers increased by 2,346.4% in 1997
to 4,061 customers from 166 in 1996. No single customer accounted for more than
10% of our revenues in 1997. In 1997 we added 1,941 new customers by
establishing relationships with affinity groups. This addition of new customers
allowed us to obtain additional revenues with relatively low incremental cost.
Excluding affinity group members, we provided Network Services to 2,120
customers as of December 31, 1997, compared to 166 customers as of December 31,
1996. The addition of 2,009 new customers (which includes affinity group
customers) represented 97.0% of Network Services revenues. The remaining 3.0%
was derived from existing customers. Average revenues per customer decreased
from $1,093 in 1996, our first year of operation, to $339 in 1997. This
decrease occurred in part because 1997 was the first year in which we
contracted with affinity group customers. These customers typically produce
lower average Network Services revenues than our business customers.
Costs of Revenues
Total costs of revenues increased by 597.2% from $363,120 in 1996 to
$2,531,787 in 1997. Costs of revenues as a percentage of revenues decreased
from 118.0% in 1996 to 109.4% in 1997.
The costs of our Internet Projects revenues increased by 530.8% from $237,037
in 1996 to $1,495,234 in 1997. This increase primarily resulted from increased
personnel costs, training and seminars, and purchases of software. Costs of
Internet Projects as a percentage of related revenues decreased from 109.1% in
1996 to 93.6% in 1997. This decrease is primarily attributable to a reduction
of freelance staff costs utilized to design websites during our first year of
operations.
64
<PAGE>
The costs of our Network Services revenues increased by 625.4% from $119,297
in 1996 to $865,357 in 1997. This increase primarily resulted from increased
personnel costs and the cost of additional leased lines. Costs of Network
Services as a percentage of related revenues decreased from 132.0% in 1996 to
120.8% in 1997. This decrease is primarily due to a decline in purchased
Internet services and leased line expenses as a percentage of revenues and was
partially offset by additional personnel costs.
Depreciation and amortization, included in costs of revenues, increased by
2,422.8% from $6,786 in 1996 to $171,196 in 1997 as a result of new investments
in product development and establishing our network from year to year.
General and Administrative Expenses
General and administrative expenses increased by 83.0% from $263,175 in 1996
to $481,700 in 1997. Increases in our general and administrative expenses
reflect the costs of building a corporate infrastructure which will support our
future growth. It also reflects the impact of the addition of general and
administrative expenses of companies acquired in 1997. As a percentage of
revenues, general and administrative expenses decreased from 85.5% in 1996 to
20.8% in 1997.
Marketing Expenses
Marketing expenses increased by 621.8% from $164,669 in 1996 to $1,188,634 in
1997. Increases in our marketing expenses are attributable primarily to
increased salaries reflecting our efforts to build a larger sales force and
larger advertising and communication expenses in our drive to improve public
awareness of our brand name. As a percentage of revenues, our marketing
expenses decreased from 53.5% in 1996 to 51.4% in 1997 due to a reduction of
freelance staff costs. These reductions were partially offset by higher
personnel costs and advertising and telecommunications expenses.
Research and Development
Research and development expenses increased by 56.3% from $178,994 in 1996 to
$279,698 in 1997 primarily as a result of increased personnel costs. As a
percentage of revenues, our research and development decreased from 58.2% in
1996 to 12.1% in 1997 due to the growth of our revenues as significant
operations commenced.
Depreciation and Amortization
Depreciation and amortization increased by 445.1% from $21,263 in 1996 to
$115,899 in 1997, reflecting increased capital expenditures in property, plant
and equipment. The increase in goodwill amortization from 1996 to 1997 is due
to goodwill arising from the 1997 acquisitions.
We had no net goodwill at December 31, 1996. At December 31, 1997, net
goodwill in connection with the acquisitions of Artwise and Eclipse amounted to
$1,322,566.
Interest Expense and Income
Interest expense increased by 1,802.4% from $2,079 in 1996 to $39,550 in
1997, principally due to the higher level of overdrafts and short-term
borrowings in 1997 compared to 1996. We incurred these overdrafts to fund our
working capital requirements.
Income Taxes
We recorded income tax benefits of $401,849 in 1996 and $1,339,407 in 1997,
arising principally from operating losses incurred from our operating
subsidiaries in Germany. Under the current German tax code, these net operating
losses may be carried forward indefinitely and used to offset our future
taxable earnings.
65
<PAGE>
Other Comprehensive Loss: Foreign Currency Translation Adjustments
Foreign currency translation adjustments resulted in a loss of $210,211 in
1997 and a loss of $5,089 in 1996.
Vianet--Results of Operations--Year Ended December 31, 1998 As Compared To The
Year Ended December 31, 1997
Vianet is an Austrian ISP acquired by our Company on December 28, 1998. We
accounted for the acquisition using the purchase method of accounting. Because
Vianet's results of operations subsequent to the acquisition date were
immaterial to our consolidated financial results, we did not include them in
our 1998 Consolidated Financial Statements.
We provide below a discussion of Vianet's results of operations for the year
ended December 31, 1998 as compared to the year ended December 31, 1997. The
financial statements on which this discussion is based have been prepared in
accordance with US GAAP.
Total Revenues
Total revenues include payment for systems integration and consulting
projects, the basic connectivity fee that is paid at the beginning of each
three month period and current usage fees which are invoiced monthly after the
relevant month. The prepaid connectivity fee is recorded under deferred income
and recognized as revenue after the service is provided. System integration and
consulting projects are billed and paid upon completion. Total revenues
increased by 37.3% from ATS 27,390,233 ($2,125,949) in 1997 to ATS 37,617,683
($2,919,773) in 1998. The revenue growth was generated by Vianet's increased
customer base.
Costs of Products Sold
Costs of products sold consist primarily of telecommunications fees, licenses
and marketing. Costs of products sold increased by 37.5% from ATS 12,403,754
($962,743) in 1997 to ATS 17,051,503 ($1,323,487) in 1998. These costs
increased because increased usage by the growing customer base required
upgrades to the network infrastructure for current and future needs.
Research and Development
Research and development costs consist principally of personnel costs,
consulting costs and allocated overhead costs. Vianet had no research and
development costs in 1997 and ATS 1,282,625 ($99,554) of such costs in 1998.
This increase in costs of research and development resulted from activities
related to the enhancement of existing services, the addition of value-added
products and billing flexibility.
General and Administrative
General and administrative costs increased by 39.0% from ATS 14,787,656
($1,147,774) in 1997 to ATS 20,558,892 ($1,595,720) in 1998. This increase in
general and administrative costs resulted from growth in the size of Vianet.
General and administrative costs include primarily salaries and other personnel
costs of Vianet's administrative staff, office rent and other overhead
expenses.
Interest Income and Expense
Interest income decreased by 57.2% from ATS 20,972 ($1,628) in 1997 to ATS
8,966 ($696) in 1998. This decrease resulted from lower bank balances. Interest
income is primarily attributable to short term interest earned on bank
balances. Interest expense increased by 3.0% from ATS 86,212 ($6,692) in 1997
to ATS 88,803 ($6,893) in 1998. This increase resulted from increased short-
term borrowing. Interest expense is primarily attributable to Vianet's
overdraft facility.
66
<PAGE>
Income Taxes
Vianet received a tax benefit of ATS 4,940 ($383) in 1998 and had income tax
expenses of ATS 193,116 ($14,989) in 1997.
Liquidity and Capital Resources
Overview
Since our inception, we have financed our operations and growth primarily
from the proceeds of private and public sales of equity and debt securities.
Total net proceeds of equity offerings in the three years ended December 31,
1998 amounted to approximately $67,660,706. Additionally, in 1998, our
subsidiaries financed the acquisition of certain equipment with capital lease
obligations. Total net proceeds from the Unit Offering in July 1999, and from
the Discount Notes Offering and the PIK Notes Offering in August 1999, were
approximately $216,861,000.
Cash Flow
Operating activities used cash of $569,685, $1,432,432 and $10,335,128 in
each of the three years ended December 31, 1996, 1997 and 1998, respectively.
The large increase in cash used in 1998 resulted from increased expenditures
for marketing and research and development. For the six months ended June 30,
1999, operating activities used $11,334,499, compared to $3,133,178 for the
comparable period in 1998. This is principally the result of our net loss in
1999.
Investing activities used cash of $1,532,912, $4,790,473 and $9,928,634 in
each of the three years ended December 31, 1996, 1997 and 1998, respectively.
The large increase in 1998 resulted from the business acquisitions and the
increase in expenditures for property and equipment in that year. Expenditures
for property and equipment consisted principally of purchases of computer
hardware and other expenditures related to our Internet backbone and equipment
necessary to support our anticipated growth. For the six months ended June 30,
1999, investing activities used cash of $36,039,454, compared to $1,452,738 for
the comparable period in 1998. This increase in use of cash represents
primarily our deferred cash payment for the Vianet acquisition, the acquisition
of Flashnet, and purchases of property and equipment.
Net cash provided by financing activities was $2,084,784, $8,644,161 and
$60,010,168 in each of the three years ended December 31, 1996, 1997 and 1998,
respectively. The large increase in 1998 results principally from our December
1998 public equity offering which generated $44,977,376 in net proceeds and the
May 1998 private equity offering which generated $12,600,000 in proceeds. In
June 1997, we completed a private placement which generated $8,070,427 in net
proceeds. In addition, in 1996, we received $2,012,903 in equity investments
from our founders. For the six months ended June 30, 1999, net cash provided by
financing activities was $23,805,141, compared to net cash used of $2,698,286
for the comparable period in 1998. This increase is primarily attributable to
the Interim Loan used to finance the Flashnet acquisition Subsequent to June
30, 1999 the Company received approximately $216,861,000 of proceeds from notes
issued to investors; of which approximately $22,374,000 was used to pay off the
Interim Loan and $57,466,076 was placed in an escrow account to fund the first
six interest payments on the Senior Notes.
Working Capital
Our working capital, defined as the excess of our current assets over our
current liabilities, was $37,750,651 at December 31, 1998, compared to $891,027
at December 31, 1997 and $339,353 at December 31, 1996. Cash and cash
equivalents amounted to $42,875,877 at December 31, 1998, compared with
$2,238,909 at December 31, 1997 and $27,889 at December 31, 1996. The increase
in working capital, cash and cash equivalents resulted primarily from the
proceeds of our first public equity offering in December 1998 and our private
placements in May 1998 and June 1997.
67
<PAGE>
On June 30, 1999, our working capital, defined as the excess of our current
assets over our current liabilities, was $(11,562,266), as compared to
$37,750,651 on December 31, 1998. The decrease in working capital resulted from
an increase in short-term borrowings (including the Interim Loan), an increase
in trade accounts payable and other accrued liabilities, as well as an increase
in accrued personnel costs and the current portion of long-term capital lease
obligations. These decreases were only partially offset by increases in cash
and accounts receivable. Our balance sheet as of June 30, 1999, reflects
$7,463,206 for net accounts receivable compared to $3,248,754 on December 31,
1998 and $4,048,784 on March 31, 1999. This increase is attributable to the
large increase in sales (and therefore average accounts receivable balances)
but also collection difficulties at Cybernet AG and at Flashnet, whose balance
sheet was first consolidated on June 30, 1999. We have instituted various
measures which we expect will facilitate collection of these receivables
including realignment of sales force compensation schemes, pre-contract credit
evaluations for both business and residential customers and assignment of
direct responsibility to managers at the subsidiary-level for reductions in
receivables balances.
Credit Arrangements
As of June 30, 1999, the Company had short-term unsecured overdraft
facilities under which the Company and its subsidiaries could borrow up to DM
1,194,445 ($652,267). These facilities are denominated in Deutsche Marks (in
the amount of DM 200,000 ($109,217)), Italian Lire (in the amount of DM 814,202
($444,623)), Austrian Schillings (in the amount of DM 142,140 ($77,621)) and
Swiss Francs (in the amount of DM 38,103 ($20,807)). The interest rates
fluctuate based upon current lending rates. The weighted average borrowing rate
on these facilities was 8.1% as of June 30, 1999. In addition, certain of the
Company's banks provide overdraft protection exceeding the limits specified in
these agreements. As of June 30, 1999, the Company and its subsidiaries had
used DM 835,768 ($456,400). In addition, as of June 30, 1999, the Company had
long-term capitalized lease obligations of DM 3,041,153 ($1,660,729). Amounts
expressed in Deutsche Marks in this paragraph have been translated for
convenience purposes into U.S. dollars at the rate of DM 1.83122 = $1.00 (the
rate implied by the August 3, 1999 Noon Buying Rate of the Euro to the U.S.
dollar).
On June 30, 1999, the Company borrowed (Euro)21,860,554 ($23,347,809) in an
Interim Loan from Lehman Commercial Paper Inc., an affiliate of Lehman Brothers
Inc. and Lehman Brothers International (Europe), and Morgan Stanley Senior
Funding, Inc., an affiliate of Morgan Stanley & Co. Incorporated and Morgan
Stanley & Co. International Limited. The proceeds of the Interim Loan were used
to fund the purchase of Flashnet, the total purchase price of which was valued
as of May 14, 1999, the contract date, at Lit. 54.2 billion ($29.9 million)
consisting of Lit 41.0 billion ($22.6 million) in cash and 301,290 shares of
Cybernet common stock. The Interim Loan was repaid with part of the proceeds of
the Unit Offering on July 12, 1999.
Capital Expenditures
For the six months ended June 30, 1999, capital expenditures totaled
$6,586,968, compared to $1,221,112 for the comparable period in 1998. We funded
these capital expenditures primarily from net cash provided by financing
activities. The major investments by the Company in the first half of 1999
included investments in (i) a class 4 national telecommunications license for
the German market at a cost of DM 3,000,000 ($1,638,256), (ii) progress
payments on the installation of a new billing system totalling approximately
DM 4,705,000 ($2,569,332), (iii) the expansion of leased-line POP's at a cost
of approximately DM 1,700,000 ($928,345) and (iv) various computer and
technical equipment at a cost of approximately DM 1,600,000 ($873,737). We have
budgeted approximately $45.0 million in capital expenditures for the remainder
of 1999. We expect to use these amounts to install carrier grade digital
circuit switches and related equipment in order to offer voice services to our
customers, to build data centers and office infrastructure and for transmission
facilities (including alternative long-haul transmission capabilities) and
related equipment. We also expect to use a portion of these budgeted amounts
for the continued roll-out of our billing system.
We have also entered into long-term data and voice communications agreements
with several vendors. These agreements enable us and our customers to access
data networks necessary for the use of our products
68
<PAGE>
and services. The minimum payments under these contracts are for an aggregate
of $1,382,228, $84,806, $84,806, $84,806, $16,139 and $80,693 in 1999, 2000,
2001, 2002, 2003 and thereafter, respectively.
Although we expect that the net proceeds of the Private Offerings, together
with internally generated funds, will provide sufficient funds for us to expand
our business as planned and to fund operating cash requirements and capital
expenditures through mid-2000, we are considering offering additional debt
securities in the immediate future. The amount of our future capital
requirements will depend upon many factors including performance of our
business, future acquisitions, the rate and manner in which and the extent to
which it leases, acquires or constructs backbone capacity, increases in
staffing levels and customer growth. These requirements will also depend upon
many factors that are not within our control, including competitive conditions,
governmental and regulatory developments and capital costs. If future sources
of funds prove to be insufficient to fund our growth and operations in the
manner and at the rate currently anticipated, then some or all of our
development and expansion plans could be delayed or abandoned or we could be
required to seek additional funds earlier than currently anticipated, including
from additional debt or equity financings. See "Risk Factors--We Will Need
Additional Capital in the Future."
Valuation Allowance
At December 31, 1998, we had available combined net operating losses carried
forward of approximately $20,230,048, most of which relate to our German
operations. Under the current German tax code, these net operating losses may
be carried forward indefinitely and used to offset our future taxable earnings.
We have not provided any valuation allowance against the deferred tax asset
related to these losses carried forward. However, if we were unable to generate
sufficient taxable income in the future or if the tax law were changed, we
would have to establish a valuation allowance through a charge to income. In
March 1999, the German government passed new tax legislation which reduced the
corporate income tax rate from 45% to 40%. The impact of recalculating the
deferred tax assets and liabilities using the new rate recorded in the first
quarter of 1999 was approximately $550,000.
Seasonality
Our quarterly results are subject to seasonality. We typically experience an
increased level of Internet Project sales in the last fiscal quarter. We also
typically experience a slowdown in the first fiscal quarter in Internet Project
sales because customers refrain from making IT investment decisions until the
completion of CeBit, a major European trade show, which takes place in the
Spring. Network Services results do not typically exhibit the same level of
seasonal variation.
Foreign Currency
Most of our revenues and a significant portion of our expenses are
denominated in Deutsche Marks instead of the dollar, our reporting currency. As
we expand our operations into other European countries (particularly Italy
following the acquisition of Flashnet), we expect that we will continue to
generate revenues in currencies other than the dollar. All of our revenues and
an increasing portion of our expenses continue to be denominated in currencies
other than the currency in which we report our results. Therefore, our reported
results will continue to be impacted by exchange rate movements of these
currencies against the dollar. The funds available from the Unit Offering and
the Discount Notes Offering were denominated in U.S. dollars and interest
payments on the Senior Notes and the Discount Notes will be made in U.S.
dollars. As a result, we will be exposed to foreign exchange risks, and our
results of operations likely will be affected by fluctuations in the value of
the local currencies in which we transact business. We do not currently engage
in hedging transactions, however, we may consider entering into such
transactions to reduce the risk of our exposure to currency fluctuations,
including any such fluctuations which may result from having significant
dollar-denominated liabilities after the offering of the Senior Notes and the
Discount Notes.
69
<PAGE>
Year 2000
The Year 2000 problem results from the fact that many existing computer
programs and systems have used only two digits to identify the year in the date
field. These programs were designed and developed without considering the
impact of a change in the century designation. If not corrected, computer
applications that use a two-digit format could fail or create erroneous results
in any computer calculation or other process involving the Year 2000 or a later
date.
We have identified two main areas of risk related to the Year 2000 problem
for our IT systems:
. Our internal computer systems or embedded chips could be disrupted or
fail, causing an interruption or decrease in productivity in our
operations; and
. Computer systems or embedded chips of third parties including (without
limitation) financial institutions, suppliers, vendors, landlords,
customers, suppliers of communications services and others could be
disrupted or fail, causing an interruption or decrease in our ability to
continue our operations.
We have evaluated our state of readiness for the Year 2000 issue. With regard
to our internal IT systems, we have concluded that substantially all of those
systems are Year 2000 compliant. Our personnel have tested and analyzed our
systems in the course of regular quality control and research development. We
did not spend significant capital on this evaluation. To date, the only costs
in connection with our Year 2000 evaluation have been limited to internal staff
costs, which have been expensed as incurred. The financial information
contained in this prospectus includes such costs, which are not material. Based
on our experience to date, we do not anticipate that we will be required to
incur significant additional operating expenses or to invest material amounts
to obtain Year 2000 compliance. To respond to our customers' inquiries, we are
in the process of developing a report to inform our customers about the effect
of the Year 2000 problem on our products and services. We anticipate utilizing
an outside consultant to prepare this report at a cost estimated to be DM
50,000 ($26,748).
We have been assured by all major suppliers, vendors and customers that the
following existing IT and other systems, upon which we rely for products and
services and for internal operations, are Year 2000 compliant:
. the Cisco routers we use in connection with leased telephone line
communications;
. the Ascend routers we use in connection with telephone dial-up
communications;
. Sun Workstations, our main Internet servers;
. the Microsoft Corporation software we use in our internal office
operations;
. our network facilities supplied by Info AG;
. our global transit facilities supplied by AT&T/Unisource;
. our leased telephone lines supplied by Deutsche Telekom; and
. the electric power to our main offices and several of its nodes,
supplied by Stadtwerke Munich.
Based on those assurances, we believe that the IT systems utilized in our
principal network, backbone and internal operations will meet Year 2000
requirements. We do not anticipate significant interruptions of billings or
service to customers or disruptions of internal operations attributable to the
Year 2000 problem.
We have plans to complete the integration of compliant operations and have
instituted procedures to assure that IT systems installed in 1999 will be Year
2000 compliant. We do not expect compliance with the Year 2000 problem on a
Company-wide basis to require acceleration of planned expenditures for the
purpose of remediation. Because we believe that substantially all our material
systems are Year 2000 compliant, we have not developed a theoretical worst case
analysis or a contingency plan to deal with such a contingency.
70
<PAGE>
We are now determining whether suppliers of secondary significance to our
business, such as local suppliers of telephone service and electric power, are
Year 2000 compliant. Some of these secondary systems are non-essential, as they
duplicate systems that we have determined will operate in the Year 2000
environment. We anticipate completing our inquiries regarding secondary systems
during the third quarter of 1999.
With respect to non-IT systems, our operations do not depend in a significant
manner on embedded technology. All of our desk-top computers and telephones are
Year 2000 compliant. Our offices' climate control systems, elevators and
monitor alarms do have embedded systems. However, our operations do not depend
upon elevators for access to the principal offices. We are in the process of
evaluating whether the embedded systems at our other facilities are Year 2000
compliant. Accordingly, we have not developed formal contingency plans in this
regard.
Conversion to the Euro
On January 1, 1999, 11 of the 15 EU member countries (the "participating
countries") adopted the Euro as their common legal currency, at which time
their respective individual currencies became irrevocably fixed at a rate of
exchange to the Euro, and the Euro became a currency in its own right.
Presently, the following 11 currencies are subject to the Euro conversion: the
Austrian Schilling, the Belgian Franc, the Dutch Guilder, the Finnish Markka,
the French Franc, the Deutsche Mark, The Irish Punt, the Italian Lira, the
Luxembourg Franc, the Portuguese Escudo and the Spanish Peseta.
From January 1, 1999 until January 1, 2002 (the "transition period"), the
Euro will exist in electronic form only and the participating countries'
individual currencies will continue in tangible form as legal tender in fixed
denominations of the Euro. During the transition period, we must manage
transactions with our customers and our third party vendors in both the Euro
and the participating countries' respective individual currencies. This may
cause significant logistical problems. We may incur increased operational costs
and may have to modify or upgrade our information systems in order to:
. convert individual currencies to Euro;
. convert individual currencies of participating countries into each
other;
. execute conversion calculations utilizing six-digit exchange rates and
other prescribed requirements;
. accommodate the new Euro currency symbol; and
. permit pricing, advertising, billing, accounting, internal financial
calculations, sales and other transactions or practices to be effected
simultaneously in Euro and the participating countries' respective
individual currencies.
Changes in pricing denominations for products once sold and advertised in an
individual currency and now sold and advertised in the Euro could cause
material billing errors and complications. Fluctuations in the business cycles
of participating countries or a failure on any participating country's part to
comply with EU directives could have negative economic effects on other
participating countries, including countries in which we operate. Additionally,
the participating countries' pursuit of a single monetary policy may adversely
affect the particular economies of markets in which we conduct business. Any of
the above could have a material adverse effect on us and our ability to make
payments under the Senior Notes, the Discount Notes and the PIK Notes.
While we believe that our systems have not been adversely impacted by the
Euro conversion and we believe that we are substantially Euro-compliant, we
cannot guarantee that we will be able to avoid the accounting, billing and
logistical difficulties that might result from the introduction of the Euro. In
addition, we cannot be sure that we, our third party suppliers or our customers
will be able to implement the necessary protocols successfully. If we, our
third party vendors, customers or any others with whom we must interact or
interconnect, fail to adapt and modify our procedures and systems to
accommodate the Euro conversion, this could materially adversely affect our
results of operations and our ability to meet our obligations under the Senior
Notes, the Discount Notes and the PIK Notes.
71
<PAGE>
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
We do not utilize market-risk-sensitive instruments, such as derivative
financial instruments. Our primary market risk is in the area of interest rate
and foreign currency exchange rate fluctuations.
We maintain our cash balances in deposits at banks and in highly liquid
short-term investments, such as money market mutual funds, therefore lowering
our exposure to interest income risks.
As a result of our Unit Offering in July 1999 and Discount Notes Offering in
August 1999, we have a substantial amount of debt in U.S. dollars. While our
reporting currency is U.S. dollars, our functional currency is the Deutsche
Mark and significant fluctuations in the U.S. dollar to Deutsche Mark exchange
rate could have an adverse impact on the amount of Deutsche Marks required to
satisfy this debt. We estimate that a 10% increase in the exchange rates
between the Deutsche Mark and the U.S. dollar would increase the Deutsche Mark
amount required to settle the debt outstanding from the Unit Offering and the
Discount Notes Offering by approximately $20,000,000.
All of our revenues and a significant portion of our expenses are denominated
in currencies other than our reporting currency, the U.S. dollar. Approximately
89% of our revenues in 1998 were denominated in Deutsche Mark and, as such, the
majority of our foreign exchange rate exposure relates to the translation of
our Deutsche Mark financial statements into U.S. dollars which is impacted by
changes in the exchange rates between the Euro and the U.S. dollar. We prepared
a sensitivity analysis to assess the impact of exchange rate fluctuations on
our 1998 operating results. Based on this analysis, we estimated that a ten
percent adverse change in the exchange rates between the Deutsche Mark and the
U.S. dollar would have increased our reported net loss for 1998 by
approximately $530,300. Our analysis also indicated that a ten percent decrease
in the exchange rate between the U.S. dollar and the Deutsche Mark would result
in a decrease of our June 30, 1999 net assets of approximately $5,230,000.
We have not entered into any derivative hedging instruments to reduce the
risk of exchange rate fluctuations.
72
<PAGE>
BUSINESS
We began our operations with the formation of Cybernet AG, a privately held
German stock company. Cybernet AG was organized in December 1995, and commenced
significant operations in 1996. On September 17, 1997, Cybernet AG was acquired
by Cybernet Utah. At the time that it acquired Cybernet AG, Cybernet Utah had
no material business activities, assets or liabilities. Effective November 18,
1998, Cybernet Utah was merged into Cybernet Delaware, and the Delaware
corporation is the surviving entity of the merger. On June 30, 1999, we
consummated our acquisition of all of the issued and outstanding capital stock
of Flashnet, a leading ISP based in Rome, Italy. The terms "Company,"
"Cybernet," "we," "us" and "our" refer to Cybernet Delaware and its
subsidiaries as a combined entity, except where its use is such that it is
clear that such term means only Cybernet Delaware.
Overview
Through our subsidiaries, we are a leading provider of Internet
communications services and solutions in Germany, Austria, Italy and
Switzerland targeting small- to medium-sized enterprises. Our IP solutions are
based on a core product offering consisting of Internet connectivity and value-
added services. Such value-added services include VPNs, web-hosting, co-
location, security solutions, electronic commerce, Intranet/Extranet and
workflow solutions. We offer consulting, design and installation, training,
technical support, and operation and monitoring of IP-based systems. We market
our products and services primarily to small- and medium-sized enterprises in
Europe because we believe that they represent an underserved and sizeable
market. Companies in this market are characterized by a lack of internal
technical resources, rapidly expanding communications needs and a high
propensity to utilize third-party outsourcing. We are recognized as a provider
of high quality Internet connectivity services and solutions to enterprises and
as one of Germany's leading Internet access providers. Recently, IT Services, a
leading German computer magazine, ranked us number one among German ISPs in
terms of infrastructure, international outlook and customer service.
Our mission is to become a leading European provider of IP-based
communications services and network-based business solutions. We intend to
continue to focus on small- and medium-sized enterprises in Europe, offering a
full portfolio of advanced communications products, including Internet access
and value added services, as well as data and switched voice services.
We believe that our capabilities in Internet, telecommunications and systems
integration services differentiate us from many of our competitors who offer
some, but not all, of the products and services that we offer. We approach and
win business customers by offering and designing a full range of services and
solutions for mission critical communications needs, such as electronic
commerce solutions, Intranets and VPNs. This enables us to work directly with
different levels of our customers' organizations, to participate in the design
of customers' systems and to offer additional network and communications
services as our customers' businesses grow and their needs change. By basing
our solutions upon product modules, we are able to meet our customers'
individual needs at competitive prices, while realizing higher margins by
reducing costs through standardization. Also, as a result of the high quality
of our services and the value-added nature of our solutions, we believe that we
experience higher customer retention rates and that we are less vulnerable to
pricing pressures than many of our competitors in the telecommunications and
Internet industries.
We sell our services and solutions primarily through our direct sales force.
Most of our sales people are based in regional offices and are supported by
specialized technical and commercial assistance from our customer care centers
in Munich, Vienna, Zurich, Rome and Trento. We complement our direct sales
effort with an extensive reseller and referral network of over 100 companies
and by forming marketing alliances with technology leaders such as Hewlett-
Packard, Microsoft, Network Associates, Sun Microsystems and Nokia Italia.
While our reseller arrangements begin with sales of our basic product
offerings, such as connectivity, they can lead to direct sales by us of more
complex solutions, such as security solutions or VPNs.
73
<PAGE>
We operate a geographically distributed IP network based upon leased lines.
Our network is spread over six countries and consists of network nodes equipped
primarily with Cisco and Ascend routers connected to a redundant high-
performance backbone infrastructure. We help corporate customers reduce
telecommunications costs by offering Internet connectivity through dedicated
lines at 56 directly owned Points of Presence ("POPs"). We also offer a system
of dial-in nodes with ISDN or analog modem ports to smaller enterprises,
employees and affiliates of corporate customers. These nodes permit local dial-
in access throughout Germany, Italy and Switzerland and most of Austria.
Flashnet owns 20 of these POPs for dedicated lines (which can also accommodate
dial-in traffic) and has access to more than 300 dial-in access nodes.
Recently, we reorganized our dial-in network in Germany by concentrating
multiple dial-in access nodes into larger access points called "Virtual POPs,"
which use a Public Switched Telephone Network ("PSTN") to aggregate traffic. We
expect this will generate operating efficiencies, in that there will be fewer
overall nodes to service. We are expanding our network across Germany, Austria,
Italy and Switzerland by installing additional POPs and replacing dial-in
access nodes with Virtual POPs.
We also plan to add digital circuit switching capabilities to our network to
offer switched voice telecommunications services to our customers, capture more
revenues from dial-in traffic and provide termination services to other
carriers by layering switched voice capability onto our expanded leased line
network. For these purposes, we require: (i) licenses to offer voice telephone
services in Germany, Austria, Italy and Switzerland; (ii) up to nine carrier
grade digital circuit switches; (iii) a billing system capable of capturing the
necessary data and generating invoices to our customers; and (iv)
interconnection agreements with incumbent operators and other
telecommunications carriers. In Germany, we have: (i) obtained a license to
offer voice telephone services in the entire country; (ii) ordered six Nortel
DMS-100 switches; (iii) installed the Kenan billing system; and (iv) begun
negotiations for an interconnection agreement with both Deutsche Telekom and
Telecom Italia. In order to enable us to begin offering voice telephone service
before our own switched voice network starts operating in the fourth quarter of
1999, we have entered into an interim agreement with a third-party carrier. In
Austria and Switzerland, we have begun the process of obtaining
telecommunications licenses. In Italy, our subsidiary Flashnet has a license to
provide voice services throughout the entire country.
We have increased our revenues from $0.3 million in 1996 to $8.6 million in
1998 ($17.4 million pro forma for acquisitions, including Flashnet). As of
March 31, 1999, we provided services to approximately 10,800 business
customers, an increase from approximately 200 customers at December 31, 1996.
The majority of these customers are small- to medium-sized enterprises. We also
provide services to larger companies and organizations such as BASF
Corporation, German Parcel, Commerzbank, Hewlett-Packard, Start Media Plus,
DaimlerChrysler Aerospace Dornier, BMW Financial Services, Raiffeisenbank,
Zuegg, Honeywell, Lauda Air, Modern Times, Amadeus, Lufthansa and News. As of
March 31, 1999, Flashnet had approximately 1,600 business customers and 38,000
residential customers, including large organizations such as Nokia Italia, ERG,
Avis, Ferrovie dello Stato (Italian Railways) and the Italian Parliament.
Our management team consists of individuals with extensive Internet, IT and
telecommunications expertise. Andreas Eder, co-founder and Chief Executive
Officer, previously held various positions at Siemens-Nixdorf Information
Systems and The Boston Consulting Group. Dr. Alessandro Giacalone, Chief
Operating Officer, previously headed the European-Industry Computer Research
Center and established it as a leading German ISP. He was also a Professor of
Computer Science at the State University of New York at Stony Brook. Robert
Eckert, our Chief Financial Officer, was previously with Netsource A/S,
Swisscom International, and General Electric (USA). Walter Franz, who is
principally responsible for our network, was director of network operations for
MCI/WorldCom in Germany and also worked for MFS Telecommunications and
Motorola. In addition, we have recruited individuals at various managerial
levels from leading industry participants such as AT&T/Unisource, British
Telecommunications and Deutsche Telekom. Our policy is to retain the key
executives of the companies we acquire. To this end, we typically structure our
acquisitions to give such executives an equity participation in the future
success of our Company. We have retained most of the key managers in our
acquisitions.
74
<PAGE>
Industry Background
The Internet is a global network of multiple private and public networks
that use standardized communication protocols to communicate with each other.
The Internet was started in 1969 by the U.S. Department of Defense, Advanced
Research Projects Agency (ARPANET) to enable scientists at universities to
share information and to develop a secure network. Use of the Internet has
grown rapidly since its initial commercialization in the early 1990s.
International Data Corporation ("IDC"), a market research organization, has
estimated that the number of Internet users worldwide will grow from
approximately 68.7 million in 1997 to approximately 319.8 million by the end
of 2002, a compound annual rate of 36.0%. Consumers and companies in the
United States have spearheaded the adoption of the Internet. While other
regions of the world have been slower to accept the Internet, its use is
becoming a standard communications tool worldwide.
The Internet has become an important commercial medium and represents a
significant opportunity for businesses to interact in new and different ways
with a large number of customers, employees, suppliers and partners. As use of
the Internet grows, businesses are increasing the breadth and depth of their
Internet product and service offerings. Pioneering Internet-based businesses
have developed Internet products and services in areas such as finance,
insurance, media, tourism, retail and advertising. Other businesses have begun
to use the Internet for an expanding variety of applications, ranging from
corporate publicity and advertising, to sales, distribution, customer service,
employee training and communication with business partners. Increasingly,
Internet operations are becoming mission-critical for many of these
enterprises. To ensure the reliability of their Internet operations,
enterprises are requiring that these operations have performance, scalability
and expert management 24 hours a day, 7 days a week.
Companies generally utilize two types of Internet services: connectivity and
value-added services. Connectivity services provide access to the Internet,
while value-added services consist of products such as web-hosting, VPNs,
security solutions and systems integration that improve the internal and
external operations of a company.
The Internet is experiencing rapid growth rates in Europe. According to IDC,
the number of Internet users in Europe reached 16.8 million in 1997 and is
expected to reach 82.0 million in 2002. Datamonitor, another market research
organization, estimates that the number of externally hosted commercial
websites in Europe will increase from 221,700 in 1997 to 981,900 in 2000,
while the number of VPNs will expand from 100 in 1997 to 27,900 in 2000. We
believe that the growing numbers of externally hosted websites and VPNs
reliably predict a corresponding growth in Internet traffic. We expect this
projected growth to be fueled by a number of factors, including the large and
growing installed base of advanced personal computers and increased
availability of bandwidth, resulting in faster and cheaper access to the
Internet, improvements in network architectures, increasing numbers of
network-enabled applications, and the emergence of compelling content and
commerce-enabling technologies.
Europe lags the U.S. in terms of total Internet users, Internet users as a
percentage of population, and personal computers ("PCs") with Internet access.
An historical comparison reveals that Europe is between one and two years
behind the U.S. when the selected indicators are considered. We expect
European Internet usage to follow historical U.S. growth rates and achieve
current U.S. levels within one to two years. The following table provides
information about current and projected Internet usage in Europe and the
United States.
<TABLE>
<CAPTION>
Europe United States
------------ --------------------------
1997 2002E 1995 1996 1997 2002E
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Internet users (millions)........... 16.8 82.0 9.7 23.2 38.7 135.9
Population (millions)............... 386.0 388.4 263.0 265.4 267.9 279.5
Internet users as a percent of
population......................... 4.4% 21.1% 3.7% 8.7% 14.4% 48.6%
PCs with internet access............ 19.7% 57.1% 11.5% 23.8% 36.3% 84.3%
</TABLE>
- --------
Sources: IDC Corporation; population and Internet users as a percent of
population are based upon population figures provided by the U.S.
Bureau of the Census.
75
<PAGE>
Internet usage varies significantly between European regions. Northern
European countries generally have a higher level of market penetration and
service usage than countries in Southern Europe, which we believe currently
presents a growth opportunity. The following table summarizes certain
information and estimates about revenues from Internet connectivity and from
Internet hosting and VPNs in European countries.
<TABLE>
<CAPTION>
Connectivity Hosting and VPN
--------------------------------------------- ---------------------------------------------
Anticipated Anticipated
1997 2000E Change 1997 2000E Change
($ in millions) ($ in millions) (%) per annum ($ in millions) ($ in millions) (%) per annum
--------------- --------------- ------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Finland................. 17 42 35.2% 1 20 171.4%
France.................. 94 383 59.7% 3 92 213.0%
Germany................. 447 1,084 34.4% 16 184 125.7%
Italy................... 30 169 77.9% 5 50 115.4%
Netherlands............. 28 85 44.8% 6 42 91.3%
Spain................... 35 136 57.2% 2 31 49.3%
Sweden.................. 31 67 29.3% 4 34 104.1%
United Kingdom.......... 154 381 35.2% 16 146 109.0%
Other (*)............... 83 272 48.5% 23 123 74.9%
--- ----- ---- --- --- -----
Total................. 919 2,619 41.8% 76 722 111.8%
=== ===== ==== === === =====
</TABLE>
- --------
(*)Other includes Austria, Belgium, Ireland, Norway, Portugal and Switzerland.
Source: Datamonitor.
Datamonitor reports that the European corporate Internet connectivity market
consisted of 1.2 million accounts and generated total revenues of $919 million
in 1997. It estimates that corporate connectivity revenues will grow to $2.6
billion in 2000, a compound annual growth rate of 41.8%.
Datamonitor also reports that in 1997, European Internet value-added services
generated revenues of $287 million. It estimates that revenues from value-added
services will increase to $1.7 billion in 2000, a compound annual growth rate
of 80.7%. In 1997, revenues from hosting services and VPNs were $76 million,
26.5% of total European revenues from value-added services. In 2000, they are
expected to be $722 million, 43.2% of such revenues, a compound annual growth
rate of 111.8%.
We consider Germany to be the most important connectivity market in Europe in
terms of revenues, with a highly developed consumer and business on-line
customer base. As the chart above shows, in 1997, the German connectivity
market had revenues of $447 million, 48.6% of total European connectivity
revenues. It is estimated that, in 2000, Germany will generate connectivity
revenues of $1.1 billion, 41.4% of total European connectivity revenues.
Italy currently has a relatively low Internet penetration level. The Internet
connectivity market in Italy is very fragmented, with many small providers. We
expect that connectivity revenues in Italy will grow at one of the fastest
rates in Europe, particularly northern and central Italy, because much of
Italian business is concentrated in that area. We believe our acquisition of
Flashnet will permit us to take advantage of this growth opportunity.
Business Strategy
Our objective is to become a leading provider of communications services and
network-based business solutions to small- to medium-sized enterprises in
Europe. We currently offer a full-service portfolio of advanced communications
products including Internet access and value-added services, as well as
switched voice services. The principal elements of our business strategy are as
follows:
Target Small- to Medium-Sized Business Enterprises. We focus on small- to
medium-sized enterprises. In Germany, we focus on companies that typically have
revenues between (Euro)25 million and (Euro)500 million.
76
<PAGE>
According to Statistisches Bundesamt, a German government agency, such
companies generate 45% of Germany's total corporate revenues. In other
countries, the revenues of small- to medium-sized enterprises as a portion of
total corporate revenues vary. We believe that this customer segment is
underserved and has substantial and increasing communications needs. Small- to
medium-sized enterprises typically lack the technical resources to build and
maintain extensive communications systems and, as a consequence, they outsource
many services and solutions to third parties. We focus in particular on network
intensive industries, such as IT, tourism, retail, finance, government, media
and advertising. For many of these industries, utilization of the Internet has
become essential. In certain markets, we also serve high-end residential
customers.
Initiate Long-Term Relationships with Customers Through Local Coverage and at
an Early Stage. Unlike some of our competitors, we use strong local management
teams to address the needs of our customers. Most of our sales people are based
in regional offices and are supported by specialized technical and commercial
assistance from our offices in Munich, Vienna, Zurich, Rome and Trento. This
strategy allows us to initiate close relationships with our customers at an
early stage of their Internet services requirements, engage in strategic
discussions with senior management about their communications requirements,
participate in the design of their systems, services and solutions, and
establish the basis for long-term relationships at different levels of our
customers' organizations. We are then in a position to provide our customers
with additional services as their requirements increase or change over time.
This also enables us to offer additional solutions to our customers without
having to compete primarily on price.
Develop Total Communications Offering. We currently offer both Internet
connectivity services and modular Internet business solutions to our customers.
Our modular solutions include web-hosting and -housing, VPNs, security
solutions, electronic commerce solutions and Intranet and workflow solutions.
As technology evolves, we intend to broaden our product offering to include
additional services, solutions and innovations that have proven reliable and
effective. In June 1999, we started offering voice services. Our ability to
offer voice services will allow us to provide one-stop shopping for integrated
voice and data solutions. We believe IP technology and IP applications will be
the primary platform and interface for business data and voice communications
in the future.
Expand Sales Channels. We are currently pursuing growth opportunities through
various sales channels. These include trained direct sales representatives with
strong technical backgrounds, an extensive reseller program and marketing
alliances with technology leaders like Hewlett-Packard, Microsoft, Network
Associates, and Sun Microsystems. We are expanding our direct sales force and
regional offices to increase our local coverage. We currently have 19 sales
offices (seven in Germany, one in Austria, nine in Italy and two in
Switzerland), and we plan to increase this number. We intend to expand our
reseller and referral arrangements to increase sales of our basic connectivity
services, and enhance our marketing alliances to obtain more potential customer
contacts.
Control Our Network. We consider it strategically important to control and
operate our own network infrastructure. This will enable us to: (i) maximize
revenues by offering total communications services, including broad band and
voice services; (ii) achieve the highest levels of service quality and
reliability; and (iii) reduce transmission costs. This involves:
. optimizing the configuration of our IP network, by concentrating
international access at a few select locations where the cost of global
access can be minimized; concentrating network planning and management
in one central location; and planning the network's redundancy on a pan-
European basis rather than on a local basis;
. establishing up to nine large-scale data centers to enhance our co-
location and housing service offering;
. acquiring up to nine carrier grade digital circuit switches to be
installed in key cities; and
. leasing transmission capacity on a long-term basis, acquiring backbone
capacity, or constructing our own infrastructure in selected locations,
to transport high bandwidth data and voice services over all available
transmission protocols (including alternative long-haul transmission
media such as microwave).
77
<PAGE>
Accelerate Growth in Europe Through Targeted Acquisitions. To date, we have
successfully integrated three acquisitions. We have recently acquired three
additional companies which we are in the process of integrating. We will seek
to acquire additional Internet-related companies to strengthen our presence in
other European countries, while continuing to grow internally. We look for
strategically and culturally compatible companies to add to our strong
management, enhance our technical expertise, and enhance our customer base in
our current coverage area and bordering countries.
Products and Services
We currently offer a comprehensive range of Internet connectivity services,
network solutions and business solutions to enterprises in Germany, Austria,
Italy, and Switzerland and have started to offer voice services.
Connectivity Services
We offer a variety of connectivity solutions, including Internet access,
third party software and hardware implementation and configuration services, in
bundled and unbundled packages. We offer dedicated line connectivity at speeds
ranging from 64 Kbps to multiples of 2 Mbps. We offer Internet connectivity to
our corporate customers through dedicated lines at our 56 directly owned POPs.
We also provide both analog and ISDN dial-in Internet access throughout
Germany, Italy and Switzerland as well as throughout most of Austria. In
Germany, Italy and Switzerland dial-in service allows our customers to dial
into one nation-wide number to access the Internet at local telephone rates.
Our dial-in services in Austria utilize dial-in access nodes, each of which has
its own dial-in number. We have seven such dial-in access nodes in Austria. At
present, we offer our dial-in service through third party telephone networks.
As we introduce our interconnection and switching capabilities, we plan to
offer dial-in access at a cost approximating that of a local call and also to
charge the customer for telephone minutes. Outside the countries in which we
operate, we offer roaming at local call rates in cooperation with more than 350
international ISPs and telecommunications companies which have joined the
Global Reach Internet Connection.
We offer third-party software products such as electronic mail, news and
other solutions that permit customers to navigate and utilize the Internet and
give remote access to mobile personnel operating outside traditional office
settings. We also provide router services such as router renting,
configuration, supervision and maintenance. Overall, we are able to offer
customers a full portfolio of services with managed connectivity. Our principal
connectivity services include:
<TABLE>
<CAPTION>
Product Name Characteristics
------------ ---------------
<S> <C>
Personal Connect, Office Single user dial-up services, with dynamic IP address and
Connect, Call & Surf, access speeds of up to 64 Kbps. Selection of usage-based
Call-to-Intranet or flat rate tariffs, including dial-in telephony costs
(except Personal Connect and Office Connect).
Business Connect, Call & Multi user dial-up service for workgroups, with multiple
Surf for Workgroups, IP addresses and access speeds of up to 128 Kbps.
Call-to-Intranet for Services provided via Local Area Networks ("LANs") with
Workgroups Ascend Pipeline 50/75 routers. Selection of usage-based
or flat rate tariffs, including dial-in telephony costs
(except Business Connect).
Business Line, Campus Leased line service for workgroups, with multiple IP
Line addresses and access speeds of up to 2 Mbps. Service
provided via LANs and Cisco 16xx routers. Selection of
usage-based and flat rate tariffs.
</TABLE>
78
<PAGE>
Network Solutions
Virtual Private Networks. Many companies today have private data
communication networks, which are often referred to as corporate networks.
These networks are used to transfer proprietary data between offices and use
relatively expensive leased lines to connect various locations. Our VPNs
utilize the Internet as a cost effective alternative to corporate networks to
provide secure transmission of data and voice with the added benefit of secure
remote access. In addition, our VPN products are often the basis for Intranet
services (connectivity of branch offices, teleworkers and mobile workforce) and
Extranet services (connectivity of business partners, suppliers and customers)
services. We offer these products in conjunction with additional hardware and
software solutions, as well as continuous operation and maintenance, customer
care and billing services. Flashnet offers a product called ALL IN ONE, an all
inclusive solution including combinations of data transmission, Internet access
and voice-over IP, representing the ideal platform to build VPNs for customers.
Security Solutions. Corporate networks and systems need to be protected
against unauthorized access and use. We currently offer a comprehensive set of
third-party supplied security products, including encryption, firewall and
authentication packages. We add value to this software by providing services
such as security consulting, installation support, on-the-job training of
customers' system administrators, hotline support (24 hours a day, 7 days a
week) and security audits. To assure the security of communication and business
transactions between users of networks, we integrate state-of-the-art software,
technologies and standards. We offer these security solutions as stand-alone
products or as part of broader solutions, such as VPNs or Intranets. Our
principal security solutions include:
<TABLE>
<CAPTION>
Product Name Characteristics
------------ ---------------
<S> <C>
Firewall 1, Gauntlet Third-party firewall software tailored to customer
requirements.
ACE / Server, SecurID Third-party authentication hardware and software.
Token
Idea@Exchange--Secure Third-party software for encryption of electronic mail
Messaging traffic tailored to customer requirements.
Business Solutions
Co-Location. We offer co-location solutions to customers who have the
resources to manage their own servers and websites and who prefer not to share
a server with others. Customers receive the benefits of having their servers
housed in one of our data centers, with full-time connection to the Internet,
direct access to our high-speed network, uninterrupted power supply, regular
back-up and monitoring and technical support 24 hours a day, seven days a week.
Our principal co-location services include:
<CAPTION>
Product Name Characteristics
------------ ---------------
<S> <C>
Server Housing Flexible service offering ranging from simple co-location
to dedicated ports and back-up facilities.
Rent-a-Server Rental of various high-end server types.
</TABLE>
Application and Website Hosting. We offer shared server application and
website hosting services, which permit corporations to market themselves and
their products on the Internet without having to invest in independent
technology infrastructure and operations staff. Such customers receive
sufficient bandwidth to meet their needs and the benefits of having their
systems housed in one of our continuously maintained data centers. Applications
on our servers, which our customers can access, include shop and mall systems,
payment systems, publishing systems and video conferencing.
Electronic Commerce. Electronic commerce is the execution of commercial
transactions on the Internet. We design and implement dedicated electronic
commerce systems or any component part which a customer may require, such as
shop or mall, credit verification and payment handling verification. These
systems are
79
<PAGE>
based on our electronic commerce platform which integrates systems and
technologies of third-party vendors, such as Brokat, Hewlett-Packard,
Intershop, Microsoft, SAP, Sun Microsystems, VeriFone and others. For customers
reluctant to undertake an investment in a proprietary electronic commerce
solution, we maintain our own electronic commerce system, which we provide on a
lease basis. Through working arrangements with content providers and media
companies, we also assist customers utilizing electronic commerce for retail
and wholesale sales to targeted groups on the Internet. This enables a customer
to establish a distribution channel for products or a channel for purchasing,
and to determine whether to invest in a dedicated system. Our principal
electronic commerce services include:
<TABLE>
<CAPTION>
Product Name Characteristics
------------ ---------------
<S> <C>
Online Shopping-- Online shopping site hosted by Cybernet on a low cost
Cybernet Shop Hosting monthly rental basis, which is based on shop software
from Intershop and Beans, among others. Administration is
conducted via Internet.
Online Shopping-- Full license online shopping customized by Cybernet,
Cybernet Shop License based on Intershop, Microsoft Site Server and Openshop,
Model among others. Integration of an inventory control system
is possible.
Online Shopping-- Complex shop or mall applications, tailored to customer
Cybernet Shop and Mall requirements. Integration of an inventory control system
and/or special modules (e.g., customer retention) is
possible.
Imperia Website management system which facilitates the
administration and creation of new websites.
Digital Order Business-to-business system for the digital integration
of procurement processes, hosted on a Cybernet platform.
Auction Server Hosted module for on-line live auctions, providing
different auction rules and methods.
PictureBase Hosted on-line database to present, sell and archive
digital pictures through the Internet. Integration of
electronic payment is possible.
</TABLE>
Intranet and Workflow Solutions. Internet technologies can be utilized in a
customers' internal information technology system. We offer Intranet and
workflow solutions that enhance the capabilities, efficiencies and
functionality of our customers' systems, speed the development of new
applications, reduce the cost of developing and maintaining applications and
allow the integration of existing systems and databases. Thus, instead of
replacing their systems, customers can preserve their investment and upgrade
their systems with our enhanced solutions. Our Intranet platform integrates
basic dial-in and leased line connectivity with IP-based VPNs and a
communications infrastructure that includes facsimile, voice mail, electronic
mail and enhanced security solutions. Our principal Intranet and workflow
solutions include:
<TABLE>
<CAPTION>
Product Name Characteristics
------------ ---------------
<S> <C>
Faxination--Unified Third-party hardware and software which transforms
Messaging Server messages and documents from one medium into another
(e.g., fax to electronic mail, electronic mail to voice).
Service accessible via PSTN line.
Teleworkx Bundle of Cybernet and third-party hardware and software
targeted at teleworkers.
Intranet Access Control Third-party software which grants secure and controlled
access for teleworkers to the Intranet.
</TABLE>
Voice Services
Since June 1999, we have been offering switched voice services to our IP-
based customers, as well as value-added and integrated solutions combining
switched voice solutions and IP solutions. We also envision offering wholesale
services to other carriers on a case-by-case basis.
80
<PAGE>
Initially, pending completion of our own interconnect arrangements, these
services will be offered in co-operation with a third-party telecommunications
operator. As we complete the implementation of our own voice switching
capabilities and leased line network, we anticipate capturing more dial-up
revenues and reducing our transmission costs.
Sales and Marketing
We believe that our sales and marketing program enables us to effectively
market our comprehensive range of products and services to corporate customers.
We tailor our marketing approach as follows:
. to our principal target market of medium-sized corporations, we offer
customized solutions at competitive prices by designing systems that
integrate modular elements of proven functionality, effectiveness and
reliability;
. to some larger customers with more specialized needs, we offer more
sophisticated technical services and individualized solutions; and
. to customers with basic service needs, we provide services which require
minimal customization and installation, such as Internet connectivity.
Flashnet provides consumer customers in Italy with dial-in access services
that are delivered through an easy to implement Internet kit. Flashnet also
simplifies customer payment by issuing rechargeable cards. We believe that
Flashnet is the first ISP in Italy to implement use of this payment method.
Direct Sales. Currently, our direct sales force consists of approximately 81
sales representatives located in 19 offices in Cologne, Frankfurt, Dusseldorf,
Berlin, Munich, Stuttgart, Hamburg, Vienna, Trento, Rome, Milan, Bologna,
Venice, Florence, Padua, Verona, Zurich and Lausanne. We are in the process of
expanding that direct sales force and opening additional sales offices. We are
also increasing our local presence and enhancing client coverage by shifting
more of our direct sales representatives from our headquarters to our regional
offices, where they will be closer to customers.
Our sales force has a strong technical background and a detailed
understanding of the differing needs of the customers in the regions it serves.
It is knowledgeable about our main targeted industry segments, particularly IT,
tourism, retail, finance, government, media and advertising.
Channel Sales and Partnerships. Our channel sales group develops
relationships with resellers of our products and services and maintains
marketing alliances. In Germany, our three-person channel sales group works
with a network of more than 100 resellers, primarily software suppliers,
systems integrators and ISPs, through whom we offer basic services such as
Internet connectivity that can be delivered with a minimum of customization and
installation. Direct sales people in Austria and Italy also develop reseller
relationships. In addition, we utilize our reseller relationships to gain
direct access to customers for the sale of additional products and services.
Our marketing alliances with a select group of companies provide a strong
mutual referral program, which we believe will enable us to acquire new
customers cost effectively, benefit from association with well-known partners
and increase our brand awareness. We currently have marketing alliances with
Hewlett-Packard, Microsoft, Network Associates, Sun Microsystems and others. In
Italy, Flashnet uses a network of approximately 240 computer stores (Flashnet
Points) as its primary means of marketing to consumer customers.
We intend to conduct our operations and marketing under the Cybernet brand
name, although we use subsidiary brand names for transition periods after
acquisitions. We have undertaken public relations efforts to raise the
awareness and visibility of the Cybernet name in our target markets. We present
ourselves as "The Communication People," providing connectivity, value-added
solutions and superior customer service.
81
<PAGE>
Technology and Network Operations
Overview
The IP network of an ISP consists of a number of access nodes linked by owned
or leased lines. Access nodes are used to provide our customers with access to
our network either through dedicated lines or regular telephone lines (dial-in
access). The IP traffic generated at each access node is carried through our
backbone network to points of traffic exchange, where traffic is exchanged with
other providers' networks. These points of traffic exchange can be of two
types: peering points or transit points. Peering points provide for the free
exchange of traffic pursuant to agreements between ISPs. Transit points provide
global connectivity which we purchase from international carriers.
IP Network
We currently operate a geographically distributed IP based network in six
countries (Germany, Switzerland, Austria, Italy, Hungary and Luxembourg)
consisting of network nodes equipped primarily with Cisco and Ascend routers
connected to a redundant high-performance backbone infrastructure. The network
nodes are connected primarily by leased lines and include fourteen POPs in
Germany, 26 POPs in Italy, seven POPs in Austria and three POPs in Switzerland,
and a single POP in Luxembourg and Budapest. We lease our lines from major
telecommunications carriers and backbone operators, such as Deutsche Telekom,
Telecom Italia, Swisscom, Telekom Austria and Hermes Europe Rail Tel. We also
operate two microwave links that connect Munich with Innsbruck and the Italian
border at speeds of 34 Mbps. Our network nodes are interconnected at E-1 to DS3
speeds. We offer our dedicated line customers direct access to our POPs at
bandwidths ranging from 64 kbps to DS3. We have at present approximately 475
customers using dedicated line access. We believe our network is recognized as
one of Germany's most extensive and highest quality Internet networks. In 1999,
we expect to expand our network to include POPs in eleven additional cities in
Germany, and seven cities in Switzerland. We intend to acquire or enter into
long-term leases for backbone capacity or construct our own infrastructure in
selected locations in order to transport high bandwidth data and voice services
over all available transmission protocols, at lower costs than using leased
lines.
Our IP network is designed to offer reliability, scalability and high
transmission speed to our customers. We achieve reliability by operating a
fault tolerant network through our redundant backbone in Germany, Austria,
Switzerland and Northern Italy, which is based on a hierarchical multiple ring
design. We include back-up routers in our access nodes to attain further
redundancy, and thereby minimize the risk of single points of failure. To
ensure constant worldwide connectivity, we use multiple global access
providers. In Italy, Flashnet's extensive network is based on a star design and
achieves redundancy through back-up leased lines. We derive scalability from a
hierarchical multi-layer architecture that offers the opportunity to add
network locations without major infrastructure changes. We offer transmission
capacities ranging from 64 kbps to DS3 and intend to upgrade parts of our
network to STM-1 capacity in the near future. In addition, our network includes
cache servers in the major POPs to reduce the delivery time of regularly
requested information and reduce bandwidth needs for international traffic.
We offer dial-in Internet access through dial-in nodes with analog and ISDN
ports that provide coverage throughout Germany, Italy and Switzerland and
throughout most of Austria. In Germany, we have completed our BELT project,
which enables us to offer local dial-in connections to our customers throughout
the country with a single dial-in number. We have achieved this by
concentrating multiple dial-in access nodes into four larger access points
called virtual POPs, using the PSTN to aggregate traffic. We expect that these
virtual POPs will generate operating efficiencies, because there will be fewer
locations we will be required to service. We already offer local dial-in access
through a single dial-in number in Switzerland and Italy. In Austria, our
dial-in customers can access our network through seven telephone numbers.
Peering and Transit Relationships. We have entered into peering agreements
with major ISPs in each of the countries in which we operate. We have peering
agreements with more than 25 ISPs in Germany and with
82
<PAGE>
the principal ISPs in Austria, Italy and Switzerland. Our main peering points
are in Frankfurt, Munich, Milan, Rome, Trento, Vienna and Zurich. We also peer
directly through leased lines connected to some of our peering partners, such
as Deutsche Telekom. We plan to enter into additional peering agreements in
order to establish a direct presence in most European peering centers and to
reduce transit costs. By the end of 1999, we expect to connect to peering
points in France, Belgium, The Netherlands and the United Kingdom. Recently,
some ISPs have restricted peering agreements by implementing restrictive
criteria for small ISPs. We believe that our size and growth prospects will
allow us to maintain and extend our existing agreements.
We have entered into global transit agreements pursuant to which we have
purchased the right to route traffic across the networks maintained by Ebone,
Global One, Swisscom, AT&T Corporation/Unisource and MCI Worldcom. This
provides our customers with the ability to communicate with those European
countries in which we are not present, and with the rest of the world.
Frankfurt, Munich, Vienna and Zurich currently serve as our global access
points.
Network Management
The effective functioning of our network is one of the key elements of our
operations. We have developed network management capabilities to offer reliable
and cost efficient communications services and to deliver high quality services
to our customers. Our Network Operations Centers ("NOCs") in Munich, Vienna,
Zurich and Trento, monitor the performance of our network and our international
links 24 hours a day and seven days a week. Our NOCs have the capability to
identify network problems on a real-time basis. Our technical support groups
are equipped to take the necessary corrective measures quickly. By the second
quarter of 2001, we intend to centralize our NOCs in a single facility in
Munich.
Data Centers
We house servers in our data centers that are linked to our network. We
currently operate data centers in Munich, Frankfurt, Vienna and Rome. Our main
data center in Munich has a capacity of 300 square meters. We intend to
establish additional data centers in Dusseldorf, Frankfurt, Hamburg, Munich,
Vienna, Trento, Rome, Milan and Zurich. These data centers will be co-located
with certain of our IP nodes (POPs) and switching facilities, and we expect
some of them to be operational in the fourth quarter of 1999 and all of them to
be operational by the third quarter of 2000. We have already signed leases for
the facilities in Hamburg, Frankfurt, Trento, Milan, Rome and Munich. Each of
these facilities will be approximately 2,000 square meters in size. We are
designing these facilities to house transmission, IP routing and switching
equipment, and to offer hosting, co-location, facilities management and
interconnection services to our corporate customers, ISPs and
telecommunications carriers. Each facility will offer uninterruptible power
supply and back-up generators, air-conditioning, constant monitoring and
physical security to ensure a high quality of service with minimal
interruptions.
Switched Voice
We intend to expand our revenues in the fourth quarter of 1999 by adding
digital circuit switching capabilities to our network. Until we finalize the
installation of our switches and negotiate interconnection agreements, we will
be able to offer switched voice services using a third-party provider. We are
installing carrier grade Nortel DMS-100 voice switches in Germany, Italy,
Austria and Switzerland. In Germany, we have obtained a class 4 license, which
is necessary to offer telephony services. We expect to interconnect with
Deutsche Telekom at multiple points of interconnection, thereby minimizing our
interconnection costs in the German market. Our subsidiary Flashnet has a
telephony license to offer voice services throughout Italy and we are currently
in negotiations with Telecom Italia for an interconnection agreement. We have
applied for national licenses to offer switched services and started the
process of entering into interconnection agreements in Switzerland and Austria.
We expect our switched network to start operating in the first quarter of 2000
and be fully operational by the end of that year. We have recently completed
the installation of our integrated billing system through which we expect to be
able to provide a single bill to our German customers for voice
83
<PAGE>
and IP services. Over time, we plan to centralize our billing and provide
integrated bills to the customers in all of the countries we service.
Customers
As of March 31, 1999, we provided network services to 10,830 business
customers (including customers served through affinity groups), as compared to
6,923 as of December 31, 1998, 4,061 as of December 31, 1997 and 166 as of
December 31, 1996. As of March 31, 1999, we had 4,735 affinity group customers,
as compared to 3,846 as of December 31, 1998, and 1,941 as of December 31,
1997. At year-end 1996, we had no affinity group customers. During the three
months ended March 31, 1999, we completed Internet Projects for 19 customers,
as compared to 122 customers in 1998, 49 customers in 1997 and 12 customers in
1996.
While our target market is the small- and medium-sized corporations, we also
provide services and solutions to prominent larger businesses. Through our
subsidiary Flashnet, we also serve consumer customers in Italy. As of March 31,
1999, Flashnet had 1,625 business customers and 38,269 residential customers,
as compared to 1,096 business customers and 31,556 residential customers as of
December 31, 1998.
Our customers include businesses in IT, tourism, service, retail, finance,
government, media and advertising and manufacturing. Following is a list of
certain business groups in each of seven selected industry groups to which we
provided services and solutions as of December 31, 1998.
* Information Technology * Finance
CompuNet AXA Nordstern Colonia
Cyberlab Interactive HypoVereinsbank
Hogatex BMW Leasing
Info AG Commerzbank
InstallShield Software GE Capital Finance
Prism Software Engineering VR--Leasing
CompuServe Interactive Service
Internet Consulting * Government
Swissdata
Federal YZK Office
* Travel and Tourism Regulierungsbehoerde fur
Telekommunikation und Post
Frosch Touristik Bundesdruckerei
START AMADEUS Ministerium fur Wissenschaft
START Media Plus Stadtwerke Karlsruhe
Lauda Air
* Media and Advertising
* Retail
Finanzen-Verlag
Eddie Bauer Media Consulting
F.W. Woolworth Co. ORF Modern Times
Suzuki Auto
Tengelmann * Manufacturing
Wrigley
Zuegg Bayer
Daimler Chrysler Aerospace
Hugo Matthaes Druckerei
Nokia Italia
Customer Service
We provide high quality customer service and support in order to enhance the
strength of our brand name, increase customer retention rates and generate new
customer referrals. Our customer services are organized into technical support
and call center groups.
Our technical support group consists of technicians in our Munich NOC and
field engineers. The NOC-based technicians respond to customer requests 24
hours a day, seven days a week, diagnosing customers'
84
<PAGE>
problems and providing immediate assistance. We believe that our centralized
technical support operations improve the quality and consistency of our
support, achieve scalability in our resources and benefit from economies of
scale. Our field engineers are available to visit our customers' premises, as
necessary.
Our call center provides complete information and specifications about each
of our products and advises our customers on service and solutions related
questions.
We have purchased and installed and are in the process of implementing an
integrated billing system for Internet and switched voice services and are in
the process of introducing this new system to our customers. We have licensed
the Kenan billing platform and have adapted it to our requirements.
Implementation of this system caused some delay in our processing of customer
invoices in the first quarter of 1999. We do not expect those problems to
recur. Kenan, a subsidiary of Lucent Technologies, is a leading provider of
billing solutions to the telecommunications industry. Initially, this system
will allow us to provide a single bill to our German customers for all the
different services they are purchasing from us, thereby simplifying their
internal operations and reducing our costs. In the year 2000, we intend to
adopt the use of this integrated billing system on a Company-wide basis and to
manage it from our central offices in Munich.
Acquisitions
Since we began business in 1996, we have acquired six companies through which
we have expanded our technical capabilities, attracted additional talent,
entered new markets and increased our customer base:
. Cybernet E-Commerce. In September 1997, we acquired 100% of Artwise
which was later renamed Cybernet E-Commerce, a German company which
provided us with expertise in Intranet messaging and workflow solutions
and established our presence in the Ulm region of Germany;
. Eclipse. In December 1997, we acquired 66% of Eclipse, an ISP based in
Trento, Italy, through which we established our presence in Northern
Italy;
. Open:Net. In August 1998, we acquired 100% of Open:Net, an ISP through
which we increased our penetration of the southwest German market
serviced by Artwise;
. Vianet. In December 1998, we acquired 100% of Vianet, a leading Austrian
ISP through which we entered the Austrian market and significantly
increased our customer base;
. Sunweb. In May 1999, we acquired 51% and an option to purchase the
remaining 49% of Sunweb, through which we established a presence in
Switzerland and acquired substantial additional expertise in switched
voice services; and
. Flashnet. In June 1999, we acquired 100% of Flashnet, a leading Italian
ISP through which we gained access to all major business centers in
Italy.
Competition
The business of providing Internet connectivity, services and solutions is
highly competitive and there are no substantial barriers to entry. We believe
that competition will intensify in the future and our ability to successfully
compete depends on a number of factors including: market presence; the
capacity, reliability and security of our network; the pricing structure of our
services; our ability to adapt our products and services to new technological
developments; and principal market and economic trends. Our competitors consist
of ISPs, telecommunications carrier, and system integrators/computer
manufacturers. Because few of our competitors in any of these groups provide
all of the products, services and solutions that we provide, we believe that we
are well positioned to compete in our market.
ISPs
We strive to differentiate ourselves from other ISPs by offering a full range
of services and solutions which business customers are likely to require in
connection with their use of the Internet. Most of our ISP competitors offer
fewer services and focus on connectivity. However, some competitor ISPs have
greater resources and larger communications and network infrastructures than we
do. In Germany, these competitors include: European Computer-Industry Research
Centre; Nacamar; PSINet; UUNet Technologies; and Xlink. In Austria, they
include Cybertron, EUnet Multimedia Network Services and Netway Austria; and in
Italy, they include I-Net.
85
<PAGE>
Telecommunications carriers
Many telecommunications carriers are large organizations and do not provide
Internet services as their main product. We compete with these organizations by
focusing on the Internet and offering flexible decision making and execution,
responsive customer service, recognized technical expertise, and high quality
products. Our main carrier competitors in Germany are: Mannesmann Arcor,
Deutsche Telekom and Viag Interkom. In Austria, our principal carrier
competitors are Telekom Austria, United Telecom and Tele.ring. And in Italy,
they are Infostrada, Telecom Italia and Wind.
When we begin to offer voice services, we will compete directly with
carriers, including large carriers such as Mannesman Arcor, Deutsche Telekom
and Viag Interkom in that market segment. Most of these competitors are
significantly larger and have substantially greater market presence, financial,
technical, operational, marketing and other resources and experience than we
do. In addition, carriers have greater resources to engage in various forms of
price competition, such as bundling Internet services with other
telecommunications services, thereby offering lower prices for either
telecommunications or Internet services. Increased price competition could
force us to reduce our prices, resulting in lower profit margins. In addition,
increased competition for new customers could result in increased sales and
marketing expenses and related customer acquisition costs and could materially
adversely affect our profitability.
Major System Integrators and Computer Manufacturers
Major systems integrators and computer manufacturers, such as Andersen
Consulting and IBM, provide IT solutions to their clients and have expanded
their offerings to include Internet-related products and solutions. Many of
these companies have established customer relationships and recognized
technical expertise, and some have significantly greater resources than we
have. However, most do not offer connectivity services and solutions. We
compete with these companies by offering a more complete Internet-related
service and product line than they offer. In fact, some system integrators and
computer manufacturers utilize our connectivity services and solutions to
complement their own lines of products and services.
Research and Development
Our future success will depend, in part, on our ability to offer services
that incorporate leading technology, address the increasingly sophisticated and
varied needs of current and prospective customers and respond to technological
advances and emerging industry standards and practices on a timely and cost
effective basis. The market for our services is characterized by rapidly
changing and unproven technology, evolving industry standards, changes in
customer needs, emerging competition and frequent introductions of new
services. We cannot assure you that future advances in technology will be
beneficial to, or compatible with, our business or that we will be able to
incorporate into our business such advances on a cost effective and timely
basis. Moreover, technological advances may have the effect of encouraging
certain of our current or future customers to rely on in-house personnel and
equipment to furnish the services we currently provide. In addition, keeping
pace with technological advances may require substantial expenditures and lead
time.
Intellectual Property Rights
In addition, we rely on a combination of copyright, service mark and trade
secret laws and contractual restrictions to establish and protect certain
proprietary rights in our products and services. In this regard, we have
applied to the EU for a trademark registration for the name "Cybernet." We have
no patented technology that would preclude or inhibit competitors from entering
our market. We have entered into confidentiality and invention assignment
agreements with our employees, and non-disclosure agreements with our
consultants, vendors, suppliers, distributors and appropriate customers in
order to limit access to and disclosure of our technology, documentation and
other proprietary information. We cannot assure you that these contractual
arrangements or the other steps we have taken to protect our intellectual
property will prove sufficient to prevent misappropriation of our technology or
to deter independent third-party development of similar
86
<PAGE>
technologies. The laws of the countries in which we operate may not protect our
products, services or intellectual property rights to the same extent as do the
laws of the United States. To date, we have not been notified that our products
are claimed to infringe the proprietary rights of third parties, but we cannot
assure you that third parties will not claim infringement by us with respect to
current or future products. We expect that participants in our markets will be
increasingly subject to infringement claims as the number of products and
competitors in our industry segment grows. Any such claim, whether meritorious
or not, could be time consuming, result in costly litigation, cause product
installation delays or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on
terms acceptable to us, or at all. As a result, any such claim could materially
adversely affect our business, results of operations and financial condition.
Regulation
Regulatory Environment in the Internet-Related Markets of the Company
Our Internet operations are not currently subject to direct regulation by
governmental agencies in the countries in which we operate (other than
regulations applicable to businesses generally). In 1997, Germany enacted the
Information and Communication Services Act which releases Internet access
providers from liability for third-party content in certain circumstances and
establishes a legal framework for Internet commerce with respect to the
identification of service providers, data privacy and price indications on the
Internet. A number of other legislative and regulatory proposals are under
consideration with respect to Internet user privacy, infringement, pricing,
quality of products and services and intellectual property ownership. There is
also controversy regarding the application of value-added taxes in the Internet
environment. The adoption of new laws could materially adversely affect our
business, result of operations and financial condition.
Regulation and Regulatory Authorities in the Telecommunications Market
Effective January 1, 1998, all of the countries in which we operate abolished
the monopoly rights of incumbent operators to provide fixed-line voice
telephone services to the public. As a result, competitive telecommunications
markets are now developing for long distance and international telephone
services. Competition for local telephone service has been much slower to
develop.
All of the countries in which we operate have enacted legislation and
regulations and have established regulatory authorities for the
telecommunications industry. The purpose of this regulation is to ensure: (i) a
wide range of high-quality, telecommunications services to private individuals
and businesses; (ii) reliable services to the entire population at affordable
prices; (iii) the absence of interference with personal and intellectual
property rights in telecommunications traffic; and (iv) effective competition
in the provision of telecommunications services.
In each of the countries in which we operate, providing telecommunications
services and related facilities requires a license. The regulatory authorities
have various powers, including the authority to grant and revoke licenses,
assign and supervise frequencies, impose universal services obligations,
control network access and interconnection, and approve or review the tariffs
and tariff-related general business terms and conditions of market-dominant
providers.
In the countries in which we operate, different classes of licenses are
required for different services offered and facilities operated. We have
obtained a "class 4 license" (voice telephone services based upon self-operated
telecommunications networks) in Germany. Geographically this license covers the
entire Federal Republic of Germany and is valid indefinitely. We have not yet
obtained similar licenses for Switzerland or Austria, which we will require to
expand our business as we currently plan. In Italy, our subsidiary Flashnet has
a license which permits us to offer voice telephone services in the entire
country. We have also obtained a "class 3 license" in Germany which permits us
to operate cables, radio links and other telecommunications-related
infrastructure throughout Germany.
87
<PAGE>
When we enter the switched voice telephony market, our ability to provide
viable services will depend in significant part upon our ability to secure and
maintain interconnection agreements with the incumbent operators and other
facilities-based providers in our target markets. We will need interconnection
to complete calls that originate on our network but terminate outside our
network or originate elsewhere and terminate on our network. The cost of
interconnecting will be a critical factor in determining whether services on
our network can be offered on a competitive basis.
Each of the countries in which we have operations has market-dominant
providers which are legally required to offer essential services such as
transmission, switching and operational interface to networks such as the one
we plan. Market-dominant operators of telecommunications facilities are
obligated to provide interconnection on a non-discriminatory basis and at cost-
related prices. If the terms and conditions of obligatory interconnection
cannot be agreed upon, the regulatory regimes of the countries in which we
operate provide for administrative proceedings which permit regulatory
authorities to set the conditions for interconnection.
In two decisions dated September 12 and October 2, 1997, the German Post
Ministry set the average interconnection price in Germany (the average fees
Deutsche Telekom may charge for origination and termination of voice services
from or into the network of other network operators) at 2.7 Pfennigs per minute
(for each delivery and receipt) until January 1, 2000. Deutsche Telekom has
filed suit seeking a higher average fee. Moreover, the German regulatory
authority (the "Regulatory Authority") has indicated to Deutsche Telekom that
it will be allowed to take additional costs into account when determining fees
subject to approval, if "atypical traffic" (still to be defined) occurs and
Deutsche Telekom provides evidence of the corresponding additional costs in
individual cases. However, Deutsche Telekom's first application for higher
prices because of such a typical traffic was denied by the Regulatory Authority
on the basis that Deutsche Telekom had not demonstrated the higher costs
resulting from such traffic. In order to assert these additional costs, we
understand that Deutsche Telekom has submitted an application to the Regulatory
Authority to supplement the interconnection fees currently in effect. We cannot
assure you that these additional costs will not be implemented until after the
Regulatory Authority has responded to this application.
Another potential consequence of the implementation of the concept of
"atypical traffic" is that Deutsche Telekom may offer interconnection on
modified conditions. We understand that Deutsche Telekom intends to force
competitors to install additional points of interconnection where traffic
originating from or terminating in an area defined by Deutsche Telekom exceeds
a specified volume. In addition, we understand that Deutsche Telekom intends to
seek certain other surcharges to interconnection rates. If approved by the
Regulatory Authority, these provisions would likely result in additional
infrastructure costs and higher interconnection rates for us.
Subscriber Line Charges
We rely upon Deutsche Telekom for leased lines so as to obtain direct access
to customers. Although the rates which Deutsche Telekom may charge for such
lines have been established by the Regulatory Authority and the ruling of the
Regulatory Authority purports to establish rates which will be in effect until
March 31, 2001, the ruling has been appealed to a court. Any possible increase
in these rates of the rental charge could impede our business development.
Internet Access Charges
T-Online, an ISP owned by Deutsche Telekom, has announced its intention to
charge Internet subscribers a flat rate that is significantly lower than the
rate charged by competitor ISPs. The District Court (Landgericht) Hamburg
enjoined T-Online from offering this rate because the telecommunications law
forbids market dominant providers from bundling services. However, this court
decision is not final and we cannot anticipate the final outcome of this issue.
If T-Online is permitted to charge the proposed rate, our ability to market
Internet access services might be adversely affected.
88
<PAGE>
Employees
At the end of March 1999, we had a total of approximately 197 employees
organized as follows: 79 in sales and marketing, 85 in technical and
operational personnel and 33 in administration. There are no collective
bargaining agreements in effect. We believe that relations with our employees
are good.
Properties
We lease the real estate where our business offices and certain nodes
containing servers, routers and other equipment are located. Our largest
leasehold property is our main office in Munich with approximately 2,000 square
meters. Other leasehold properties for our regional offices are located in Ulm,
Neu-Ulm, Frankfurt, Dusseldorf, Berlin, Munich, Stuttgart, Hamburg, Vienna,
Trento, Rome, Milan, Florence, Padua, Verona, Zurich, Lausanne and an
administrative office is located in Washington, D.C. In addition, we lease
approximately 3,500 square meters for our planned facility in Frankfurt, 2,500
square meters for our planned facility in Hamburg and 600 square meters for our
new Trento Data Center, and are planning to lease additional space in
Dusseldorf, Munich, Vienna and Zurich.
We believe that none of these leases is critical to operations and that
relocation of any of the leased premises would be feasible on acceptable terms,
if necessary.
We lease dedicated telephone lines from telecommunications carriers and
resellers. Assets relating to our operations, including servers and routers,
are leased or owned.
Legal Proceedings
In December 1998, we applied for and received a class 4 telecommunications
license from Germany's Regulierungsbehoerde fur Telekommunikation und Post. The
fee for this license was DM 3,000,000. The EU regulations set the maximum fee
that can be charged at the actual cost incurred by a government agency to
administer its regulations. We filed an action in a German court to recover a
portion of the fee paid for our license because we believe the fee charged
exceeded the amount chargeable under EC regulations in effect in 1998 and
prevailed in that action in the court of first instance. The decision is
subject to appeal and it is not possible to predict the ultimate outcome of our
action.
We are not involved in any other legal proceedings which we believe would, if
adversely determined, have a material adverse effect upon our business,
financial condition or results of operations.
89
<PAGE>
INFORMATION REGARDING SIGNIFICANT SUBSIDIARIES
The following table sets forth certain information pertaining to Cybernet's
significant subsidiaries.
<TABLE>
<CAPTION>
Country of %
Company Name in Full Registration Activity Ownership
- -------------------- ------------ -------- ---------
<S> <C> <C> <C>
Cybernet AG/(1)/ Germany Internet services 100
Flashnet S.p.A./(2)/ Italy Internet services 100
</TABLE>
- --------
(1) Net loss arising out of ordinary activities, after tax and for the
financial year ended December 31, 1998 amounted to DM 8,514,505
($4,649,647) and the net loss arising out of ordinary activities, after
tax, for the first quarter of 1999 amounted to DM 5,283,378 ($2,885,175).
No dividends have been received from Cybernet AG in the course of 1998 or
1999. Cybernet AG has no reserves as of December 31, 1998 as they are not
required for German corporations or under US GAAP. It has an issued share
capital of DM 3,200,000, all of which shares are credited as fully paid.
(2) Net loss after tax for the year ended December 31, 1998 amounted to Lit.
2,365,503 thousand ($1,304,796) and net loss after tax for the first
quarter of 1999 amounted to Lit. 833,163 thousand ($459,567). Flashnet had
an issued share capital of 2,182,857 shares as of March 31, 1999.
90
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and positions of our executive
officers and directors:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Andreas Eder................. 39 Co-founder, Chairman of the Board of
Directors, President, Chief Executive
Officer, and Head of the Management Board of
Cybernet AG
Dr. Alessandro Giacalone..... 48 Director, Chief Operating Officer and Member
of the Management Board of Cybernet AG
Robert Eckert................ 38 Chief Financial Officer and Treasurer
Dr. Hubert Besner............ 36 Director and Member of the Management Board
of Cybernet AG
Christian Moosmann........... 37 Member of the Management Board of Cybernet AG
Timon Lutze.................. 42 Managing Director and Member of the
Management Board of Cybernet AG
Robert Fratarcangelo......... 61 Director and Secretary
G.W. Norman Wareham.......... 46 Director
R. Walter Franz.............. 37 Director of Network Operations of Cybernet AG
Tristan Libischer............ 30 Director, Co-Founder of Vianet and Member of
the Management Board of Vianet
Jurg Heim.................... 35 Co-Founder of Sunweb, Chief Executive Officer
of Subweb and Member of the Management Board
of Sunweb
Marco Samek.................. 27 Co-Founder of Sunweb, Chief Operational
Officer of Sunweb and Member of the
Management Board of Sunweb
Roberto Loro................. 33 Co-Founder of Eclipse, Director of Marketing
Division of Eclipse and Member of the
Management Board of Eclipse
Stefano Longano.............. 37 Co-Founder of Eclipse and Member of the
Management Board of Eclipse
Patrizia Loro................ 31 Manager of Eclipse and Member of the
Management Board of Eclipse
</TABLE>
Andreas Eder
Mr. Eder, a co-founder of Cybernet AG, has been Chairman, President, Chief
Executive Officer and Head of the Management Board of Cybernet AG since its
formation in December 1995 and has been Chairman of our Board of Directors,
President and Chief Executive Officer since we acquired Cybernet AG in 1997.
Before founding Cybernet AG, Mr. Eder held management positions with The Boston
Consulting Group from April 1991 to October 1995 and Siemens-Nixdorf
Information Systems from April 1986 to March 1991. Mr. Eder holds a Master
Degree in Business Administration from the University of Munich.
Dr. Alessandro Giacalone
Dr. Giacalone has been our Chief Operating Officer and member of the
Management Board of Cybernet AG since October 1997 and a Director since
February 1999. From September 1994 to May 1997, Dr. Giacalone was Managing
Director of the European Computer-Industry Research Centre ("ECRC") in Munich
and, from 1990 to September 1994, he was Research Group Leader at the ECRC. At
the ECRC, he built a commercial Internet service enterprise which was the
second such enterprise in Germany. This project
91
<PAGE>
was completed by the end of 1996. Between 1984 and 1990, he was an Assistant
Professor of Computer Science at the State University of New York. Dr.
Giacalone graduated in Computer Science from the University of Pisa and holds
Masters and Doctorate degrees in Computer Science from Brown University.
Robert Eckert
Mr. Eckert joined the Company as Chief Financial Officer and Treasurer in May
1999. From September 1998 to May 1999, Mr. Eckert was the Chief Financial
Officer of NetSource ASA, a pan-European reseller of telecommunications
services. From July 1997 to August 1998, Mr. Eckert was the Director of
International Business Development and from 1995 to July 1997, he was the
Finance Director at Swisscom International. From 1987 to 1994, Mr. Eckert was
with the General Electric Company (USA) where he held several finance positions
in various countries and business groups. He holds a BA in International
Business and Marketing from Northeastern University in the USA and an MBA from
INSEAD in France.
Dr. Hubert Besner
Dr. Besner is one of our Directors and a member of the Management Board of
Cybernet AG and has served in these capacities since February 1996. From April
1994 to the present, he has been a partner in the law firm of Besner Kreifels
Weber in Munich. From January 1992 to March 1994, he was the head of the legal
department of Schneider, a German real estate development company. He is
currently a Director of Marine Shuttle Operations, a member of the Supervisory
Board of Schuller Industsrieentsorgung, Typhoon Networks and IPO Beteiligungen,
and is the head of the Supervisory Board of PIPECAD Integrierte Softwaresyteme.
Dr. Besner received his First State Exam in law from Ludwig-Maximilians-
Universitat in 1986 and his Doctorate Degree magna cum laude from Ludwig-
Maximilians-Universitat in 1988.
Christian Moosmann
Mr. Moosmann has been a member of the Management Board of Cybernet AG since
August 1997. Before joining Cybernet AG, he held management positions with ECRC
from March 1995 to June 1997 and with Siemens Devision ZFE Central Research and
Development Division from June 1990 to February 1995. He holds a degree in
Accounting from the University of Rosenheim.
Timon Lutze
Since March 1999, Mr. Lutze has served as a member of the Management Board of
Cybernet AG and as Managing Director, responsible for the areas of marketing,
sales and production. From November 1998 to March 1999, Mr. Lutze was sales
director of Cybernet AG. From October 1997 to March 1998, Mr. Lutze was head of
the operational division of Telekommunication Multimedia Consult. From April
1996 to September 1997, Mr. Lutze was the sales director of Alcatel Mobile
Communications Division. From May 1993 to April 1996, Mr. Lutze held various
positions with Alcatel in Germany. Mr. Lutze graduated from the German Armed
Forces University with degrees in Aerospace Engineering and Data Processing.
Robert Fratarcangelo
Since May 1999, Mr. Fratarcangelo has been our Secretary, and he has been one
of our Directors since September 1997. Since September 1996, he has been the
President and Chief Executive Officer of Criminal Investigative Technologies,
Inc. From 1993 to 1996, Mr. Fratarcangelo was a District Manager at EMC/2/ in
Massachusetts. From 1988 to 1993, Mr. Fratarcangelo was Vice President, Federal
Sales at Teradata and Digital Communications Associates. Previously, Mr.
Fratarcangelo held various positions at IBM. Mr. Fratarcangelo has a Bachelors
Degree in Political Science from the State University of New York.
G.W. Norman Wareham
Mr. Wareham has been one of our Directors since May 1997. Mr. Wareham is a
director of ZMAX Corporation and has served in this capacity since September
1996. He has been the President of Wareham
92
<PAGE>
Management Ltd. since May 1996. Mr. Wareham is currently a director and officer
of Aquaplan, British Brasses, Solar Energy, Viper Resources and WattMonitor and
has served in these capacities since May 1997, December 1998, December, 1997,
November 1998 and December 1998, respectively. Since June 1998 and February
1997, respectively, Mr. Wareham has been a director of two Canadian public
companies, Anthian Resources and Orko Gold. From June 1995 to January 1996, Mr.
Wareham was an accountant with the certified general accounting firm of Wanzel,
Sigmund, & Overes. From April 1993 to February 1995, Mr. Wareham served as
President and Chief Executive Officer of Transatlantic Financial, a private
investment banking company. From August 1986 to March 1993, Mr. Wareham was the
proprietor of Wareham & Company, providing accounting and management consulting
services.
R. Walter Franz
Mr. Franz is our Director of Network Operations and has served in this
capacity since joining us in January 1999. From January 1997 to January 1999,
Mr. Franz was Director of Operations in Germany at MCI/Worldcom. From January
1995 to January 1997, Mr. Franz was Manager of Operations at MFS
Telecommunications. From June 1989 to December 1994, Mr. Franz worked for
Motorola where he was responsible for implementation of the infrastructure
necessary to support Motorola's European computer network.
Tristan Libischer
Mr. Libischer has been one of our Directors since February 1999. He is co-
founder of Vianet and has been a Managing Director of Vianet since September
1994. From February 1992 to August 1994, Mr. Libischer held various positions
with BARK. From November 1990 to January 1992, Mr. Libischer was a senior
consultant and sales engineer with 3C Group.
Jurg Heim
Mr. Heim, a co-founder and member of the Management Board of Sunweb, has
served as Chief Executive Officer of Sunweb since its formation in March 1998.
From October 1997 to March 1998, Mr. Heim was a Systems Engineer of data and
intellectual property services at Netcom Services. Mr. Heim was head of Systems
Administration at Telepax Communications from February 1988 to March 1994. Mr.
Heim holds an Electronic Installation degree in Informatik Telephonie.
Marco Samek
Mr. Samek, a co-founder of Sunweb, has served as Chief Operational Officer
and as a member of the Management Board of Sunweb since its formation in March
1998. Since December 1997, Mr. Samek has also been a principal of Framenet EDP.
He was a Systems Engineer of Internet Services at Newtelco from August 1997 to
April 1998. From January 1996 to April 1997, Mr. Samek was Chief Systems
Engineer in the multimedia company Decatron. Mr. Samek has a technical degree
in Communications from Technikum Winterhur College.
Roberto Loro
Mr. Loro, a co-founder of Eclipse, has served as Director of the Marketing
Division of Eclipse and member of the Management Board of Eclipse since April
1998 and before that, he was Director of Project Development there since
January 1992. Previously, he performed various software, IT and mathematics
consulting assignments for a variety of public and private organizations. Mr.
Loro holds a Mathematics degree from the University of Trento.
93
<PAGE>
Stefano Longano
Mr. Longano is a co-founder of Eclipse and has been a member of the
Management Board of Eclipse since April 1998. From January 1996 to March 1998,
Mr. Longano was technical director of Eclipse. From January 1991 to December
1995, he was a senior scientist and project manager for European projects at
the Laboratory of Information and Communication Technologies of the University
of Trento. He holds a Masters Degree in Physics from the University of Trento.
Patrizia Loro
Ms. Loro has been a member of the Management Board of Eclipse since April
1998 and a manager of Eclipse since January 1995. From March 1993 to December
1997, Ms. Loro was Managing Director and a major shareholder of Centro Servizi
Agiendali Sas. Since 1990, Ms. Loro has held various positions in accounting in
several companies. She attended economics courses at the University of Trento
and Italian Tax Code classes in Milan.
Except for a sibling relationship between Roberto and Patrizia Loro, no
family relationship exists between any director or executive officer and any
other director or executive officer.
Board Composition
We currently have six directors. In accordance with the terms of our
Certificate of Incorporation, the Board of Directors will be divided into three
classes: Class A, whose term will expire at the annual meeting of stockholders
to be held in 2002; Class B, whose term will expire at the annual meeting of
stockholders to be held in 2000; and Class C, whose term will expire at the
annual meeting of stockholders to be held in 2001. The Class A directors are
Dr. Besner and Mr. Fratarcangelo, the Class B directors are Dr. Giacalone and
Mr. Wareham, and the Class C directors are Messrs. Eder and Libischer. At each
annual meeting of stockholders after the initial classification, the successors
to directors whose terms will then expire will be elected to serve from the
time of election and qualification until the third annual meeting following
election. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the directors. Directors may
be removed for cause by the affirmative vote of the holders of a majority of
all outstanding voting shares of Cybernet entitled to vote generally, voting
together as a single class.
Board Committees
The Board of Directors has three committees: an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee consists of Mr.
Eder, Dr. Besner and Dr. Giacalone. The Audit Committee consists of Messrs.
Fratarcangelo and Wareham. The Audit Committee reviews our accounting
processes, financial controls and reporting systems, as well as our selection
of independent auditors and the scope of the audits to be conducted.
The Compensation Committee consists of Dr. Besner, Mr. Fratarcangelo, and Mr.
Wareham. It reviews executive compensation and organization structure. The
Compensation Committee also administers our Stock Option Plan. Prior to the
creation of the Compensation Committee in November 1998, all decisions
concerning salaries, incentives and other forms of compensation of our
directors, officers and other employees were made by the whole Board of
Directors.
Director Compensation
Directors, who are not also employees ("Outside Directors"), receive $15,000
annually (the "Annual Director Fee") and are reimbursed for out-of-pocket
expenses incurred in connection with their service on the Board. Each Outside
Director may elect to receive his Annual Director Fee in cash, stock options or
a combination thereof. The value of the stock options is determined pursuant to
the Black-Scholes method and the options are fully vested at the date of grant.
Employment Contracts
Our executive officers are appointed by the Board of Directors and serve
until their successors are elected or appointed.
94
<PAGE>
We have entered into employment agreements with each of the following
officers and directors on the following material terms.
Andreas Eder. On March 1, 1999, we entered into an employment agreement with
Mr. Eder to serve as President and Chief Executive Officer. The agreement
provides for a three-year term and an annual base salary of approximately
$125,716 per year. It also permits Mr. Eder to earn an annual bonus of up to
approximately $41,906 if certain performance standards established by the
Compensation Committee are achieved. We may terminate the agreement if Mr. Eder
should suffer a "disability" or for "cause."
Upon Mr. Eder's death, we are obligated to pay to his estate an amount equal
to his base salary for the period ended 12 months after his death. If Mr. Eder
resigns or we terminate his employment as a result of a "disability" or for
"cause," we are obligated to pay his base salary through the date of
termination.
Under the agreement, "disability" is defined as: (a) any mental or physical
disability which the Board of Directors deems in good faith would preclude Mr.
Eder from performing his duties; or (b) a mental or physical disability which
lasts for a period of 60 consecutive days or for 90 days in any six-month
period and which the Board of Directors elects to treat as permanent in nature.
The agreement defines "cause" as any material breach of its terms by Mr. Eder
or the commission of a felony or a crime involving moral turpitude.
Alessandro Giacalone. On March 1, 1999, we entered into an employment
agreement with Dr. Giacalone to serve as Chief Operating Officer on the same
terms as described above with respect to Mr. Eder.
Tristan Libischer. On December 28, 1998, Vianet entered into an employment
agreement with Mr. Libischer to serve as a member of the Management Board of
Vianet. The agreement is for a five-year term beginning January 1, 1999,
provides for an annual base salary of approximately $100,573 and permits
Mr. Libischer to earn an annual bonus of approximately $33,524 if certain
performance standards established by the Management Board of Vianet are
achieved.
Vianet may terminate the agreement for "good cause." "Good cause" is defined
as a gross breach of duty, the inability to properly conduct the affairs of
Vianet or a vote of no confidence at an annual meeting of Vianet.
Mr. Libischer is not entitled to severance pay if his employment is
terminated for good cause or if he resigns prematurely without the permission
of the Management Board of Vianet. If Mr. Libischer is unable to perform his
duties due to illness or accident, Vianet is required to pay his full base
salary for a maximum of six months and 49% of his base salary for another three
months. If Mr. Libischer leaves Vianet in the middle of a fiscal year, any
bonus earned will be paid on a pro-rata basis.
Robert Eckert. Mr. Eckert entered into an employment agreement with the
Company to serve as Chief Financial Officer which will become effective when
Mr. Eckert receives his working permit from the German governmental
authorities. The agreement is for a three-year term and provides for a base
salary of approximately $114,000. The agreement also provides for a bonus of up
to approximately $46,000 if certain performance standards established by the
Compensation Committee are achieved. Mr. Eckert will also receive an option to
purchase 100,000 shares of Cybernet's common stock pursuant to Cybernet's
Incentive Plan (as defined). In the event Mr. Eckert is unable to work due to
illness or other reasons, the Company is obligated to pay Mr. Eckert his base
salary for six months. In the event of Mr. Eckert's death, the Company is
obligated to pay Mr. Eckert's heirs his base salary for six months.
Christian Moosmann. On March 15, 1999, Cybernet AG entered into an employment
agreement with Mr. Moosmann to serve as a member of the Management Board of
Cybernet AG. The agreement is for a three-year term and requires the parties to
negotiate any extension of the agreement at least 12 months prior to the
expiration of the agreement. The agreement provides for an annual base salary
of approximately $100,573 and permits Mr. Moosmann to earn an annual bonus of
up to approximately $39,112 if certain performance standards established by the
Management Board of Cybernet AG are achieved.
95
<PAGE>
In the event Mr. Moosmann is unable to work due to illness or other reasons,
Cybernet AG is obligated to pay Mr. Moosmann his base salary for six months. In
the event of Mr. Moosmann's death, Cybernet AG is obligated to pay Mr.
Moosmann's heirs his base salary for six months.
Pursuant to the terms of his employment agreement, as of March 12, 1999, Mr.
Moosmann was granted options to purchase 20,000 shares of Cybernet common stock
at an exercise price of $31.41 per share. The options vest over a three-year
period on each anniversary of the grant date in increments of approximately
one-third.
Timon Lutze. On March 15, 1999, Cybernet AG entered into an employment
agreement with Mr. Lutze to serve as a member of the Management Board of
Cybernet AG. The agreement provides for an annual base salary of approximately
$111,748 and permits Mr. Lutze to earn an annual bonus of up to approximately
$39,112 if certain performance standards established by the Management Board of
Cybernet AG are achieved. Mr. Lutze also received an option to purchase 30,000
shares of Cybernet common stock at an exercise price of $31.41 per share. The
options vest over a three-year period on each anniversary of the grant date in
increments of approximately one-third. Otherwise the terms are the same as
those described above with respect to Mr. Moosmann.
Jurg Heim. Sunweb has entered into an employment agreement with Mr. Heim for
a term expiring on March 31, 2001. The agreement provides for a base
compensation of approximately $98,115, in addition to certain management
bonuses and an option to purchase 15,000 shares of Cybernet's common stock if
Sunweb meets specified performance goals for 1999.
Marco Samek. Sunweb has entered into an employment agreement with Mr. Samek
on the same terms as described above for Mr. Heim.
Summary Compensation Table
Our compensation program for executive management includes base salaries,
annual performance-based incentive bonus plans and stock option plans. The
compensation of each executive officer was established by the Board of
Directors acting upon the recommendations of the Compensation Committee.
The following table sets forth the annual long-term and other compensation
for our Chief Executive Officer and our other two most highly compensated
executive officers during the last fiscal year, as well as the total annual
compensation paid to each individual for the three previous fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
--------------- ------------
Securities
Underlying All Other
Fiscal Options Compensation
Name and Principal Position Year Salary ($)/(1)/ SARs (#) ($)
- --------------------------- ------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Andreas Eder............................................. 1998 $96,135 100,000/(3)/ N/A
Chairman of the Board, President, Chief Executive 1997 65,066/(2)/ 0 N/A
Officer, and Head of the Management Board of Cybernet AG 1996 N/A/(2)/ N/A/(2)/ N/A
Alessandro Giacalone..................................... 1998 125,716 100,000/(3)/ N/A
Director, Chief Operating Officer, and Member of 1997 31,429/(2)/ 0 N/A
Management Board of Cybernet AG 1996 N/A/(2)/ N/A/(2)/ N/A
Rudolf Strobl............................................ 1998 96,163 0 $251,433/(4)/
Former Member of Management 1997 70,616/(2)/ 0 N/A
Board of Cybernet AG 1996 N/A/(2)/ N/A/(2)/ N/A
</TABLE>
96
<PAGE>
- --------
(1) Each of the persons listed has or had an employment contract with us
calling for the payment of an annual bonus if certain performance standards
are achieved. No bonus was paid in the years listed.
(2) Messrs. Eder and Strobl became executive officers of Cybernet in connection
with our acquisition of Cybernet AG in September 1997. As a result, the
information presented for fiscal 1997 represents payments made from the
time of such acquisition through December 31, 1997 and no information is
presented for fiscal 1996. Dr. Giacalone joined the Company in October
1997.
(3) Represents shares of Cybernet's common stock subject to an option granted
to the named executive on December 27, 1998.
(4) The amount indicated was paid to Mr. Strobl in December 1998 as severance
pay in connection with the termination of his employment agreement. Mr.
Strobl's employment terminated on December 31, 1998.
Option/SAR Grants in Last Fiscal Year
The following table provides information on options to purchase Cybernet's
common stock that were granted to two of the above named executives during
fiscal 1998. Mr. Strobl received no option grants in fiscal 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------- ---------------------
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------------ ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andreas Eder........... 100,000 14.6% $32.04 12/27/08 $2,015,000 $5,016,000
Chairman of the Board,
President, Chief
Executive Officer, and
Head of the Management
Board of Cybernet AG
Alessandro Giacalone... 100,000 14.6% 32.04 12/27/08 2,015,000 5,106,000
Director, Chief
Operating Officer, and
Member of the
Management Board of
Cybernet AG
</TABLE>
Indemnification of Directors and Officers
Our Certificate of Incorporation limits the liability of our directors and
executive officers to the maximum extent permitted by Delaware law. Delaware
law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for (i) breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments
of dividends or unlawful stock repurchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit. Such
limitation of liability does not apply to liability arising under the federal
or state securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
We have also secured insurance on behalf of each officer, director, employee
or other agent for any liability arising out of claims under applicable
securities laws against such persons and us, and on behalf of directors and
officers with respect to other claims.
At present, there is no pending litigation or proceeding involving any of our
directors or officers in which indemnification is required or permitted, and we
are not aware of any threatened litigation or proceeding that may result in a
claim for such indemnification.
97
<PAGE>
Stock Incentive Plan
We maintain the Cybernet Internet Services International, Inc. 1998 Stock
Incentive Plan (the "Incentive Plan"). The Board of Directors has reserved
2,000,000 shares of Cybernet's common stock for issuance pursuant to awards
that may be made under the Incentive Plan, subject to adjustment as provided
therein. The number of shares of common stock associated with any forfeited
stock incentive are added back to the number of shares that can be issued under
the Incentive Plan. No participant may be granted during any one year period
rights to shares of common stock under options and stock appreciation rights
which, in the aggregate, exceed 100,000 shares of common stock. On November 19,
1998 and December 27, 1998, the Compensation Committee granted options to 97
employees to purchase a total of 685,000 shares of common stock in varying
amounts.
The Incentive Plan allows for the grant of incentive stock options, non-
qualified stock options, stock appreciation rights, stock awards, dividend
equivalent rights, performance units and phantom shares. The exercise price of
an incentive stock option may not be less than the fair market value of the
common stock on the date of the grant (or less than 110% of the fair market
value if the participant controls more than 10% of the voting power of Cybernet
or a subsidiary thereof). Non-qualified stock options may be made exercisable
at a price equal to, less than or more than the fair market value of the common
stock on the date that the option is awarded. The term of an incentive stock
option may not exceed ten years from the date of grant. However, any incentive
stock option granted to a participant who controls more than 10% of the voting
power of Cybernet or a subsidiary thereof will not be exercisable after the
expiration of five years following the date the option is granted.
RELATED PARTY TRANSACTIONS
Dr. Besner, one of our Directors, is a partner with the law firm of Besner
Kreifels Weber, which represents us and to which we paid fees of approximately
$98,303 during fiscal 1998.
In November 1998, Mr. Timm, one of our principal stockholders and a former
Director who resigned on December 2, 1998, advanced an interest free loan to us
for approximately $1,396,849. We repaid the loan in December 1998.
In December 1998, we paid $2,916,000 in underwriting fees to an investment
bank that is 40% owned by a company of which Mr. Timm is Head of the Managing
Board, President, Chief Executive Officer and a principal stockholder. These
underwriting fees were paid in connection with a best efforts all or nothing
public offering of our common stock.
We provide Internet connectivity services to Cybermind Interactive Europe
("Cybermind"), a principal stockholder of Cybernet, pursuant to a standard
service contract. In 1998, Cybermind paid us approximately $68,200 for such
services. Mr. Timm is Chief Executive Officer and Head of the Managing Board,
as well as the principal stockholder, of Cybermind.
98
<PAGE>
STOCK OWNERSHIP OF PRINCIPAL
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of August 2, 1999, regarding
beneficial ownership of Cybernet's common stock, Series A Preferred Stock and
Series B Voting Preferred Stock by (i) each stockholder known by us to be the
beneficial owner of more than five percent of the outstanding shares of common
stock or Series B Voting Preferred Stock, as the case may be; (ii) each of our
directors with respect to the equity securities held by such director; (iii)
each of our executive officers named in the Summary Compensation Table with
respect to the equity securities held by such executive officer; and (iv) all
of our current executive officers and directors as a group with respect to the
equity securities held by such executive officers and directors. Stock
ownership information has been furnished to us by such beneficial owners or is
based upon filings made by such owners with the Securities and Exchange
Commission. As of August 2, 1999, there were 20,957,148 shares of Cybernet
common stock, 923,440 shares of Series A Preferred Stock and 3,870,000 shares
of Series B Voting Preferred Stock issued and outstanding.
<TABLE>
<CAPTION>
Name Shares Beneficially Owned
- ---- ---------------------------------------
Series A Series B
Non-Voting Voting
Common Preferred Preferred
Executive Officers and Directors Stock Stock Stock
- -------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
Andreas Eder................... 1,573,081/(1)/ 133,313/(1)/ 0
Stefan-George-Ring 19
81929 Munich, Germany
Alessandro Giacalone........... 318,600/(2)/ 27,000 0
Stefan-George-Ring 19
81929 Munich, Germany
Alessandro Giacalone........... 318,600/(2)/ 27,000 0
Stefan-George-Ring 19
81929 Munich, Germany
Tristan Libischer.............. 150,000 0 0
Mariannengasse 14
1090 Vienna, Austria
Hubert Besner.................. 1,261/(3)/ 0 0
Widenmayerstrasse 41
80538 Munich, Germany
G.W. Norman Wareham............ 0 0 0
1177 West Hastings Street
Suite 1818
Vancouver, B.C., Canada V6E
2K3
Robert Fratarcangelo........... 0 0 0
10842 Oak Crest
Fairfax, Virginia 22030
All executive officers and
directors as a group (10
persons)...................... 2,202,242 173,813 0
<CAPTION>
Principal Stockholders Other
Than Executive Officers
and Directors
<S> <C> <C> <C>
Rudolf Strobl.................. 474,117 40,179 0
Gleiwitzerstrasse 15
81929 Munich, Germany
Holger Timm.................... 2,462,175/(4)/ 536,625/(5)/ 3,870,000/(6)/
Trabner Strasse 12
14193 Berlin, Germany
Cybermind Interactive Europe... 1,440,000 450,000 3,870,000
Am Borsigturm 48
13507 Berlin, Germany
<CAPTION>
Approximate
Name Percentage of Class
- ---- -----------------------------------------------------------
Percentage of Percentage of
Series A Series B
Percentage of Non-Voting Voting
Common Preferred Preferred Voting
Executive Officers and Directors Stock Stock Stock Distribution/(7)/
- -------------------------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Andreas Eder................... 7.5% 14.4% * 6.3%
Stefan-George-Ring 19
81929 Munich, Germany
Alessandro Giacalone........... 1.5% 2.9% * 1.3%
Stefan-George-Ring 19
81929 Munich, Germany
Tristan Libischer.............. * * * *
Mariannengasse 14
1090 Vienna, Austria
Hubert Besner.................. * * * *
Widenmayerstrasse 41
80538 Munich, Germany
G.W. Norman Wareham............ * * * *
1177 West Hastings Street
Suite 1818
Vancouver, B.C., Canada V6E
2K3
Robert Fratarcangelo........... * * * *
10842 Oak Crest
Fairfax, Virginia 22030
All executive officers and
directors as a group (10
persons)...................... 10.5% 19.4% * 8.9%
<CAPTION>
Principal Stockholders Other
Than Executive Officers
and Directors
<S> <C> <C> <C> <C>
Rudolf Strobl.................. 2.2% 4.4% * 1.9%
Gleiwitzerstrasse 15
81929 Munich, Germany
Holger Timm.................... 11.7% 58.1% 100.0% 25.5%/(8)/
Trabner Strasse 12
14193 Berlin, Germany
Cybermind Interactive Europe... 6.8% 48.7% 100.0% 21.4%
Am Borsigturm 48
13507 Berlin, Germany
</TABLE>
- --------
* Indicates less than 1% beneficial ownership
(1) Includes 333,027 shares of common stock and 28,223 shares of Series A Non-
voting Preferred Stock held by Mr. Eder's spouse. She has sole investment
and sole voting power over all shares held by her, and Mr. Eder disclaims
beneficial ownership of any of the shares held by her. Includes 169,200
shares of common stock and 10,800 shares of Series A Preferred Stock
subject to an agreement
99
<PAGE>
between Andreas Eder and Dave Morton, an employee of the Company, by which
Mr. Morton has the option to acquire, (a) 25% of the total number of shares
starting on January 1, 1999 and ending June 30, 1999, (b) 25% of the total
number of shares starting on January 1, 2000 and ending June 30, 2000, and
(c) 50% of the total number of shares starting on January 1, 2001, and
ending June 30, 2001 and (B) 98,700 shares of common stock and 6,300 shares
of Series A Preferred Stock subject to an agreement between Andreas Eder and
Todd Ferguson, an employee of the Company or its subsidiary, by which Mr.
Ferguson has the option to acquire such shares at the same price and under
terms as for Mr. Morton. Does not include options to purchase 100,000 shares
of common stock under the Company's Incentive Plan, which begin to become
exercisable on December 28, 1999.
(2) Does not include options to purchase 100,000 shares of common stock under
the Company's Incentive Plan which begin to become exercisable on December
28, 1999.
(3) Includes 1,261 shares of common stock held by Dr. Besner's spouse who has
sole voting and investment power with respect to such shares. Dr. Besner
disclaims beneficial ownership of any of the shares held by her.
(4) Mr. Timm can be deemed to control Cybermind as a result of his position as
Chief Executive Officer and Head of the Managing Board and principal
shareholder. Includes 1,290,000 shares of common stock held by Cybermind
after the conversion of the Series B Preferred. Does not include an
aggregate of 637,200 shares of common stock sold by Mr. Timm to Alessandro
Giacalone, Christian Moosmann, Frank Lutze and Hans Bergbreiter pursuant
to stock purchase agreements dated April 8, 1997 (the "April 8 Stock
Purchase Agreements"). Also, does not include an aggregate of 54,000
shares of Series A Preferred Stock sold by Mr. Timm to the same
individuals pursuant to the April 8 Stock Purchase Agreements. Each of the
April 8 Stock Purchase Agreements involved an employee purchaser and
provides that, subject to certain conditions, the securities sold shall
revert to Mr. Timm if the purchaser's employment terminates for any reason
except termination without cause by us or one of our subsidiaries, or if
we or one of our subsidiaries breaches our employment agreement with such
buyer. If such shares were included as beneficially owned by Mr. Timm for
purposes of this chart, he would be deemed to hold 14.7% of the common
stock of Cybernet (27.9% of Voting Distribution).
(5) Includes 450,000 shares of Series A Non-Voting Preferred Stock held by Mr.
Timm indirectly through Cybermind. For an explanation of Mr. Timm's
relationship to Cybermind, see Footnote 4 above.
(6) Reflects shares of Series B Voting Preferred Stock held by Mr. Timm
indirectly through Cybermind. For an explanation of Mr. Timm's
relationship to Cybermind, see Footnote 4 above.
(7) For purposes of this column, the percentages were calculated by adding the
number of shares of common stock outstanding to 100% of the Series B
Voting Preferred. It does not take into account the Series A Non-Voting
Preferred Stock that is not presently convertible or options granted to
directors, employees or management that have not been exercised.
(8) Assuming conversion of the remaining Series A Non-Voting Preferred Stock,
Mr. Timm would control approximately 27.1% of the voting securities of
Cybernet.
100
<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
General
The Outstanding Notes were issued under the Senior Notes Indenture dated July
8, 1999 between the Company and The Bank of New York, as trustee (the
"Trustee"). The Exchange Notes will be issued under the Senior Notes Indenture,
which will be qualified under the United States Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), upon the effectiveness of the registration
statement of which this prospectus is a part. The form and terms of the
Exchange Notes are the same in all material respects as the form and terms of
the Outstanding Notes, except that the Exchange Notes will have been registered
under the Securities Act of 1933 and, therefore, will not bear legends
restricting transfer thereof other than those relating to the offer and sale of
Exchange Notes in the United Kingdom. The Exchange Notes will evidence the same
debt as the Outstanding Notes and will be treated as a single class under the
Senior Notes Indenture with any Outstanding Notes that remain outstanding. The
Outstanding Notes and Exchange Notes are herein collectively referred to as the
"Notes."
The following summary of certain provisions of the Senior Notes Indenture
does not purport to be complete and is qualified in its entirety by reference
to the Senior Notes Indenture, including the definitions therein of certain
terms used below. The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions." All references
herein to principal of, premium, if any, interest, and/or Additional Amounts,
if any, shall be deemed to include Liquidated Damages, if any. For purposes of
this "Description of the Exchange Notes," the term "Company" is used to refer
specifically to Cybernet Internet Services International, Inc.
The Company expects to make an application to list the Exchange Notes on the
Luxembourg Stock Exchange after the Separation Date. If and so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange, the Company will
maintain a special agent or, as the case may be, a paying and transfer agent in
Luxembourg. See "Listing and General Information."
Ranking
The Notes will be general unsecured (except to the extent described under "--
Escrow Account") obligations of the Company and will rank senior in right of
payment to all future Indebtedness of the Company that is, by its terms or by
the terms of the agreement or instrument governing such Indebtedness, expressly
subordinated in right of payment to the Notes and pari passu in right of
payment with all existing and future unsecured liabilities of the Company that
are not so subordinated.
The Company is a holding company with limited assets and operates its
business through Subsidiaries. Any right of the Company and its creditors,
including Holders of the Notes, to participate in the assets of any of the
Company's Subsidiaries upon any liquidation or administration of any such
Subsidiary will be subject to the prior claims of the creditors of such
Subsidiary. The claims of creditors of the Company, including holders of the
Notes, will be effectively subordinated to all existing and future third party
indebtedness and liabilities, including trade payables, of the Company's
Subsidiaries. At June 30, 1999, the Company's Subsidiaries had total
liabilities of $16,200,635 million reflected on the Company's balance sheet.
The Company and its Subsidiaries may incur other debt in the future, including
secured debt.
The Notes will not be entitled to any security (except to the extent
described under "--Escrow Account") and will not be entitled to the benefit of
any guarantees, except under the circumstances described under "--Certain
Covenants--Limitation on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries."
Principal, Maturity and Interest
The Notes will be limited in aggregate principal amount to $350 million and
will mature on July 1, 2009. The Notes will bear interest at the rate of 14.0%
per annum payable semi-annually in arrears on each July 1 and
101
<PAGE>
January 1 (each, an "Interest Payment Date"), commencing on January 1, 2000 to
the Person in whose name each Note (or any predecessor Note) is registered at
the close of business on the preceding June 15 or December 15, as the case may
be. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company may issue additional Notes ("Additional Notes") from time
to time after the Unit Offering, subject to the provisions of the Senior Notes
Indenture described below under "--Certain Covenants" and applicable law. The
Notes offered hereby and any Additional Notes subsequently issued under the
Senior Notes Indenture would be treated as a single class for all purposes
under the Senior Notes Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Principal of, and premium, if
any, interest, and Additional Amounts, if any, on the Notes will be payable at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest and
Additional Amounts, if any, may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes; provided that all payments with respect to Notes the holders of which
have given wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes are currently represented by a global
Note in registered, global form without interest coupons. The global Note shall
be exchanged by the Company (with authentication by the Trustee) for one or
more Definitive Notes (the "Definitive Notes"), if (a) DTC (i) has notified the
Company that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under the Exchange Act, and (ii) a successor to DTC
registered as a clearing agency under the Exchange Act is not able to be
appointed by the Company within 90 days of such notification, or (b) at any
time at the option of the Company. If an Event of Default occurs and is
continuing, the Company shall, at the request of the Holder thereof, exchange
all or part of a global Note for one or more Definitive Notes (with
authentication by the Trustee); provided, however, that the principal amount of
such Definitive Notes and such global Note after such exchange shall be $1,000
or integral multiples thereof. The Notes will be issued in minimum
denominations of $1,000 principal amount and integral multiples thereof. If the
Exchange Notes are listed on the Luxembourg Stock Exchange, the Company will
appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg as an additional paying and transfer agent. Upon the issuance of
Definitive Notes, Holders will be able to receive principal of, and interest
and Additional Amounts, if any, on the Notes and will be able to transfer
Definitive Notes at the Luxembourg office of such paying and transfer agent,
subject to the right of the Company to mail payments in accordance with the
terms of the Senior Note Indenture.
Escrow Account
Concurrently with the consummation of the Unit Offering, pursuant to an
escrow agreement relating to the Notes (the "Escrow Agreement"), the Company
purchased, pledged and transferred to the Escrow Agent, for the benefit of the
Holders of the Notes, U.S. Government Securities (the "Pledged Securities") in
such amounts as will be sufficient upon scheduled interest payments of such
securities to provide for the payment in full of the first six scheduled
interest payments on the Notes (excluding, in each case, any Additional
Amounts). The Company used approximately $57 million of the net proceeds of the
Unit Offering to acquire the U.S. Government Securities. The Pledged Securities
were pledged to the Escrow Agent for the benefit of the Holders of the Notes
and deposited in the Escrow Account held by the Escrow Agent for the benefit of
the Trustee and the Holders of the Notes in accordance with the Escrow
Agreement. The Escrow Agreement provides, among other things, that funds may be
disbursed from the Escrow Account for interest payments on the Notes. The
Escrow Agent has been instructed to cause any uninvested funds in the Escrow
Account to be invested, pending disbursement, in cash equivalents (as provided
in the Escrow Agreement). Interest earned on the Pledged Securities and any
such cash equivalents will be added to the Escrow Account.
102
<PAGE>
Under the Escrow Agreement, the Company has granted to the Trustee, for the
benefit of the Holders of the Notes, a first priority and exclusive security
interest in the Escrow Collateral. The Escrow Agreement provides that the
Trustee may foreclose on the Escrow Collateral upon acceleration of the
maturity of the relevant series of Notes. Under the terms of the Senior Notes
Indenture, the proceeds of the Escrow Collateral will be applied, first, to
amounts owing to the Trustee in respect of fees and expenses of the Trustee,
and second, to amounts owing on the Notes as provided in the Senior Notes
Indenture. The ability of Holders to realize upon the Escrow Collateral may be
subject to certain bankruptcy law limitations in the event of the bankruptcy of
the Company.
Upon payment in full of the first six scheduled interest payments (including
any Additional Amounts), if no Default has occurred and is continuing, the
Escrow Collateral will be released to the Company.
Mandatory Redemption
The Company will not be required to make mandatory redemptions or sinking
fund payments prior to maturity of the Notes.
Optional Redemption
Except as described below and in the following paragraph or under "--
Redemption for Taxation Reasons," the Notes will not be redeemable at the
Company's option prior to July 1, 2004. From and after July 1, 2004, the Notes
will be subject to redemption at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' prior notice published in a
leading newspaper having a general circulation in New York (which is expected
to be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and if and so long as the Exchange Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) or, in the case of Definitive Notes,
mailed by first-class mail to the registered address of each Holder of the
Notes (and, if and so long as the Exchange Notes are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, published
in a newspaper having a general circulation in Luxembourg (which is expected to
be the Luxemburger Wort)), at the redemption prices (expressed as a percentage
of principal amount) set forth below, plus accrued and unpaid interest and
Additional Amounts, if any, to the applicable redemption date (and, in the case
of Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest and Additional Amounts, if any, due on the
relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on July 1 of each of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2004..................................................... 110.000%
2005..................................................... 106.667%
2006..................................................... 103.333%
2007 and thereafter...................................... 100.000%
</TABLE>
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the
principal securities exchange, if any, on which the Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of
selection, on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate, although no Note
of $1,000 in original principal amount or less shall be redeemed in part. If
any Note is to be redeemed in part only, the notice of redemption relating to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued and delivered to the Depositary, or, in the case of
Definitive Notes, issued in the name of the Holder thereof in each case upon
cancellation of the original Note. On
103
<PAGE>
and after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
Redemption for Taxation Reasons
The Notes may be redeemed, at the option of the Company, in whole but not in
part, at any time upon giving not less than 30 nor more than 60 days' notice to
the Holders (which notice shall be irrevocable), at a redemption price equal to
the principal amount thereof, together with accrued and unpaid interest to the
date fixed by the Company for redemption (a "Tax Redemption Date") and all
Additional Amounts (see "--Withholding Taxes"), if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations or rulings promulgated
thereunder) of the Federal Republic of Germany (or any political subdivision or
taxing authority thereof) affecting taxation which becomes effective on or
after the Issue Date, or (ii) any change in or new or different position
regarding the application, administration or interpretation of such laws,
treaties, regulations or rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date, the Company is, or
on the next Interest Payment Date would be, required to pay Additional Amounts,
and the Company determines that such payment obligation cannot be avoided by
the Company taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to make such payment or withholding if a payment in respect of the
Notes were then due. Prior to the publication or, where relevant, mailing of
any notice of redemption of the Notes pursuant to the foregoing, the Company
will deliver to the Trustee an opinion of an independent tax counsel of
recognized international standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
Prescription
Claims against the Company for the payment of principal of, or interest, or
Additional Amounts, if any, on the Notes will become void unless presentation
for payment is made (where so required in the Senior Notes Indenture) within a
period of 10 years, in the case of principal, or Additional Amounts, if any, or
five years, in the case of interest, from the applicable original payment date
therefor.
Certain Covenants
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that if no Default
or Event of Default shall have occurred and be continuing at the time, or would
occur as a consequence of the Incurrence of any such Indebtedness, the Company
may Incur Indebtedness if immediately thereafter the ratio of (i) the aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
on a consolidated basis outstanding as of the Transaction Date to (ii) the pro
forma Consolidated Cash Flow for the preceding two full fiscal quarters
multiplied by two, determined on a pro forma basis as if any such Indebtedness
had been Incurred and the proceeds thereof had been applied at the beginning of
such two fiscal quarters, would be greater than zero and less than or equal to
6.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under subsection
(vii) below) the Company and (except for Indebtedness under subsections (v),
(vi), (x) and (xii) below) any Restricted Subsidiary may Incur each and all of
the following:
104
<PAGE>
(i) Indebtedness (other than Acquired Indebtedness) in an aggregate
principle amount at any one time outstanding not to exceed (Euro)100.0
million Incurred to finance the cost (provided that such Indebtedness is
Incurred at any time on or before, or within 90 days following, the
incurrence of such cost) (including the cost of design, development,
construction, acquisition, transportation, installation or integration) of
equipment, inventory or network assets used in the Permitted Business or
Equity Interests of (A) a Restricted Subsidiary that owns principally such
assets from a Person other than the Company or a Restricted Subsidiary of
the Company or (B) any Person that is principally engaged in the Permitted
Business, that would become a Restricted Subsidiary and owns principally
such assets; provided that (x) any such Indebtedness of a Restricted
Subsidiary must be Incurred under one or more Credit Facilities, under one
or more Capitalized Leases or from the vendor of the equipment, inventory
or network assets acquired with the proceeds of such Indebtedness, (y) the
amount of such Indebtedness of the Company or any Restricted Subsidiary may
not exceed the Fair Market Value of the assets so acquired and (z) the
amount of any such Indebtedness permitted to be Incurred to acquire Equity
Interests pursuant to clauses (A) or (B) shall be reduced by the amount of
any Acquired Indebtedness Incurred in such acquisition;
(ii) Indebtedness of any Restricted Subsidiary owing to and held by the
Company, Indebtedness of the Company owing to and held by any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary owing to and held
by any other Restricted Subsidiary; provided that any subsequent issuance
or transfer of any Capital Stock or any other 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
the Incurrence of such
Indebtedness not permitted by this clause (ii); and provided, further, that
Indebtedness of the Company owing to and held by a Restricted Subsidiary
must be unsecured and subordinated in right of payment to the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness of the
Company or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (ii), (iv), (vii), (viii), (x) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, and reasonable fees and
expenses); provided that such new Indebtedness shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced or refunded is pari passu with the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness
being refinanced or refunded and (D) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, has a Weighted Average
Life to Maturity which is not less than the remaining Weighted Average Life
to Maturity of the Indebtedness to be refinanced or refunded; and provided
further that in no event may Indebtedness of the Company be refinanced or
refunded 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
or letters of credit supporting Trade Payables, in each case provided in
the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (x) are designed solely to
protect the Company or the Restricted Subsidiary, as the case may be,
against fluctuations in foreign currency exchange rates or interest rates
and (y) 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
105
<PAGE>
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, bankers' acceptances, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred
for the purpose of financing such acquisition by the Person acquiring all
or any portion of such business, assets or Restricted Subsidiary), 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, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described under "--Legal
Defeasance and Covenant Defeasance;"
(vi) Indebtedness of the Company represented by the Notes;
(vii) Indebtedness represented by a Guarantee of the Notes and Guarantees
of other Indebtedness of the Company by a Restricted Subsidiary in each
case permitted by and made in accordance with the "Limitation on Issuances
of Guarantees of Indebtedness by Restricted Subsidiaries" covenant;
(viii) Indebtedness under one or more Credit Facilities (which shall be
in addition to any such Indebtedness incurred under one or more Credit
Facilities under clause (b)(i) above) in an aggregate principal amount at
any one time outstanding not to exceed the greater of (x) (Euro)50.0
million and (y) 80% of Eligible Accounts Receivable at such time;
(ix) Acquired Indebtedness; provided that the aggregate amount of such
Acquired Indebtedness of the Person that is to become a Restricted
Subsidiary, or to be merged or consolidated with or into the Company or any
Restricted Subsidiary in the contemplated transaction, or to be assumed by
the Company or a Restricted Subsidiary in connection with an Asset
Acquisition, outstanding at the time of such transaction does not exceed
the Fair Market Value of the equipment, inventory, network assets and Cash
Equivalents of any Restricted Subsidiary so acquired or that are acquired
in such Asset Acquisition, as the case may be;
(x) Indebtedness of the Company not to exceed, at any one time
outstanding, the sum of (A) 2.00 times the Net Cash Proceeds received from
the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Redeemable Stock and excluding any Equity Interests issued in
connection with the Unit Offering) of the Company, less (I) the amount of
such proceeds used to make Restricted Payments as provided in clause (C)(2)
of the first paragraph or clauses (iii) or (iv) of the second paragraph of
the "Limitation on Restricted Payments" covenant and (II) if such proceeds
are used to consummate a transaction pursuant to which the Company Incurs
Acquired Indebtedness, one-half of the amount of such Acquired Indebtedness
so Incurred and (B) the Fair Market Value of any Permitted Assets acquired
by the Company in exchange for Equity Interests of the Company issued after
the Issue Date; provided, however, that in determining the Fair Market
Value of any such Permitted Assets so acquired, if the estimated Fair
Market Value of such Permitted Assets exceeds (x) (Euro)2.0 million, then
the Fair Market Value of such Permitted Assets will be determined by a
majority of the Board of Directors, which determination will be evidenced
by a resolution thereof, and (y) (Euro)10.0 million, then the Company will
deliver to the Trustee a written appraisal as to the fair market value of
such Permitted Assets prepared by an internationally recognized investment
banking or public accounting firm (or, if no such investment banking or
public accounting firm is qualified to prepare such an appraisal, by an
internationally recognized appraisal firm); and provided further that such
Indebtedness (other than the Indebtedness Incurred under one or more Credit
Facilities, under one or more Capitalized Leases or from the vendor of
assets, property or services acquired with the proceeds of such
Indebtedness) does not mature prior to the Stated Maturity of the Notes and
the Weighted Average Life to Maturity of such Indebtedness is longer than
that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
106
<PAGE>
(xii) Unsecured Indebtedness of the Company (in addition to Indebtedness
permitted under clauses (i) through (xi) above) in an aggregate principal
amount outstanding at any one time not to exceed (Euro)200.0 million.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, 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; provided,
however, that the foregoing shall not in any way be deemed to limit the
provisions of the "Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries" covenant. For purposes of determining compliance with
this "Limitation on Indebtedness" covenant, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Company, in its sole discretion, shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses and (B) the principal
amount of Indebtedness issued at a price that is less than the principal amount
thereof shall be equal to the amount of the liability in respect thereof
determined in conformity with US GAAP.
(d) For purposes of determining compliance with any Euro-denominated
restriction on the Incurrence of Indebtedness, the Euro-equivalent principal
amount of Indebtedness denominated in a non-Euro currency shall be calculated
based on the relevant currency exchange rate in effect on the date such
Indebtedness was Incurred, in the case of term Indebtedness, or first
committed, in the case of revolving credit Indebtedness; provided that if such
Indebtedness is Incurred to refinance other Indebtedness denominated in a non-
Euro currency, and such refinancing would cause the applicable Euro-denominated
restriction to be exceeded if calculated at the relevant currency exchange rate
in effect on the date of such refinancing, such Euro-denominated restriction
shall be deemed not to have been exceeded so long as the principal amount of
such refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. 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
currency exchange rate applicable to the currencies in which such refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.
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 account of any Equity Interest in the Company or any Restricted
Subsidiary to the holders thereof, including any dividend or distribution
payable in connection with any merger or consolidation (other than (A)
dividends or distributions payable solely in Equity Interests (other than
Redeemable Stock) of the Company, (B) dividends or distributions made only to
the Company or a Restricted Subsidiary and (C) pro rata dividends or
distributions of Capital Stock of a Restricted Subsidiary held by Persons other
than the Company or a Restricted Subsidiary), (ii) purchase, redeem, retire or
otherwise acquire for value any Equity Interests of the Company, an
Unrestricted Subsidiary or a Restricted Subsidiary (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary), (iii) make any
principal payment or redeem, purchase, repurchase, defease, or otherwise
acquire or retire for value, in each case, prior to any scheduled repayment, or
maturity, any 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 (all such payments or any other actions described in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments") unless, at the time of, and after giving effect to, the proposed
Restricted Payment:
(A) no Default or Event of Default shall have occurred and be continuing;
(B) the Company could Incur at least (Euro)1.00 of additional
Indebtedness under paragraph (a) of the "Limitation on Indebtedness"
covenant; and
107
<PAGE>
(C) the aggregate amount expended for all Restricted Payments (the amount
so expended, 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) after the Issue Date is less than the sum of (1) 50%
of the aggregate amount of the Consolidated Net Income (or, if the
Consolidated Net Income is a loss, 100% of the amount of such loss) accrued
on a cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter beginning immediately
following the Issue 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 the "Provision
of Financial Statements and Reports" covenant, plus (2) 100% of the
aggregate Net Cash Proceeds received by the Company after the Issue Date
from the issuance and sale of its Equity Interests (other than Redeemable
Stock and excluding any Equity Interests issued in connection with the Unit
Offering) to a Person (other than a Subsidiary of the Company), except to
the extent that such Net Cash Proceeds are used (I) to purchase, redeem or
otherwise retire Equity Interests or Indebtedness as set forth below in
clause (iii) or (iv) of the immediately succeeding paragraph or (II) to
Incur Indebtedness pursuant to clause (x) of paragraph (b) of the
"Limitation on Indebtedness" covenant, plus (3) the aggregate amount by
which Indebtedness (other than any Indebtedness subordinated in right of
payment to the Notes) of the Company or any Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date
into Equity Interests (other than Redeemable Stock and less the amount of
any cash, or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange), plus (4) without
duplication of any amount included in the calculation of Consolidated Net
Income, in the case of repayment of, or return of capital with respect to,
any Investment constituting a Restricted Payment (including the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries) made
after the Issue Date, an amount equal to the lesser of (x) the repayment
of, or the return of capital with respect to, such Investment and (y) the
cost of such Investment, in either case less the cost of the disposition of
such Investment and net of taxes.
The foregoing provisions shall not prohibit: (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 provisions of the Senior Notes
Indenture; (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 paragraph (b) of the "Limitation on Indebtedness" covenant; (iii) the
repurchase, redemption or other acquisition of Equity Interests in the Company
in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent
offering of Equity Interests (other than Redeemable Stock and excluding any
Equity Interests issued in connection with the Unit Offering) in the Company to
any Person (other than a Subsidiary); (iv) the repurchase, redemption or other
acquisition of Indebtedness of the Company which is subordinated in right of
payment to the Notes in exchange for, or out of the Net Cash Proceeds of, a
substantially concurrent offering of Equity Interests (other than Redeemable
Stock and excluding any Equity Interests issued in connection with the Unit
Offering) in the Company to any Person (other than a Subsidiary); (v)
repurchases of Equity Interests of the Company from employees of the Company or
any of its Restricted Subsidiaries deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise price of
such options, provided that any payments made pursuant to this clause (v) may
not exceed in the aggregate (Euro)5.0 million in any fiscal year 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 Investment); provided that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) (Euro)25.0 million, plus (b) the amount of Net Cash
Proceeds received by the Company after the Issue Date from the issuance and
sale of its Equity Interests (other than Redeemable Stock and excluding any
Equity Interests issued in connection with the Unit Offering) to a Person
(other than a Subsidiary of the Company), except to the extent that such Net
Cash Proceeds are used (I) to make Restricted Payments pursuant to clause
(C)(2) of the first paragraph or clauses (iii) or (iv) of the second paragraph
of the "Limitation on Restricted Payments" covenant or (II) to Incur
Indebtedness pursuant to clause (x) of
108
<PAGE>
paragraph (b) of the "Limitation on Indebtedness" covenant, plus (c) the
aggregate amount by which Indebtedness (other than any Indebtedness
subordinated in right of payment to the Notes) of the Company or any Restricted
Subsidiary is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the Issue
Date into Equity Interests (other than Redeemable Stock and less the amount of
any cash, or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange); and (vii) Investments
acquired in exchange for Capital Stock (other than Redeemable Stock) of the
Company; provided that, in the case of clauses (ii) through (vii), no Default
or Event of Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payments referred to in clauses (ii) and
(vii) thereof and the Net Cash Proceeds from any issuance of Equity Interests
referred to in clauses (iii) and (iv) thereof) shall be included in calculating
whether the conditions of clause (C) of the first paragraph of this "Limitation
on Restricted Payments" covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Equity
Interests (other than Redeemable Stock and excluding any Equity Interests
issued in connection with the Unit Offering) of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this "Limitation on Restricted Payments" covenant only to the
extent such proceeds are not used for such redemption, repurchase or other
acquisition of the Notes.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, 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 Equity Interests 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 prohibit any encumbrances or restrictions:
(i) existing under or by reason of any agreement in effect on the Issue Date,
and any amendments, supplements, extensions, refinancings, renewals or
replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with
respect to any Restricted Subsidiary acquired by the Company or any Restricted
Subsidiary after the Issue Date, or the property or assets of such Restricted
Subsidiary, and 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; (iv) in the case of clause
(iv) of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in
a customary manner the subletting, assignment or transfer of any property or
asset that is, or is subject to, a lease, purchase mortgage obligation,
license, conveyance or contract or similar property or asset, (B) existing by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Senior Notes 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, materially
detract from the value of property or assets of the Company or any Restricted
Subsidiary 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 in, or property and assets of, such Restricted Subsidiary;
provided that such restriction shall terminate if such
109
<PAGE>
transaction is abandoned or if such transaction is not consummated within six
months of the date such agreement was entered into; 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 applies only in the event of a
payment default or a default with respect to a financial covenant contained in
such Indebtedness or 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 Board of Directors) and (C) the
Board of Directors determines that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest payments
on the Notes. Nothing contained in this "Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries" covenant shall prevent
the Company or any Restricted Subsidiary from creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant that limit the right of the debtor to dispose of the assets securing
such Indebtedness.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue, transfer, convey, sell, lease or otherwise dispose of
any shares of Capital Stock (including options, warrants or other rights to
purchase shares of such Capital Stock) of such Restricted Subsidiary or any
other Restricted Subsidiary to any Person (other than (i) to the Company or a
Wholly Owned Restricted Subsidiary and (ii) issuances of director's qualifying
shares of Capital Stock of foreign Restricted Subsidiaries, in each case, to
the extent required by applicable law), unless (A) the Net Cash Proceeds from
such issuance, transfer, conveyance, sale, lease or other disposition are
applied in accordance with the provisions of the "Limitation on Asset Sales"
covenant, (B) immediately after giving effect to such issuance, transfer,
conveyance, sale, lease or other disposition, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and (C) any Investment in such
Person remaining after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition would have been permitted to be made under the
"Limitation on Restricted Payments" covenant if made on the date of such
issuance, transfer, conveyance, sale, lease or other disposition (valued as
provided in the definition of "Investment").
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction or series
of transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
direct or indirect holder (or any Affiliate of such holder) of 5% or more of
any class of Capital Stock of the Company or with any Affiliate of the Company
or any Restricted Subsidiary, unless (i) such transaction or series of
transactions is on terms that are no less favorable to the Company or such
Restricted Subsidiary than could reasonably be obtained in a comparable arm's-
length transaction with a Person that is not such a holder or Affiliate, (ii)
if such transaction or series of transactions involves aggregate consideration
in excess of (Euro)2.5 million, the Company shall
have delivered to the Trustee a resolution set forth in an Officers'
Certificate adopted by a majority of the Board of Directors, including a
majority of the independent, disinterested directors, approving such
transaction or series of transactions, and certifying that such transaction or
series of transactions comply with clause (i) above and (iii) if such
transaction or series of transactions involves aggregate consideration in
excess of (Euro)7.5 million, the Company shall have delivered to the Trustee a
written opinion as to the fairness to the Company or such Restricted Subsidiary
of such transaction or series of transactions from a financial point of view
from an internationally recognized investment banking firm (or, if an
investment banking firm is generally not qualified to give such an opinion, by
an internationally recognized appraisal firm or accounting firm).
The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) the payment of dividends, distributions or other amounts by the Company
or any Restricted Subsidiary permitted by the
110
<PAGE>
"Limitation on Restricted Payments" covenant; (iv) issuances of Equity
Interests (other than Redeemable Stock) on terms consistent with the
requirements of clause (i) of the preceding paragraph; and (v) any payments or
other transactions pursuant to tax-sharing agreements 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.
Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
(other than Permitted Liens) on any asset or property of the Company or any
Restricted Subsidiary without making effective provisions for all of the Notes
and all other amounts due under the Senior Notes 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; provided that any Lien
which is granted to secure the Notes under this covenant shall be discharged at
the same time as the discharge of the Lien that gave rise to the obligation to
so secure the Notes.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to, make
any Asset Sale unless (i) the Company or the Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets sold or disposed of and (ii) at least 75%
of the consideration received for such Asset Sale consists of cash or Cash
Equivalents or Replacement Assets or the assumption of Indebtedness which ranks
equal in right of payment with the Notes.
The Company shall, or shall cause the relevant Restricted Subsidiary to,
apply the Net Cash Proceeds from an Asset Sale within 360 days of the receipt
thereof to (A) permanently prepay, repay or purchase unsubordinated
Indebtedness of the Company or any Restricted Subsidiary providing a Guarantee
pursuant to the "Limitation on Issuances of Guarantees by Restricted
Subsidiaries" covenant or Indebtedness of any other Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its Restricted
Subsidiaries, and elect to permanently reduce the commitments thereunder by the
amount of such Indebtedness prepaid, repaid or purchased, (B) invest in
Replacement Assets or (C) in any combination of prepayment, repayment, purchase
and reinvestment permitted by the foregoing clauses (A) and (B).
The Senior Notes Indenture provides that any Net Cash Proceeds from the Asset
Sale that are not invested as provided and within the time period set forth in
the second paragraph of this "Limitation on Asset Sales" covenant will be
deemed to constitute "Excess Proceeds." If at any time the aggregate amount of
Excess Proceeds exceeds (Euro)5.0 million, the Company shall, within 15
business days thereafter, make an offer to all holders of Notes (an "Asset Sale
Offer") to purchase on a pro rata basis the maximum principal amount of Notes,
that is an integral multiple of $1,000 that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof, plus accrued and unpaid interest thereon
plus Additional Amounts, if any, to the date fixed for the closing of such
offer (and, in the case of Definitive Notes, subject to the right of a holder
of record on the relevant record date to receive interest due on the relevant
interest payment date and Additional Amounts, if any, in respect thereof), in
accordance with the procedures set forth in the Senior Notes Indenture. The
Company will commence an Asset Sale Offer by publishing and mailing the notice
required pursuant to the terms of the Senior Notes Indenture, with a copy to
the Trustee. To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, subject to applicable
law, the Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by holders
thereof exceeds the amount of Excess Proceeds, the selection of such Notes for
purchase will be made by the Trustee in the same manner as the Notes are
redeemed, as described under "--Optional Redemption." Upon completion of any
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
111
<PAGE>
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Senior Notes Indenture, the
Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in such Senior
Notes Indenture by virtue thereof.
Limitation on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Senior Notes Indenture providing for a Guarantee of all of the Company's
obligations under the Notes and the Senior Notes Indenture on terms
substantially similar to the guarantee of such Indebtedness, except that if the
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such assumption, Guarantee or other liability of such Restricted
Subsidiary with respect to such Indebtedness shall be subordinated in right of
payment to such Restricted Subsidiary's assumption, Guarantee or other
liability with respect to the Notes substantially to the same extent as such
Indebtedness is subordinated to the Notes and (ii) such Restricted Subsidiary
waives, and 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 Guarantee; provided that
any Restricted Subsidiary may guarantee Indebtedness of the Company under a
Credit Facility if such Indebtedness is Incurred in accordance with the
"Limitation on Indebtedness" covenant; and provided further 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.
Notwithstanding the foregoing, any Guarantee of all of the Company's
obligations under the Notes and the Senior Notes Indenture by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Subsidiary's Equity Interests in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Senior Notes Indenture), or (ii)
the release or discharge of the guarantee which resulted in the creation of
such Guarantee, except a discharge or release by or as a result of payment
under such guarantee.
Business of the Company; Restriction on Transfers of Existing Business
The Company will not, and will not permit any Restricted Subsidiary to, be
principally engaged in any business or activity other than a Permitted
Business. In addition, the Company and any Restricted Subsidiary will not be
permitted, directly or indirectly, to transfer to any Unrestricted Subsidiary
(i) any of the licenses, permits or authorizations used in the Permitted
Business of the Company or any Restricted Subsidiary or (ii) any material
portion of the "property and equipment" (as such term is used in the Company's
consolidated financial statements) of the Company or any Restricted Subsidiary
used in the licensed service areas of the Company or any Restricted Subsidiary.
Restriction on Sale/Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to, enter
into any Sale/Leaseback Transaction with respect to any property unless (a) the
Company or such Restricted Subsidiary would be entitled to (i) Incur
Indebtedness in an amount equal to the Attributable Debt with respect to such
Sale/Leaseback Transaction pursuant to the "Limitation on Indebtedness"
covenant and (ii) create a Lien on
112
<PAGE>
such property securing such Attributable Debt without equally and ratably
securing the Notes pursuant to the "Limitation on Liens" covenant, (b) the net
cash proceeds received by the Company or any Restricted Subsidiary in
connection with such Sale/Leaseback Transaction are at least equal to the fair
value (as determined in good faith by the Board of Directors) of such property
and (c) the transfer of such property is permitted by, and the Company applies
the proceeds of such transaction in compliance with, the "Limitation on Asset
Sales" covenant.
Provision of Financial Statements and Reports
The Company will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not the Company has
a class of securities registered under the Exchange Act, (i) all annual and
quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Forms 10-K and 10-Q
(which financial statements shall be prepared in accordance with US GAAP),
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual financial information, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K, in each case, if the Company had a class of securities registered under
the Exchange Act, whether or not the Company has such a class of securities
registered under the Exchange Act. Such quarterly financial information shall
be filed with the Commission within 45 days following the end of each fiscal
quarter of the Company, and such annual financial information shall be
furnished within 90 days following the end of each fiscal year of the Company.
Such annual financial information shall include the geographic segment
financial information required to be disclosed by the Company under Item 101(d)
of Regulation S-K under the Securities Act. The Company will also be required
(a) to file with the Trustee, and provide to each holder, without cost to such
holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required, and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under
the Exchange Act, to supply, at the Company's cost, copies of such reports and
documents to any prospective holder promptly upon request. In addition, if and
so long as the Exchange Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange shall require, copies of all reports and
information described above will be available during normal business hours at
the office of the listing agent in Luxembourg.
Limitation on Investment Company Activities.
The Company will not, and will not permit any of its Restricted Subsidiaries
or controlled Affiliates to, conduct its business in a fashion that would cause
the Company to be required to register as an "investment company" (as that term
is defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act")), or otherwise to become subject to regulation under the
Investment Company Act. For purposes of establishing the Company's compliance
with this provision, any exemption which is or would become available under
Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act will be
disregarded.
Repurchase of Notes upon a Change of Control
Upon the occurrence of a Change of Control, the Company will make an offer to
purchase all or any part (equal to $1,000 in principal amount and integral
multiples thereof) of the Notes pursuant to the offer described below (the
"Change of Control Offer") at a price in cash (the "Change of Control Payment")
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, thereon to the date of repurchase, plus Additional Amounts, if any,
to the date of repurchase (and in the case of Definitive Notes, subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date and Additional Amounts, if any, in
respect thereof). The Senior Notes Indenture provides that within 30 days
following any Change of Control, the Company will publish notice of such in a
leading newspaper having a general circulation in New York (which is expected
to be The Wall Street Journal) and in Frankfurt (which is
113
<PAGE>
expected to be the Frankfurter Allgemeine Zeitung) (and if and so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange shall so require, a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)) or, in the case
of Definitive Notes, mail a notice to each holder (and if and so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange shall so require, a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)), with a copy to
the Trustee, with the following information: (i) a Change of Control Offer is
being made pursuant to the covenant entitled "Repurchase of Notes upon a Change
of Control" and all Notes properly tendered pursuant to such Change of Control
Offer will be accepted for payment; (ii) the purchase price and the purchase
date, which will be no earlier than 30 days nor later than 60 days from the
date such notice is published, or where relevant, mailed, except as may be
otherwise required by applicable law (the "Change of Control Payment Date");
(iii) any Note not properly tendered will remain outstanding and continue to
accrue interest; (iv) unless the Company defaults in the payment of the Change
of Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control Payment
Date; (v) holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the relevant Paying Agent and at the address specified in the notice prior to
the close of business on the third business day preceding the Change of Control
Payment Date; (vi) holders will be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such Notes; provided that
the Paying Agent receives, not later than the close of business on the last
business day of the offer period, a facsimile transmission or letter setting
forth the name of the holder, the principal amount of Notes tendered for
purchase, and a statement that such holder is withdrawing his tendered Notes
and his election to have such Notes purchased; and (vii) holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the principal amount of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the Senior Notes Indenture,
the Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations contained in the Senior
Notes Indenture by virtue thereof. The provisions relating to the Company's
obligation to make an offer to repurchase the Notes as a result of a Change of
Control may be waived or modified with the written consent of the holders of a
majority in principal amount of the Notes.
The Senior Notes Indenture provides that on the Change of Control Payment
Date, the Company will, to the extent permitted by law, (i) accept for payment
all Notes or portions thereof properly tendered pursuant to the Change of
Control Offer, (ii) deposit with each Paying Agent an amount equal to the
aggregate Change of Control Payment in respect of all Notes or portions thereof
so tendered and (iii) deliver, or cause to be delivered, to the Trustee for
cancellation the Notes so accepted together with an Officers' Certificate
stating that such Notes or portions thereof have been tendered to and purchased
by the Company. The Senior Notes Indenture provides that the Paying Agent will
promptly either (x) pay to the holder against presentation and surrender (or,
in the case of partial payment, endorsement) of the Global Notes or (y) in the
case of Definitive Notes, mail to each holder of Notes the Change of Control
Payment for such Notes, and the Trustee will promptly authenticate and deliver
to the holder of the Global Notes a new Global Note or Notes or, in the case of
Definitive Notes, mail to each holder a new Definitive Note, as applicable,
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided, however, that each new Definitive Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
114
<PAGE>
If the Company is unable to repay all of its Indebtedness that contains
restrictions prohibiting the repurchase of the Notes or is unable to obtain the
consents of the holders of Indebtedness, if any, of the Company outstanding at
the time of a Change of Control whose consent would be so required to permit
the repurchase of Notes, then the Company will be unable to fulfil its
repurchase obligations to holders of the Notes, thereby resulting in a breach
of the "Repurchase of Notes upon a Change of Control" covenant. Such breach
will constitute an Event of Default under the Senior Notes Indenture if it
continues for a period of 30 consecutive days after written notice is given to
the Company by the Trustee or the holders of at least 25% in aggregate
principal amount of the Notes outstanding. In addition, the failure by the
Company to repurchase Notes at the conclusion of the Change of Control Offer
will constitute an Event of Default without any waiting period or notice
requirements.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless the consents referred to above are obtained, require the Company
to repay all Indebtedness then outstanding which by its terms would prohibit
such Note repurchase, either prior to or concurrently with such Note
repurchase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would
constitute a Change of Control.
Consolidation, Merger and Sale of Assets
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 in a series of related transactions) to, any Person or permit
any Person to merge with or into the Company and the Company will not permit
any of its Restricted Subsidiaries to enter into any such transaction or series
of transactions if such transaction or series of transactions, in the
aggregate, would result in the sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company or the Company and its Restricted Subsidiaries, taken as a whole,
to any other Person or Persons, unless: (i) the Company will be the continuing
Person, or the Person (if other than the Company) (the "Surviving Entity")
formed by such consolidation or into which the Company is merged or that
acquired or leased such property and assets of the Company will be a
corporation organized and validly existing under the laws of the United States
of America, any state thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company with respect to the Notes and under the
Senior Notes Indenture and the Escrow Agreement; (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;
(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 (Euro)1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; (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 the Senior Notes
Indenture; and (vi) the Company shall have delivered to the Trustee an opinion
of tax counsel reasonably acceptable to the Trustee stating that (A) holders
will not recognize income, gain or loss for U.S. federal or German income tax
purposes as a result of such transaction, (B) any payment of principal,
redemption price or purchase price of, premium (if any) and interest on the
Notes by the Company to a holder after the consolidation, merger, conveyance,
transfer or lease of assets will be exempt from the Taxes described under "--
Withholding Taxes" and (C) no other taxes on income (including taxable capital
gains) will be payable
115
<PAGE>
under the tax laws of the Relevant Taxing Jurisdiction (as defined in "--
Withholding Taxes") by a holder who is or who is deemed to be a non-resident of
the Relevant Taxing Jurisdiction in respect of the acquisition, ownership or
disposition of the Notes, including the receipt of principal of, premium and
interest paid pursuant to such Notes.
Events of Default
The following constitute "Events of Default" under the Senior Notes
Indenture: (a) default for 30 days or more in the payment when due of interest
on the Notes or Additional Amounts, if any, with respect to the Notes;
(b) 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; (c) default in the payment of principal or interest on
Notes required to be purchased pursuant to an Asset Sale Offer as described
under "Limitation on Asset Sales" or pursuant to a Change of Control Offer as
described under "Repurchase of Notes upon a Change of Control;" (d) failure to
perform or comply with the provisions described under "Consolidation, Merger
and Sale of Assets;" (e) default in the performance of or breach of any other
covenant or agreement of the Company in the Senior Notes Indenture or the
Escrow Agreement or under the Notes and such default or breach continues for a
period of 30 consecutive days after written notice by the Trustee or the
holders of 25% or more in aggregate principal amount of the Notes; (f) a
default occurs on any other Indebtedness of the Company or any Restricted
Subsidiary if (i) either (x) such default is a failure to pay principal of such
Indebtedness when due after any applicable grace period or (y) as a result of
such default, the maturity of such Indebtedness has been accelerated prior to
its scheduled maturity and such default has not been cured within the shorter
of 30 days and the applicable grace period, and such acceleration has not been
rescinded, and (ii) the principal amount of such Indebtedness, together with
the principal amount of any other Indebtedness of the Company and its
Restricted Subsidiaries that is also in default as to principal, or the
maturity of which has also been accelerated, aggregates (Euro)5.0 million or
more; (g) failure to pay final judgments and orders against the Company or any
Restricted Subsidiary (not covered by insurance) aggregating in excess of
(Euro)5.0 million (treating any deductibles, self-insurance or retention as not
so covered), which final judgments remain unpaid, undischarged and unstayed for
a period in excess 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, discharged or stayed to exceed (Euro)5.0
million; (h) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any of its Significant Subsidiaries or for all or substantially
all of the property and assets of the Company or any of its Significant
Subsidiaries or (C) the winding up or liquidation of the affairs of the Company
or any of its Significant Subsidiaries and, in each case, such decree or order
shall remain unstayed and in effect for a period of 30 consecutive days; (i)
the Company or any of its Significant Subsidiaries (A) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property and assets of the
Company or any of its Significant Subsidiaries or (C) effects any general
assignment for the benefit of creditors; or (j) the Company challenges the Lien
on the Escrow Collateral under the Escrow Agreement prior to such time as the
Escrow Collateral is to be released to the Company, or the Escrow Collateral
shall become subject to any Lien other than the Lien under the Escrow
Agreement.
If an Event of Default (other than an Event of Default specified in clauses
(h) or (i) above) occurs and is continuing under the Senior Notes Indenture,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company, may declare the
principal of, premium, if any, interest and other monetary obligations
(including Additional Amounts, if any) on all the then outstanding Notes to be
immediately due and payable. Upon such a declaration, such principal of,
premium, if any, interest and other monetary obligations on the Notes shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (f) above has
116
<PAGE>
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 (f) shall be remedied or cured by the
Company and/or the relevant Restricted Subsidiaries or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clauses (h) or (i)
above occurs, the principal of, premium, if any, accrued interest and other
monetary obligations 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. 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 defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, interest and other
monetary obligations on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. For information as to the waiver of defaults, see "--Amendment,
Supplement and Waiver."
Holders of the Notes may not enforce the Senior Notes Indenture or the Notes
except as provided in the Senior Notes Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Senior
Notes Indenture provides that the Trustee thereunder may withhold from holders
of the Notes notice of any continuing Default (except a Default relating to the
payment of principal, premium, if any, interest and Additional Amounts, if any)
if it determines that withholding notice is in their interest. The Senior Notes
Indenture further provides that the Trustee thereunder shall have no obligation
to accelerate the Notes if in the best judgment of the Trustee acceleration is
not in the best interest of the holders.
The Senior Notes Indenture requires that the Company will deliver annually an
Officers' Certificate to the Trustee certifying that a review has been
conducted of the activities of the Company and the Company's performance under
the Senior Notes Indenture and that the Company has fulfilled all obligations
thereunder or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Senior Notes
Indenture within five business days of becoming aware of any such default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Notes or
Senior Notes Indenture or for any claim based on, in respect of, or by reason
of such obligations or their creation. Each holder of the Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. federal securities laws, and it
is the view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The obligations of the Company under the Senior Notes Indenture will
terminate (other than certain obligations) and will be released upon payment in
full of all of the Notes. The Company may, at its option and at any time, elect
to have all of its obligations discharged with respect to the outstanding Notes
("Legal Defeasance") and cure all then existing Events of Default except for
(i) the rights of holders of outstanding Notes to receive payments in respect
of the principal of, premium, if any, interest and Additional Amounts, if any,
on such Notes when such payments are due or on the redemption date solely out
of the trust created pursuant to the Senior Notes Indenture, (ii) the Company's
obligations with respect to Notes concerning issuing temporary Notes, or, where
relevant, registration of such Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Senior Notes
Indenture. In addition, the Company
117
<PAGE>
may, at its option and at any time, elect to have the obligations of the
Company released with respect to certain covenants that are described in the
Senior Notes Indenture ("Covenant Defeasance"), and thereafter any omission to
comply with such obligations shall not constitute a Default with respect to the
Notes. In the event Covenant Defeasance occurs, certain events (not including
non-payment on other indebtedness, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes,
(i) the Company must irrevocably deposit, or cause to be irrevocably
deposited, with the Trustee, in trust, for the benefit of the holders of
the Notes, cash in U.S. dollars, U.S. Government Securities or a
combination thereof and, in such amounts as will be sufficient, in the
opinion of an internationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, interest and
Additional Amounts, if any, due on the outstanding Notes on the stated
maturity date or on the applicable redemption date, as the case may be, of
such principal, premium, if any, interest and Additional Amounts, if any,
due on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee (A) an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions, (1) the Company has received from, or there has been
published by, the U.S. Internal Revenue Service a ruling or (2) since the
Issue Date, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that, and based thereon such opinion
of counsel in the United States shall confirm that, subject to customary
assumptions and exclusions, the holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Legal Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred and (B) an
opinion of counsel in the Federal Republic of Germany reasonably acceptable
to the Trustee to the effect that (1) holders will not recognize income,
gain or loss for German income tax purposes as a result of such Legal
Defeasance and will be subject to German income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred and (2) payments from the defeasance
trust will be free and exempt from any and all withholding and other income
taxes of whatever nature imposed or levied by or on behalf of the German
government or any political subdivision thereof or therein having the power
to tax;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee (A) an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to such tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred and (B) an opinion of
counsel in the Federal Republic of Germany reasonably acceptable to the
Trustee to the effect that (1) holders will not recognize income, gain or
loss for German income tax purposes as a result of such Covenant Defeasance
and will be subject to German income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred and (2) payments from the defeasance trust will
be free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the German government
or any political subdivision thereof or therein having the power to tax;
(iv) no Default or Event of Default shall have occurred and be continuing
with respect to certain Events of Default on the date of such deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument to which the Company is a party or by which the
Company is bound;
118
<PAGE>
(vi) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable German law or U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion
of counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
Satisfaction and Discharge
The Senior Notes Indenture will be discharged and will cease to be of further
effect as to all Notes issued thereunder when either (i) all such Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Company) have
been delivered to the Trustee for cancellation, or (ii) (A) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable by reason of the making of a notice of redemption or otherwise or will
become due and payable within one year and the Company has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust an
amount of money sufficient to pay and discharge the entire indebtedness on the
Notes not theretofore delivered to the Trustee for cancellation for principal,
premium, if any, and accrued and unpaid interest and Additional Amounts, if
any, to the date of maturity or redemption; (B) no Default with respect to the
Senior Notes Indenture or the Notes shall have occurred and be continuing on
the date of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company is a party or by which it is
bound; (C) the Company has paid, or caused to be paid, all sums payable by it
under the Senior Notes Indenture; and (D) the Company has delivered irrevocable
instructions to the Trustee under the Senior Notes Indenture to apply the
deposited money toward the payment of such Notes at maturity or the redemption
date, as the case may be. In addition, the Company must deliver an Officers'
Certificate and an opinion of counsel to the Trustee stating that all
conditions precedent to satisfaction and discharge have been satisfied.
Withholding Taxes
All payments made by the Company on the Notes (whether or not in the form of
Definitive Notes) will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or levied by or on
behalf of Germany, or any jurisdiction in which the Company or any Surviving
Entity is organized or is otherwise resident for tax purposes or any political
subdivision thereof or any authority having power to tax therein or any
jurisdiction from or through which payment is made (each, a "Relevant Taxing
Jurisdiction"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any Relevant Taxing Jurisdiction, shall at any time be required on any
payments made by the Company with respect to the Notes, including payments of
principal, redemption price, interest or premium, the Company will pay such
additional amounts (the "Additional Amounts") as may be necessary in order that
the net amounts received in respect of such payments by the holders of the
Notes or the Trustee, as the case may be, after such withholding or deduction,
equal the respective amounts which would have been received in respect of such
payments in the absence of such withholding or deduction; except that no such
Additional Amounts will be payable with respect to:
119
<PAGE>
(i) any payments on a Note held by or on behalf of a holder or beneficial
owner who is liable for such Taxes in respect of such Note by reason of the
holder or beneficial owner having some connection with the Relevant Taxing
Jurisdiction (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, the Relevant Taxing Jurisdiction) other than
by the mere holding of such Note or enforcement of rights thereunder or the
receipt of payments in respect thereof;
(ii) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(iii) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(iv) any Note presented for payment (where presentation is required) more
than 30 days after the relevant payment is first made available for payment
to the holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (i) to (iv) inclusive
above.
Upon request, the Company will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts.
Copies of such documentation will be made available to the holders upon
request.
The Company will pay any present or future stamp, court or documentary taxes,
or any other excise or property taxes, charges or similar levies which arise in
any jurisdiction from the execution, delivery or registration of the Notes or
any other document or instrument referred to therein, or the receipt of any
payments with respect to the Notes, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside of the Federal Republic of
Germany, the United States of America or any jurisdiction in which a Paying
Agent is located, other than those resulting from, or required to be paid in
connection with, the enforcement of the Notes or any other such document or
instrument following the occurrence of any Event of Default with respect to the
Notes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Senior Notes
Indenture and the Notes issued thereunder may be amended or supplemented with
the consent of the holders of at least a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for the Notes), and any existing Default or Event of
Default and its consequences or compliance with any provision of the Senior
Notes Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for such Notes).
The Senior Notes Indenture provides that without the consent of each holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting holder of the Notes): (i) reduce the principal amount of the
Notes whose holders must consent to an amendment, supplement or waiver, (ii)
reduce the principal of or change the fixed maturity of any such Note or alter
or waive the provisions with respect to the redemption of such Notes, (iii)
reduce the rate of or change the time for payment of interest on any Note, (iv)
waive a Default in the payment of principal of, or premium, if any, interest or
Additional Amounts, if any, on the Notes (except a rescission of acceleration
of such Notes by the holders of at least a majority in aggregate principal
amount of such Notes and a waiver of the payment default that resulted from
such acceleration with respect to such Notes), or in respect of a covenant or
provision contained in the Senior Notes
120
<PAGE>
Indenture which cannot be amended or modified without the consent of all
holders, (v) make any Note payable in money other than that stated in such
Notes, (vi) make any change in the provisions of the Senior Notes Indenture
relating to waivers of past Defaults or the rights of holders of such Notes to
receive payments of principal of, or premium, if any, interest or Additional
Amounts, if any, on such Notes, (vii) make any change in the amendment and
waiver provisions in the Senior Notes Indenture, (viii) make any change in the
provisions of the Senior Notes Indenture described under "--Withholding Taxes"
that adversely affects the rights of any holder of the Notes, (ix) amend the
terms of the Notes or the Senior Notes Indenture in a way that would result in
the loss of an exemption from any of the Taxes described thereunder or an
exemption from any obligation to withhold or deduct Taxes as described
thereunder unless the Company agrees to pay Additional Amounts, if any, in
respect thereof, (x) modify the provisions of the Escrow Agreement or the
Senior Notes Indenture relating to the Escrow Collateral in any manner adverse
to the holders or release the Escrow Collateral from the Lien under the Escrow
Agreement or permit any other obligation to be secured by the Escrow Collateral
or (xi) impair the right of any holder of the Notes to receive payment of
principal of, interest and Additional Amounts, if any, on such holder's Notes
on or after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such holder's Notes.
The Senior Notes Indenture provides that, notwithstanding the foregoing,
without the consent of any holder of Notes, the Company and the Trustee
together may amend or supplement the Senior Notes Indenture or the Notes (i) to
cure any ambiguity, omission, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, or to
provide for additional forms of global Notes containing transfer and other
restrictions and which comply with applicable U.S. securities and other laws,
(iii) to comply with the covenant relating to mergers, consolidations and sales
of assets, (iv) to provide for the assumption of the Company's obligations to
holders of such Notes, (v) to make any change that would provide any additional
rights or benefits to the holders of the Notes or that does not adversely
affect the legal rights under the Senior Notes Indenture of any such holder,
(vi) to add covenants for the benefit of the holders or to surrender any right
or power conferred upon the Company, (vii) to comply with requirements of the
Commission in order to effect or maintain the qualification of the Senior Notes
Indenture under the Trust Indenture Act or (viii) to execute and deliver any
documents necessary or appropriate to release Liens or any Escrow Collateral as
permitted by the Escrow Agreement.
The consent of the holders is not necessary under the Senior Notes Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
Notices
Notices regarding the Notes in global form will be published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and, if and so long as the Exchange Notes in global form
are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall so require, a leading daily newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort)).
Notices regarding the Definitive Notes will be published in a leading daily
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) and mailed to holders by first-class mail at their
respective addresses as they appear on the registration books of the Registrar.
Notices given by publication will be deemed given on the first date on which
publication is made and notices given by first-class mail, postage prepaid,
will be deemed given five calendar days after mailing.
Concerning the Trustee
The Senior Notes Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; provided, however, if it acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue or resign.
121
<PAGE>
The Senior Notes Indenture provides that the Holders of a majority in
principal amount of the outstanding Notes issued thereunder will have the right
to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee, subject to certain exceptions.
The Senior Notes Indenture provides that in case an Event of Default shall
occur (which shall not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent person in the conduct of
his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Senior Notes
Indenture at the request of any Holder of such Notes, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
Governing Law
The Senior Notes Indenture and the Notes and the rights and duties of the
parties thereunder are governed by, and construed in accordance with, the laws
of the State of New York.
Enforceability of Judgments
Since most of the operating assets of the Company and its Subsidiaries are
outside the United States, any judgment obtained in the United States against
the Company or a Subsidiary, including judgments with respect to the payment of
principal, premium, if any, interest, Additional Amounts, if any, redemption
price and any purchase price with respect to the Notes, may not be collectible
within the United States.
The Company has been informed by its German counsel, Besner Kreifels Weber,
that, subject to certain exceptions, the laws of the Federal Republic of
Germany permit an action to be brought in a court of competent jurisdiction in
the Federal Republic of Germany permitting the enforcement of a judgment of a
United States federal court or a court of the State of New York sitting in the
Borough of Manhattan in the City of New York awarding claims under the terms
and conditions of the Notes and the Senior Notes Indenture. In granting
permission to enforce the United States or New York State court ruling, the
respective German court would not substantively re-examine or re-litigate the
case on the merits of the subject matter thereof.
The said exception to permission of enforcement of United States and New York
State court judgments provide, among other things, that a judgment may not be
enforced in Germany, if:
. such judgment is not final and remains subject to appeal or any other
form of contestation in the United States,
. the court having rendered such judgment is not the court of competent
jurisdiction pursuant to German international law,
. the judgment contradicts an earlier final and enforceable judgment
rendered in Germany or abroad on the same subject matter,
. the enforcement of such judgment would contradict essential principles
of German law and German ordre public (which especially excludes the
enforcement of judgments with a penal or revenue character).
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Senior Notes Indenture. Reference is made to the Senior Notes Indenture for the
full definition of all terms as well as any other capitalized term used herein
for which no definition is provided. For purposes of the Senior Notes
Indenture, unless otherwise specifically indicated, the term "consolidated"
with respect to any Person refers to such Person consolidated with its
Restricted Subsidiaries, and excludes from such consolidation any Unrestricted
Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such
Person. For purposes of the following definitions and the Senior Notes
Indenture generally, all calculations and determinations shall be made in
accordance with US GAAP and shall be based upon the consolidated financial
statements of the Company and its subsidiaries prepared in accordance with US
GAAP.
"Acquired Indebtedness" is defined to mean Indebtedness of a Person existing
at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted
122
<PAGE>
Subsidiary or assumed in connection with an Asset Acquisition by the Company or
a Restricted Subsidiary and not incurred in connection with, or in anticipation
of, such Person becoming a Restricted Subsidiary, such merger or consolidation
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 the consummation of the transactions by which such Person becomes a
Restricted Subsidiary or is merged or consolidated with or into the Company or
any Restricted Subsidiary or such Asset Acquisition shall not be Indebtedness.
"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" is defined to mean (i) any capital contribution (by means
of transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary 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 an operating unit or line of business of such Person or
which is otherwise outside the ordinary course of business.
"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of
its Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of
its Restricted Subsidiaries outside the ordinary course of business (including
the receipt of proceeds paid on account of the loss of or damage to any
property or asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceedings). For the purposes of this
definition, the term "Asset Sale" shall not include (a) any transaction
consummated in compliance with "--Consolidation, Merger and Sale of Assets" and
the creation of any Lien not prohibited by the "Limitation on Liens" covenant;
provided, however, that any transaction consummated in compliance with such "--
Consolidation, Merger and Sale of Assets" description involving a sale,
conveyance, assignment, transfer, lease or other disposal of less than all of
the properties or assets of the Company and the Restricted Subsidiaries shall
be deemed to be an Asset Sale with respect to the properties or assets of the
Company and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Restricted Subsidiary, as the case may be; (c) sales of telecommunications
network capacity of the Company or any Restricted Subsidiary including sales of
indefeasible rights of use of or transfers of dark fiber optic transmission
cable, in each case in the ordinary course of business; and (d) any transaction
consummated in compliance with the "Limitation on Restricted Payments"
covenant. In addition, solely for purposes of the "Limitation on Asset Sales"
covenant, any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of
(Euro)1.0 million in any fiscal year shall be deemed not to be an "Asset Sale."
"Attributable Debt" is defined to mean, in respect of a Sale/Leaseback
Transaction, as at the time of determination, the present value (discounted at
the interest rate borne by the Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
123
<PAGE>
"Board of Directors" is defined to mean the Board of Directors of the
Company.
"Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.
"Capital Stock" is defined to mean, 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, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Capitalized Lease" is defined to mean, 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 US GAAP, is required to be capitalized and reflected as a liability on the
balance sheet of such Person; and "Capitalized Lease Obligation" is defined to
mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.
"Cash Equivalents" is defined to mean, (a) securities issued or directly and
fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof or by the German government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) overnight bank deposits or certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities of 360 days
or less from the date of acquisition, in each case with any commercial bank
having capital and surplus in excess of $500 million and outstanding debt rated
at least "A" or the equivalent thereof by S&P or Moody's; provided, however,
that securities deposited in the Escrow Account may have a Stated Maturity as
late as July 1, 2002; (c) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (a) and
(b) entered into with any financial institution meeting the qualifications
specified in clause (b) above; (d) commercial paper rated at least A-1 or P-1,
or the equivalent thereof by S&P or Moody's, respectively, and in each case
maturing within 360 days after the date of acquisition and (e) direct
obligations of, or obligations fully and unconditionally guaranteed by, any
member of the European Community rated at least "AAA" or the equivalent thereof
by both S&P and Moody's.
"Change of Control" is defined to mean such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (other
than a Permitted Holder) becomes 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 then outstanding Voting Stock of the Company on a fully diluted basis,
provided that the relevant threshold in the case of Cybermind Interactive
Europe and Holger Timm shall be 40%; (ii) individuals who at the beginning of
any period of two consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board of Directors on the
date hereof and any new directors whose election by the Board of Directors or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the members of the Board of Directors then still
in office who either were members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of such
Board of Directors then in office; (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or
a series of related transactions, of all or substantially all of the assets of
the Company to any such "person" or "group" (other than to a Restricted
Subsidiary); or (iv) the merger or consolidation of the Company with or into
another corporation or the merger of another corporation with or into the
Company with the effect that immediately after such transaction any such
"person" or "group" of persons or entities shall have become the beneficial
owner of securities of the surviving corporation of such merger or
consolidation representing a majority of the total voting power of the then
outstanding Voting Stock of the surviving corporation.
"Commission" is defined to mean the United States Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of the Indenture such commission is not existing and
124
<PAGE>
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period
plus, to the extent deducted in computing such Consolidated Net Income (and
without duplication), Consolidated Fixed Charges, (ii) any provision for taxes
(other than taxes (either positive or negative) attributable to extraordinary
and nonrecurring gains or losses or sales of assets), (iii) any amount
attributable to depreciation and amortization expense and (iv) all other non-
cash items reducing Consolidated Net Income (excluding any non-cash charge to
the extent that it requires or represents an accrual of, or reserve for, cash
charges in any future period), less all non-cash items increasing Consolidated
Net Income (excluding any items which represent the reversal of an accrual of,
or reserve for, anticipated cash charges at any prior period), all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with US GAAP; provided, however, that there shall be
excluded therefrom the Consolidated Cash Flow (if positive) of any Restricted
Subsidiary (calculated separately for such Restricted Subsidiary in the same
manner as provided above) that is subject to a restriction which prevents the
payment of dividends or the making of distributions to the Company or another
Restricted Subsidiary to the extent of such restriction.
"Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
"Consolidated Interest Expense" is defined to mean with respect to any Person
for any period, the aggregate amount of interest in respect of Indebtedness
(including capitalized interest, amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation)
calculated in accordance with US GAAP; 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 Agreement, and interest
on Indebtedness that is Guaranteed or secured by such Person or any of its
Restricted Subsidiaries, less the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by such Person and its Restricted Subsidiaries during such period;
excluding, however, any amount of such interest of any Restricted Subsidiary to
the extent the net income of such Restricted Subsidiary is excluded in the
calculation of Consolidated Net Income pursuant to the last proviso of such
definition.
"Consolidated Net Income" is defined to mean, for any period, the net income
(or loss) of the Company and its consolidated Restricted Subsidiaries
determined in accordance with US GAAP; provided, however, that there will not
be included in such Consolidated Net Income: (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject
to the limitations contained in clauses (iv), (v) and (vi) below, the Company's
equity in the net income of any such Person for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (b) the Company's equity in a net loss of
any such Person (other than an Unrestricted Subsidiary) for such period will be
included in determining such Consolidated Net Income to the extent such loss
has been funded with cash from the Company or a Restricted Subsidiary; (ii) any
net income (loss) of any Person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (but not loss) of any Restricted Subsidiary
if such Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (a) subject to
the limitations contained in clauses (iv), (v) and (vi) below, the Company's
equity in the net income of any such Restricted Subsidiary for such period will
be included in such Consolidated Net Income up to the aggregate amount of cash
that could have been distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a dividend (subject,
in the case of a dividend to another Restricted Subsidiary, to the limitation
contained in this clause) and (b) the Company's equity in a net loss of any
such Restricted
125
<PAGE>
Subsidiary for such period will be included in determining such Consolidated
Net Income; (iv) any gain (loss) realized upon the sale or other disposition of
any property, plant or equipment of the Company or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is
not sold or otherwise disposed of in the ordinary course of business and any
gain (loss) realized upon the sale or other disposition of any Capital Stock of
any Person; (v) any extraordinary gain or loss; and (vi) the cumulative effect
of a change in accounting principles.
"Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to the
date of determination), less any amounts attributable to Redeemable Stock or
any equity security convertible into or exchangeable for Indebtedness, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of Equity Interests in the Company or any of its Restricted
Subsidiaries, each item to be determined in conformity with US GAAP (excluding
the effects of foreign currency exchange adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52).
"Credit Facilities" is defined to mean one or more senior credit agreements,
senior loan agreements or similar senior facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with US GAAP.
"Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with US GAAP.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
"Default" is defined to mean any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with US
GAAP) of any Person that are not more than 60 days past their due date and that
were entered into in the ordinary course of business on normal payment terms as
shown on the most recent consolidated balance sheet of such Person filed with
the Commission, all in accordance with US GAAP.
"Equity Interests" is defined to mean Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Escrow Account" is defined to mean the account established by the Escrow
Agent pursuant to the terms of the Escrow Agreement for the deposit of the U.S.
Government Securities purchased by, or purchased at the direction of, the
Company with a portion of the net proceeds from the Unit Offering.
"Escrow Agent" is defined to mean The Bank of New York, as escrow agent under
the Escrow Agreement.
126
<PAGE>
"Escrow Agreement" is defined to mean the Escrow Agreement relating to the
Notes dated as of the date of the Senior Notes Indenture, among the Escrow
Agent, the Trustee and the Company, governing the disbursement of funds from
the Escrow Account.
"Escrow Collateral" is defined to mean all funds and securities in the Escrow
Account and the proceeds thereof.
"Exchange Act" is defined to mean the United States Securities Exchange Act
of 1934, as amended, or any successor statute, and the rules and regulations
thereunder.
"Fair Market Value" is defined to mean, with respect to any asset or
property, the price (after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction; provided, however,
that the Fair Market Value of any such asset or assets shall be determined
conclusively by the Board of Directors acting in good faith, which
determination shall be evidenced by a resolution of such Board delivered to the
Trustee.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; 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.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that none of the accrual of interest, the payment of interest in the form of
additional Indebtedness or the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the 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, (D)
representing Capitalized Lease Obligations, (ii) 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, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of
determination and (v) 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 that (x) the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with US GAAP, (y) money borrowed and set aside at the time of the
Incurrence of any Indebtedness for the sole purpose of prefunding the payment
of interest on such Indebtedness (and which is pledged in favor of the holders
of such Indebtedness pending such application) shall not be deemed to be
"Indebtedness" so long as such money is held to secure the
127
<PAGE>
payment of such interest and (z) Indebtedness shall not include any liability
for federal, state, local or other taxes.
"Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
"Investment" in any Person is defined to mean 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 US GAAP, recorded as
accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to another Person or any payment for any
property or services for the account or use of another Person), or any purchase
or acquisition of Equity Interests, bonds, notes, debentures, or other similar
instruments issued by any other Person. For purposes of the definition of
"Unrestricted Subsidiary," the "Limitation on Restricted Payments" covenant and
the "Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant described above, (i) "Investment" shall include (a) the
Fair Market Value of the assets (net of liabilities) of any Restricted
Subsidiary of the Company at the time that such Restricted Subsidiary of the
Company is designated an Unrestricted Subsidiary and shall exclude the Fair
Market Value of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company and (b) the Fair Market Value, in the case of a sale
of Equity Interests in accordance with the "Limitation on the Issuance and Sale
of Capital Stock of Restricted Subsidiaries" covenant such that a Person no
longer constitutes a Restricted Subsidiary, of the remaining assets (net of
liabilities) of such Person after such sale, and shall exclude the Fair Market
Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Company and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.
"Issue Date" is defined to mean the date on which the Notes are originally
issued under the Senior Notes Indenture.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
"Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.
"Most Recent Balance Sheet" is defined to mean, with respect to any Person,
the most recent consolidated balance sheet of such Person reported on by an
internationally recognized firm of independent accountants without
qualification as to scope.
"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (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
128
<PAGE>
paid as a result of such sale and (iv) appropriate amounts to be provided by
the Company or any Restricted Subsidiary of the Company as a reserve against
any 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 US GAAP;
provided that such amounts which cease to be held as reserves shall be deemed
Net Cash Proceeds and (b) with respect to any issuance or sale of Equity
Interests (other than Redeemable Stock and excluding any Equity Interests
issued in connection with the Unit Offering), 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 (1) such obligations are financed, directly
or indirectly, with money borrowed from the Company or any Restricted
Subsidiary or otherwise financed or sold with recourse to the Company or any
Restricted Subsidiary or (2) the purchase of the Equity Interests is otherwise
financed, directly or indirectly, by the Company or any Restricted Subsidiary,
including through funds contributed, extended, guaranteed or otherwise advanced
by the Company or any Affiliate) and proceeds from the conversion of other
property received when converted to cash or Cash Equivalents, net of attorneys'
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.
"Officers' Certificate" is defined to mean a certificate signed on behalf of
the Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in the Senior Notes Indenture.
"Permitted Assets" is defined to mean, with respect to any Person, assets
used in the Permitted Business (or Equity Interests of a Person that becomes a
Restricted Subsidiary, the assets of which consist principally of such
Permitted Assets) that are purchased or acquired by the Company or a Restricted
Subsidiary after the Issue Date.
"Permitted Business" is defined to mean the business of (i) operating an
Internet connectivity or internet enhancement service as it may exist from time
to time, including, without limitation, providing dial up or dedicated internet
service, web hosting or co-location services, security solutions, configuration
services, electronic commerce, intranet solutions, data backup and restoral,
business content and collaboration or consulting services with respect to the
foregoing (including, without limitation, any business conducted by the Issuer
or any Restricted Subsidiary on the Issue Date), (ii) transmitting or providing
services relating to the transmission of, voice, video or data through owned or
leased transmission facilities, (iii) constructing, creating, developing,
providing or marketing communications-related network equipment, products,
software and other devices for use in an Internet or telecommunications
business, or (iv) evaluating, participating in or pursuing any other activity
or opportunity that is primarily related to those identified in clause (i),
(ii) or (iii) above. A good faith determination by a majority of the Board of
Directors as to whether a business meets the requirements of this definition
shall be conclusive, absent manifest error.
"Permitted Holder" is defined to mean Andreas Eder, Alessandro Giacalone and
any Affiliate of the foregoing Persons.
"Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with US GAAP; (iii) stock, obligations or securities received (a) in
satisfaction of judgments or (b) in settlement of debts, or as a result of
foreclosure, perfection or enforcement of any Lien, in each case under this
clause (b) arising in the ordinary course of business and not in contemplation
of the acquisition of such stock, obligations or securities; (iv) Investments
in Cash Equivalents; (v) Investments made as a result of the receipt of noncash
consideration from any Asset Sale made in
129
<PAGE>
compliance with the "Limitation on Asset Sales" covenant; (vi) Investments in
negotiable instruments held for collection, lease, utility and workers'
compensation, performance and other similar pledges or deposits, and other
pledges or deposits permitted under the "Limitation on Liens" covenant; (vii)
obligations under Interest Rate Agreements or Currency Agreements; provided
that such agreements (a) are designed solely to protect the Company or the
Restricted Subsidiary, as the case may be, 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; (viii) Investments
made in the ordinary course of business and on ordinary business terms in the
Permitted Business in consortia formed to construct transmission infrastructure
for use primarily in the Permitted Business, provided such Investment entitles
the Company to rights of way or rights of use on such transmission
infrastructure; and (ix) any Investment in Pledged Securities.
"Permitted Liens" is defined to mean (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 US GAAP shall have been made; (ii) statutory Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be
required in conformity with US 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 or
other similar legislation and other insurance-related obligations (including,
without limitation, pledges or deposits securing liability to insurance
carriers under insurance or self-insurance arrangements); (iv) 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; (v) Liens (including extensions and renewals thereof)
upon real or personal property of a Restricted Subsidiary purchased or leased
after the Issue Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred by such Restricted Subsidiary in
compliance with the "Limitation on Indebtedness" and "Limitation on Issuances
of Guarantees of Indebtedness by Restricted Subsidiaries" covenants (1) to
finance the cost 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 and the Incurrence of such Indebtedness or (2) to refinance
any Indebtedness of a Restricted Subsidiary previously so secured, (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; (vi) any interest or title
of a lessor in the property subject to any Capitalized Lease or operating lease
of a Restricted Subsidiary which, in each case, is permitted under the Senior
Notes Indenture; (vii) Liens on property of, or on Equity Interests in or
Indebtedness of, any Person existing at the time such Person becomes, or
becomes a part of, any Restricted Subsidiary; provided that such Liens were not
created, incurred or assumed in contemplation of such transaction and do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets so acquired; (viii) Liens arising
from the rendering of a final judgment or order against the Company or any
Restricted Subsidiary of the Company that does not give rise to an Event of
Default; (ix) Liens encumbering customary initial deposits and margin deposits
and other Liens that are either within the general parameters customary in the
industry or incurred in the ordinary course of business, in each case, securing
Indebtedness under Interest Rate Agreements and Currency Agreements; (x) 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
Issue Date; (xi) Liens existing on the Issue Date or securing the Notes or any
Guarantee of the Notes; (xii) Liens granted after the Issue Date on any assets
or Equity Interests in the Company or its Restricted Subsidiaries created in
favor of the holders; (xiii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or another
Restricted Subsidiary to secure Indebtedness owing to the Company or such
Restricted Subsidiary and Incurred in
130
<PAGE>
compliance with clause (ii) of paragraph (b) of the "Limitation on
Indebtedness" covenant; (xiv) Liens created in connection with the incurrence
of any Indebtedness permitted to be Incurred under clause (iii) of paragraph
(b) of the "Limitation on Indebtedness" covenant; provided that the
Indebtedness which it refinances is secured by similar Liens; (xv) Liens
securing Indebtedness under Credit Facilities incurred in compliance with
clause (viii) of paragraph (b) of the "Limitation on Indebtedness" covenant;
(xvi) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, subleases, licenses, sublicenses, obligations for utilities,
statutory or regulatory obligations, bankers' acceptances, letters of credit,
surety and appeal bonds, government or other contracts, completion guarantees,
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); (xvii) 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; (xviii) Liens created to secure
Attributable Debt in connection with Sale/Leaseback Transactions permitted to
be entered into by the "Restriction on Sale/Leaseback Transactions" covenant;
and (xix) Liens with respect to the Escrow Account (or any similar escrow
account established in connection with the issuance of any Additional Notes or
any other notes which are pari passu with the Notes) arising under the Escrow
Agreement (or any similar escrow agreement established in connection with the
issuance of any Additional Notes or any other notes which are pari passu with
the Notes).
"Pledged Securities" is defined to mean the U.S. Government Securities
purchased by the Company and deposited in the Escrow Account (or any similar
escrow account established in connection with the issuance of any Additional
Notes).
"Preferred Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
"Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such
period calculated on a pro forma basis to give effect to any Asset Sale or
Asset Acquisition (including acquisitions of other Persons by merger,
consolidation or purchase of Equity Interests) during such period as if such
Asset Sale or Asset Acquisition had taken place on the first day of such period
and income (or losses) ceased to accrue or accrued, as the case may be,
therefrom from such date.
"Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
or Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under the "Limitation on Asset Sales" covenant and "--Repurchase of
Notes upon a Change of Control" and (y) any such requirement only becomes
operative after compliance with such terms applicable to the Notes including
the purchase of any Notes tendered pursuant thereto.
"Replacement Assets" is defined to mean any property, plant or equipment of a
nature or type that are used or usable in the Permitted Business (as determined
in good faith by the Board of Directors, whose determination shall be evidenced
by a Board Resolution).
131
<PAGE>
"Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of the Company that is then not an Unrestricted Subsidiary.
"S&P" is defined to mean Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, and its successors.
"Sale/Leaseback Transaction" is defined to mean an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person, other than leases between the Company
and a Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries.
"Securities Act" is defined to mean the United States Securities Act of 1933,
as amended, or any successor statute, and the rules and regulations thereunder.
"Share Capital" is defined to mean, at any time of determination, the stated
capital of the Equity Interests (other than Redeemable Stock) and additional
paid-in capital of the Company as set forth on the Most Recent Balance Sheet of
the Company at such time.
"Significant Subsidiary" is defined to mean, at any time of determination,
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.
"Stated Maturity" is defined to mean, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar
entity of which (A) more than 50% of the capital accounts, distribution rights,
total equity and voting interests or general or limited partnership interests,
as applicable, are owned or controlled, directly or indirectly, by such Person
or one or more of the other Subsidiaries of that Person or a combination
thereof whether in the form of membership, general, special or limited
partnership or otherwise and (B) such Person or any Restricted Subsidiary of
such Person is a controlling general partner, co-venturer, manager or similar
position or otherwise controls such entity.
"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" is defined to mean, 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.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated 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 Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary;
132
<PAGE>
provided that (a) the Company certifies in an Officers' Certificate that such
designation complies with the covenants described under "Limitation on
Restricted Payments," (b) such Subsidiary is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might reasonably be obtained in a
comparable arm's-length transaction at the time from Persons who are not
Affiliates of the Company, (c) neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (1) to subscribe for
additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating
results and (d) such Subsidiary and its Subsidiaries have not at the time of
designation, and do not thereafter, Incur any Indebtedness other than
Unrestricted Subsidiary Indebtedness. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) the Company could
Incur (Euro)1.00 of additional Indebtedness under the first paragraph of the
"Limitation on Indebtedness" covenant described above on a pro forma basis
taking into account such designation and (y) no Default or Event of Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of any
Unrestricted Subsidiary (i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of the Company or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon
the occurrence of a default with respect thereto, does not result in, or permit
any holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"US GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
"U.S. Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the United States of America for the payment of
which obligations or guarantee the full faith and credit of the United States
is pledged and are not callable or redeemable at the option of the issuer
thereof.
"Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products of the number of years from such date
of determination to the dates of each successive scheduled principal payment
of, or redemption or similar payment with respect to, such Indebtedness
multiplied by (b) the amount of such principal payment, by (ii) the sum of all
such principal payments.
"Wholly Owned Restricted Subsidiary" is defined to mean any Restricted
Subsidiary all of the outstanding voting Equity Interests (other than
directors' qualifying shares) of which are owned, directly or indirectly, by
the Company.
Exchange Offer and Registration Rights
The Company entered into a registration rights agreement with the initial
purchasers in connection with the Unit Offering (the "Registration Rights
Agreement"), pursuant to which the Company agreed to file with
133
<PAGE>
the SEC, subject to the provisions described below, a registration statement
(the "Exchange Offer Registration Statement") on an appropriate form permitting
registration of the Exchange Notes and to permit resales of Exchange Notes held
by broker-dealers as contemplated by the Registration Rights Agreement. The
Registration Rights Agreement provides that unless the Exchange Offer would not
be permitted by applicable law or SEC policy, the Company will (i) file the
Exchange Offer Registration Statement with the SEC on or prior to 90 days after
the Issue Date, (ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective by the SEC within 150 days
after the Issue Date, (iii) (A) file all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) file, if applicable, a post-effective
amendment to such Registration Statement pursuant to Rule 430A under the
Securities Act and (C) cause all necessary filings in connection with the
registration and qualifications of the Exchange Notes to be made under the blue
sky laws of such jurisdictions as are necessary to permit consummation of the
Exchange Offer and (iv) use its best efforts to cause the Exchange Offer to be
consummated on or prior to 30 days after the date on which the Exchange Offer
Registration Statement is declared effective by the SEC.
For purposes of the foregoing, "Transfer Restricted Securities" means each
Note until the earliest to occur of (i) the date on which such Note has been
exchanged by a person other than a broker-dealer for Exchange Notes in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of such Note for one or more Exchange Notes, the date on which such
Exchange Notes are sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with a shelf registration statement (the "Shelf Registration
Statement") or (iv) the date on which such Note is eligible for distribution to
the public pursuant to Rule 144 under the Securities Act.
Under existing SEC interpretations, the Exchange Notes would, in general, be
freely transferable after the Exchange Offer without further registration under
the Securities Act; provided, however, that in the case of broker-dealers
participating in the Exchange Offer, a prospectus meeting the requirements of
the Securities Act must be delivered by such broker-dealers in connection with
resales of the Exchange Notes. The Company has agreed, for a period of 180 days
after consummation of the Exchange Offer, to make available a prospectus
meeting the requirements of the Securities Act to any such broker-dealer for
use in connection with any resale of any Exchange Notes acquired in the
Exchange Offer. A broker-dealer that delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Holders of Notes that desire to exchange such Notes for Exchange Notes in the
Exchange Offer will be required to make certain representations, including
representations that (i) any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company, or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer and
will indemnify the initial purchasers in the Unit Offering against certain
liabilities, including liabilities under the Securities Act.
134
<PAGE>
If (i) the Company is not permitted to file the Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or SEC policy, (ii) any holder of Transfer
Restricted Securities that is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) notifies Cybernet at least 20 business days
prior to the consummation of the Exchange Offer that (a) applicable law or
Commission policy prohibits the holder from participating in the Exchange
Offer, (b) such holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such holder or (c) such holder is a broker-dealer
and holds Notes acquired directly from the Company or an affiliate of the
Company, (iii) the Exchange Offer is not for any other reason consummated
within 180 days of the Issue Date or (iv) the Exchange Offer has been completed
and, in the opinion of counsel for the initial purchasers, a Registration
Statement must be filed and a prospectus must be delivered by the initial
purchasers in connection with any offering or sale of Transfer Restricted
Securities, the Company will use its best efforts to: (A) file a Shelf
Registration Statement within 90 days of the earliest to occur of (i) through
(iv) above and (B) cause the Shelf Registration Statement to be declared
effective with respect to each series of Notes by the SEC on or prior to the
150th day after such obligation arises. Cybernet shall use its best efforts to
keep such Shelf Registration Statement continuously effective, supplemented and
amended to ensure that it is available for resales of Notes by the holders of
Transfer Restricted Securities entitled to this benefit and to ensure that such
Shelf Registration Statement conforms and continues to conform with the
requirements of the Registration Rights Agreement, the Securities Act and the
policies, rules and regulations of the SEC, as announced from time to time,
until the second anniversary of the Issue Date; provided, however, that during
such two-year period the holders of Notes may be prevented or restricted by the
Company from effecting sales pursuant to the Shelf Registration Statement as
more fully described in the Registration Rights Agreement. A holder of Notes
that sells its Notes pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such holder (including
certain indemnification and contribution obligations).
If (i) the Company fails to file with the SEC any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified therein for such filing, (ii) any of such Registration Statements is
not declared effective by the Commission on or prior to the date specified for
such effectiveness in the Registration Rights Agreement (the "Effectiveness
Target Date"), (iii) the Exchange Offer has not been consummated within 30 days
after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) any Registration Statement required by the
Registration Rights Agreement is filed and declared effective but thereafter
ceases to be effective or fails to be usable for its intended purpose without
being succeeded within five business days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (i) through (iv)
above, a "Registration Default"), additional cash interest ("Liquidated
Damages") shall accrue to each holder of the affected Notes commencing upon the
occurrence of such Registration Default in an amount equal to 0.50% per annum
of the principal amount of Notes held by such holder. The amount of Liquidated
Damages will increase by an additional 0.50% per annum of the principal amount
of the Notes with respect to each subsequent 90-day period (or portion thereof)
until all Registration Defaults have been cured, up to a maximum rate of
Liquidated Damages of 1.50% per annum of the principal amount of the Notes. All
accrued Liquidated Damages will be paid to holders by the Company in the same
manner as interest is paid pursuant to the Senior Notes Indenture. Following
the cure of all Registration Defaults relating to any particular Transfer
Restricted Securities, the accrual of Liquidated Damages with respect to such
Transfer Restricted Securities will cease.
The summaries herein of certain provisions of the Senior Notes Indenture and
the Registration Rights Agreement do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all the provisions of
the Senior Notes Indenture and the Registration Rights Agreement, copies of
which will be made available upon request to the Company.
135
<PAGE>
DESCRIPTION OF MATERIAL INDEBTEDNESS
On August 26, 1999, we sold $50,002,183 in aggregate initial accreted value
of our 13.0% Convertible Senior Subordinated Discount Notes due 2009. Each
Discount Note was sold at an initial accreted value of $534.78, a substantial
discount from its principal amount at maturity of $1,000. There will not be any
accrual of cash interest on the Discount Notes prior to August 15, 2004 or
payment of cash interest prior to February 15, 2005. Holders of the Discount
Notes may convert the Discount Notes at their option into our common stock at
any time after August 26, 2000. The number of shares of our common stock
issuable upon conversion of the Discount Notes is equal to the accreted value
of the Discount Notes being converted on the date of conversion divided by
$25.00, subject to adjustment under certain events. If the market price of our
common stock exceeds certain prices at any time after August 26, 2000, the
Discount Notes will automatically convert into shares of our common stock at
the same conversion ratio. The net proceeds of the Discount Notes Offering were
$47,502,074, which we intend to use for capital expenditures and general
corporate purposes.
On August 26, 1999, we sold (Euro)25 million aggregate principal amount of
our 13.0% Convertible Senior Subordinated Pay-In-Kind Notes due 2009. We will
pay interest on the PIK Notes in the form of additional notes issued under the
pay-in-kind feature through August 15, 2004. From that date to maturity
interest will accrue and will be paid in cash. Holders of the PIK Notes and any
additional notes issued under the pay-in-kind feature may convert both types of
notes at their option into our common stock at any time after August 26, 2000.
The number of shares of our common stock issuable upon conversion of these
notes is equal to the principal value of the notes being converted divided by
$25.00, subject to adjustment under certain circumstances. The net proceeds of
the PIK Notes Offering were (Euro)23,750,000, which we intend to use for
capital expenditures and general corporate purposes.
136
<PAGE>
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income tax
consequences of the acquisition, ownership and disposition of the Exchange
Notes as of the date hereof. Except where noted, it deals only with the
Exchange Notes held as capital assets and does not deal with special
situations, such as those of dealers in securities or currencies, financial
institutions, tax-exempt entities, life insurance companies, persons holding
Exchange Notes as a part of a hedging, integrated, conversion or constructive
sale transaction or a straddle or holders of Exchange Notes whose "functional
currency" is not the U.S. dollar. Furthermore, the discussion below is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or modified so as to
result in United States federal income tax consequences different from those
discussed below. Likewise, this summary does not address the federal income tax
consequences of the acquisition of Exchange Notes as an asset separate from the
Warrants. Persons considering the acquisition, ownership or disposition of the
Exchange Notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
As used herein, a "U.S. Holder" means a holder of an Exchange Note that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust (X) that is subject to the supervision of a court within the
United States and the control of one or more United States persons as described
in section 7701(a)(30) of the Code or (Y) that has a valid election in effect
under applicable U.S. Treasury regulations to be treated as a United States
person. A "Non-U.S. Holder" is a holder of an Exchange Note that is not a U.S.
Holder.
Exchange Offer
An exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange
Offer will not be a taxable event for U.S. federal income tax purposes. The
Exchange Notes received by a Holder pursuant to the Exchange Offer generally
will be treated as a continuation of the Outstanding Notes in the hands of such
Holder. A U.S. Holder must continue to include original issue discount ("OID")
on the Exchange Notes and will have the same tax basis and holding period in
the Exchange Notes as the Outstanding Notes.
Payments of Interest
Except as described below under "Original Issue Discount," interest on an
Exchange Note will generally be taxable to a U.S. Holder as ordinary income at
the time it is paid or accrued in accordance with the U.S. Holder's method of
accounting for tax purposes.
Sale, Exchange and Retirement of Notes
A U.S. Holder's tax basis in a Note will, in general, be the U.S. Holder's
cost therefor increased by OID.
Upon the sale, exchange, retirement or other disposition of an Exchange Note,
a U.S. Holder will recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange, retirement or other disposition (less
any accrued qualified stated interest not previously included in income, which
will be taxable as such) and the adjusted tax basis of the Exchange Note.
Generally, such gain or loss will be capital gain or loss. Capital gains of
individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
137
<PAGE>
Applicable High Yield Discount Obligations
The Exchange Notes are "applicable high yield discount obligations"
("AHYDOs"), as defined in the Code, because (i) the yield to maturity on the
Notes exceeds the "applicable federal rate" in effect at the time of their
issuance (the "AFR") plus five percentage points and (ii) the Notes have
"significant OID" as that term is defined in the Code. Accordingly, the Company
will not be allowed to take a deduction for interest (including OID) accrued on
the Notes for U.S. federal income tax purposes until such time as the Company
actually pays such interest (including OID). Moreover, because the yield to
maturity on the Notes exceeds the sum of the AFR and 6% (such excess shall be
referred to hereinafter as the "Disqualified Yield"), the deduction for
interest (including OID) accrued on the Notes will be permanently disallowed
for U.S. federal income tax purposes to the extent such interest or OID is
attributable to the Disqualified Yield on the Notes ("Dividend-Equivalent
Interest"). For purposes of the dividends received deduction, such Dividend-
Equivalent Interest will be treated as a dividend to the extent it is deemed to
have been paid out of the Company's current or accumulated earnings and
profits. Accordingly, a U.S. Holder of the Notes that is a corporation will be
entitled, subject to applicable limitations, to take a dividends received
deduction with respect to any Dividend-Equivalent Interest received by such
corporate holder on such Note.
Original Issue Discount
The Exchange Notes will be issued with OID in an amount equal to the
difference between the principal amount of the Exchange Notes and the issue
price of the Exchange Notes which was established by allocating the purchase
price between Notes and Warrants issued in the Unit Offering. U.S. Holders
should be aware that they generally must include OID in gross income in advance
of the receipt of cash attributable to that income.
The amount of OID includible in income by a U.S. Holder of an Exchange Note
is the sum of the "daily portions" of OID with respect to the Exchange Note for
each day during the taxable year or portion of the taxable year in which such
U.S. Holder held such Exchange Note ("accrued OID"). The daily portion is
determined by allocating to each day in any "accrual period" a pro rata portion
of the OID allocable to that accrual period. The "accrual period" for an
Exchange Note may be 6 months or less and may vary in length over the term of
the Exchange Note, provided that each scheduled payment of principal or
interest occurs on the first day or the final day of an accrual period. The
amount of OID allocable to any accrual period is an amount equal to the excess,
if any, of (a) the product of the Exchange Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any stated interest
allocable to the accrual period. OID allocable to a final accrual period is the
difference between the amount payable at maturity (other than a payment of
stated interest) and the adjusted issue price at the beginning of the final
accrual period. The "adjusted issue price" of an Exchange Note at the beginning
of any accrual period is equal to its issue price increased by the accrued OID
for each prior accrual period. Under these rules, a U.S. Holder will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to provide information returns stating the
amount of OID accrued on Notes held of record by persons other than
corporations and other exempt holders.
U.S. Holders may elect to treat all interest on any Exchange Note as OID and
calculate the amount includible in gross income under the constant yield method
described above. For the purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID and unstated interest. The
election is to be made for the taxable year in which the U.S. Holder acquired
the Exchange Note, and may not be revoked without the consent of the IRS. U.S.
Holders should consult with their own tax advisors about this election.
In the event Exchange Notes are held by a related foreign person (within the
meaning of the Code), the Company generally may not deduct OID attributable to
such Exchange Notes until paid.
138
<PAGE>
Non-U.S. Holders
Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
(a) payments of principal or interest (including OID) on an Exchange Note
owned by a Non-U.S. Holder will not be subject to U.S. withholding tax
provided (i) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote within the meaning of section 871(h)(3) of
the Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on an Exchange Note is described in section 881(c)(3)(A) of the
Code and (iv) the beneficial owner satisfies the statement requirement
(described generally below) set forth in section 871(h) and section 881(c)
of the Code and the regulations thereunder;
(b) gain realized by a Non-U.S. Holder upon the sale, exchange,
retirement or other disposition of an Exchange Note will not be subject to
U.S. withholding tax; and
(c) an Exchange Note beneficially owned by an individual who at the time
of death is a Non-U.S. Holder will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that
the interest payments with respect to such Exchange Note would not have
been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual. However, Warrants and Warrant Shares held by an individual Non-
U.S. Holder at the time of death will be included in such holder's gross
estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
To satisfy the requirement referred to in (a)(iv) above, the beneficial owner
of such Exchange Note, or a financial institution holding the Exchange Note on
behalf of such owner, must provide, in accordance with specified procedures, a
paying agent of the Company with a statement to the effect that the beneficial
owner is not a United States person. Currently, these requirements will be met
if (1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a United States person (which
certification may be made on an IRS W-8 (or successor form)) or (2) a financial
institution holding the Exchange Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (a)(iv) above may also be satisfied with other documentary
evidence for interests paid after December 31, 2000 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments interest (including OID)
made to such Non-U.S. Holder will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides the Company or its paying agent, as
the case may be, with a properly executed (1) IRS Form 1001 (or successor form)
claiming an exemption from or reduction in withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under the Final Regulations, Non-U.S. Holders will generally be
required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224,
although alternative documentation may be applicable in certain situations.
139
<PAGE>
If a Non-U.S. Holder of an Exchange Note is engaged in a trade or business in
the United States and if interest on the Exchange Note or gain realized on the
sale, exchange or other disposition of the Exchange Note is effectively
connected with the conduct of such trade or business, the Non-U.S. Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest (including OID) on a net
income basis in the same manner as if it were a U.S. Holder. In addition, if
such Non-U.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% (or lesser rate under an applicable treaty) of its
effectively connected earnings and profits for the taxable year, subject to
adjustments.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of an Exchange Note generally will not be subject to United States
federal income tax unless (i) such gain or income is effectively connected with
a trade or business in the United States of the Non-U.S. Holder, or (ii) in the
case of a Non-U.S. Holder who is an individual, such individual is present in
the United States for 183 days or more in the taxable year of such sale,
exchange, retirement or other disposition, and certain other conditions are
met.
Special Rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies," that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the U.S.
federal, state, local and other tax consequences that may be relevant to them.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain payments
of principal and interest (including OID) paid on the Exchange Notes and to the
proceeds of the sale of an Exchange Note made to U.S. Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the U.S. Holder fails to provide a taxpayer
identification number or certification of foreign or other exempt status or
fails to report in full dividend and interest income.
In general, information reporting and backup withholding will not apply with
respect to payments made on the Exchange Notes by the Company or any paying
agent to Non-U.S. Holders if a statement described in (a)(iv) under "Non-U.S.
Holders" has been received (and the payor does not have actual knowledge that
the beneficial owner is a United States person). On and before December 31,
2000, information reporting and backup withholding will not apply to dividends
paid to a Non-U.S. Holder at an address outside the United States (unless the
payer has knowledge that the payee is a U.S. person). After December 31, 2000,
however, a Non-US Holder will be subject to back-up withholding unless
applicable certification requirements are met.
In addition, backup withholding and information reporting will not apply if
payments of the principal and interest (including OID) on an Exchange Note are
paid or collected by a foreign office of a custodian, nominee or other foreign
agent on behalf of the beneficial owner of such Exchange Note, or if a foreign
office of a broker (as defined in applicable Treasury regulations) pays the
proceeds of the sale of an Exchange Note, to the owner thereof. If, however,
such nominee, custodian, agent or broker is, for United States federal income
tax purposes, a United States person, a controlled foreign corporation or a
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or, for taxable
years beginning after December 31, 2000, a foreign partnership in which one or
more United States persons, in the aggregate, own more than 50% of the income
or capital interests in the partnership or which is engaged in a trade or
business in the United States, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records
that the beneficial owner is not a United States person and certain other
conditions are met or (2) the beneficial owner otherwise establishes an
exemption.
Payments of principal and interest (including OID) on an Exchange Note paid
to the beneficial owner by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds
of sale of an Exchange Note will be subject to both backup withholding and
information reporting
140
<PAGE>
unless the beneficial owner provides the statement referred to in (a)(iv) above
and the payor does not have actual knowledge that the beneficial owner is a
United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
141
<PAGE>
PLAN OF DISTRIBUTION
Based on positions taken by the Staff of the Commission set forth in no-
action letters issued to Exxon Capital Holding Corp. and Morgan Stanley & Co.
Inc., among others, we believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder
which is (i) an "affiliate" of our Company within the meaning of Rule 405 under
the Securities Act of 1933, (ii) a broker-dealer who acquired Notes directly
from our Company, or (iii) broker-dealers who acquired Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions for the Securities Act of 1933
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business, and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person to
participate in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes, provided that broker-
dealers ("Participating Broker-Dealers") receiving Exchange Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with
respect to resales of such Exchange Notes. To date, the Staff of the Commission
has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Outstanding
Notes to the Initial Purchasers thereof) with the prospectus contained in the
registration statement of which this prospectus is a part. Pursuant to the
registration rights agreement entered into in connection with the Unit
Offering, we have agreed to permit Participating Broker-Dealers and other
persons, if any, subject to similar prospectus delivery requirements to use
this prospectus in connection with the resale of such Exchange Notes. We have
agreed that, for a period of 180 days after the Exchange Offer has been
consummated, we will make this prospectus, and any amendment or supplement to
this prospectus, available to any broker-dealer that requests such documents in
the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to us as set forth in "The Exchange Offer". In addition, each
holder who is a broker-dealer and who receives Exchange Notes for its own
account in exchange for Outstanding Notes that were acquired by it as a result
of market-making activities or other trading activities, will be required to
acknowledge that it will deliver a prospectus in connection with any resale by
it of such Exchange Notes.
Holders who tender Outstanding Notes in the Exchange Offer with the intention
to participate in a distribution of the Exchange Notes may not rely upon the
Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar no-
action letters.
We will not receive any proceeds from any sale of Exchange Notes by broker-
dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act of 1933.
We have agreed to pay all expenses incidental to the Exchange Offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Outstanding Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act of 1933, as set
forth in the registration rights agreement entered into in connection with the
Unit Offering.
142
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes will be passed upon
for Cybernet by Powell, Goldstein, Frazer & Murphy LLP, Washington, D.C.
Certain matters of German law with respect to the Exchange Notes will be passed
upon for Cybernet by Besner Kreifels Weber, Munich, Germany.
INDEPENDENT ACCOUNTANTS
Our consolidated financial statements at December 31, 1998, 1997 and 1996,
and for each of the years then ended and the financial statements of Open:Net
at December 31, 1997 and for the year then ended appearing elsewhere in this
prospectus have been audited by Schitag Ernst & Young, AG, independent
accountants.
The financial statements of Vianet at December 31, 1997 and 1998, and for
each of the three years in the period ended December 31, 1998 appearing in this
prospectus have been audited by Ernst & Young, Wirtschaftsprufungs-Und,
Steuerberatungsgesellschaft MBH, independent accountants.
The financial statements of Flashnet at December 31, 1998 and for the year
then ended appearing in this prospectus have been audited by Grant Thornton
S.p.A., independent accountants.
AVAILABLE INFORMATION
We have filed with the Commission a Registration Statement on Form S-4 under
the Securities Act of 1933 with respect to the Exchange Notes offered hereby.
This prospectus, which forms a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations
of the Commission. For further information with respect to our Company and the
Exchange Notes, reference is made to the Registration Statement. Statements
contained in this prospectus as to the contents of certain documents are not
necessarily complete, and, in each instance, reference is made to the copy of
the document filed as an exhibit to the Registration Statement, and each such
statement is qualified in its entirety by such reference.
Cybernet is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with those requirements,
Cybernet is required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Reports, proxy statements and
other information filed with the Securities and Exchange Commission may be
inspected without charge and copied at prescribed rates at the public reference
facilities maintained by the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Securities and Exchange Commission located at Suite 1400, Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661-2551 and Room 1300, 7 World Trade
Center, New York, New York 10048. Information on the operation of the Public
Reference Room may be obtained by calling the Securities and Exchange
Commission at 1-800-SEC-0330. In addition, such reports, proxy statements and
other information can be inspected on the Securities and Exchange Commission's
website at http://www.sec.gov. In addition, Cybernet intends to furnish its
stockholders with annual reports containing financial statements audited by its
independent certified public accountants.
If and so long as the Notes are listed on or admitted for trading on an
internationally recognized stock exchange and the rules of such exchange shall
so require, copies of the information described above will also be available in
such places and for such times as the rules of such stock exchange may require.
143
<PAGE>
LISTING AND GENERAL INFORMATION
1. Listing: Application will be made to list Exchange Notes on the Luxembourg
Stock Exchange. The legal notice relating to the issue of the Exchange Notes
and the Certificate of Incorporation of the Company will be registered prior
to the listing with the Registrar of the District Court in Luxembourg
(Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg), where
such documents are available for inspection and where copies thereof can be
obtained upon request. As long as the Exchange Notes are listed on the
Luxembourg Stock Exchange, an agent for making payments on, transfers and
conversions of the Exchange Notes will be maintained in Luxembourg.
2. Authorizations: The Company has obtained all necessary consents, approvals
and authorizations in connection with the issue of the Notes. The issue of
the Notes was authorized by resolutions of the Board of Directors of the
Company passed on May 26, 1999.
3. Material Change: Except as disclosed in this prospectus, there has been no
significant change in the financial or trading position of the Company and
its subsidiaries since June 30, 1999 and no material adverse change in the
financial position or prospects of the Company and its subsidiaries since
June 30, 1999.
4. Litigation: Neither the Company nor any of its subsidiaries is involved in
any litigation or arbitration proceedings which may have, or have had during
the 12 months preceding the date of this Exchange Offer, a material adverse
effect on the financial position of the Company and its subsidiaries, nor,
so far as any of them is aware, is any such proceeding pending or
threatened.
5. Auditors: The Company's consolidated balance sheets as of December 31, 1998,
1997 and 1996 and the related consolidated statements of loss and
comprehensive loss, cash flows and changes in shareholders' equity for each
of the three years then ended have been audited by Schitag Ernst & Young in
accordance with United States generally accepted auditing standards. Schitag
Ernst & Young have given and not withdrawn their written consent to the
issuer of this prospectus to the inclusion in it of their reports in the
form and context in which they are included.
6. Documents Available: Copies (and certified English translations where the
documents are not in English) of the following documents may be inspected at
the specified office of Kredietbank S.A. in Luxembourg for so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange:
. Certificate of Incorporation of the Company;
. a copy of the reports of the independent accountants and the audited
consolidated financial statements of the Company and its
subsidiaries for the three years ended December 31, 1998;
. the purchase agreement relating to the Notes;
. the Senior Notes Indenture under which the Notes are issued (which
includes the form of the Global Note and Definitive Notes);
. the Escrow Agreement; and
. such other documents as the rules and regulations of such stock
exchange may require.
In addition, copies of the most recent consolidated financial statements of
the Company for the preceding financial year, and any quarterly interim
financial statements published by the Company, will be available at the
specification of the Kredietbank S.A. in Luxembourg for as long as the
Exchange Notes are listed on the Luxembourg Stock Exchange. The Company
does not prepare non-consolidated financial statements for public release.
144
<PAGE>
7. Clearing Systems: The Notes will be cleared, either directly or indirectly,
through The Depository Trust Company, Euroclear and/or Cedel Bank. Relevant
trading information is set forth below:
<TABLE>
<S> <C>
CUSIP for Outstanding Notes...................................... 232503AC7
ISIN for Outstanding Notes....................................... US232503AC64
CUSIP for Exchange Notes.........................................
ISIN for Exchange Notes..........................................
</TABLE>
8. Accounts: The Company prepares annual consolidated balances sheets,
consolidated statements of loss and comprehensive loss, consolidated
statements of cash flows and consolidated statements of shareholders' equity
and quarterly consolidated balance sheets, consolidated statements of loss
and comprehensive loss and consolidated statements of cash flows.
9. Exchange Notes: Application will be made to list the Exchange Notes on the
Luxembourg Stock Exchange. The Exchange Notes will be accepted for clearance
through the accounts of the Euroclear Operator and Cedel Bank and they will
have a new common code and a new common ISIN number, which will be
transmitted to the Luxembourg Stock Exchange. All documents prepared in
connection with the Exchange Offer will be available at the office of the
special agent in Luxembourg and all necessary actions and services in
respect of the Exchange Offer may be done at the office of the special agent
in Luxembourg. The special agent appointed for these purposes is Kredietbank
S.A. Luxembourgeoise, 43, Boulevard Royal, L-2955 Luxembourg.
All notices relating to the Exchange Offer will be published in accordance
with the notice provisions of the Senior Notes Indenture. See "Description
of the Notes--Notices." So long as the Exchange Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall
require, prior to the commencement of the Exchange Offer, notice of the
Exchange Offer will be given to the Luxembourg Stock Exchange and will be
published in a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort). Such notice will, among other
things, provide details of the conditions to the Exchange Offer and the
commencement and expected completion dates of the Exchange Offer. So long
as the Exchange Notes are listed on the Luxembourg Stock Exchange and the
rules of such stock exchange shall require, notice of the results of the
Exchange Offer will be given to the Luxembourg Stock Exchange and will be
published in a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort), in each cash, as promptly as
practicable following the completion of the Exchange Offer. Similar notice
will also be provided in connection with the payment of Liquidated Damages
and the declaration of the effective date of interest rates.
145
<PAGE>
GLOSSARY OF TERMS
Set forth below are definitions of some of the terms used in this prospectus.
Backbone..................... A centralized high-speed network that
interconnects smaller, independent networks.
Bandwidth.................... A measure of the amount of information which
can move through a communications medium in a
given amount of time; the capacity of a
telecommunications circuit/network to carry
voice, data and video information. Typically
measured in kb/s and Mb/s.
Caching...................... Temporary storage or replication of Web server
content at one or more locations throughout the
Internet to provide a quicker response to a
local browser request.
CGI.......................... Custom Gateway Interface.
Co-Location.................. Housing of a server owned and maintained by
another.
DS-3 or T-3.................. A data communications circuit capable of
transmitting data at 45 Mb/s. Equivalent to 28
T-1's of data capacity. Currently used only by
business/institutions and carriers for high-end
applications.
E-1.......................... The European counterpart to T1 which transmits
at 2.0448 Mb/s.
Electronic mail or e-mail.... An application that allows a user to send or
receive text messages to or from any other user
with an Internet address, commonly termed an e-
mail address.
Ethernet..................... A common method of networking computers in a
LAN. Ethernet will handle about 10 Mb/s and can
be used with almost any kind of computer.
Extranet..................... A company Website that is made available to
external customers or organizations for
electronic commerce.
FDDI......................... Fiber Distributed Data Interface. A standard
for transmitting data on fiber-optic cables at
a rate of 100 Mb/s.
Firewall..................... A gateway between two networks that buffers and
screens all information and prevents
unauthorized traffic from passing between such
networks.
Frame relay.................. A communications standard that is optimized for
efficient switching of variable-length data
packets.
Host......................... A computer with direct access to the Internet.
Internet..................... A global collection of interconnected computer
networks which use a specific communications
protocol.
Intranet..................... A TCP/IP based network and Website which is
securely isolated from the Internet and serves
the internal needs of a company or institution.
146
<PAGE>
IP or Internet Protocol...... Network protocols that allow computers with
different architectures and operating systems
software to communicate with other computers on
the Internet.
ISDN or Integrated Services
Digital Network.............. An information transfer standard for
transmitting digital voice and data over
telephone lines at speeds up to 128 Kb/s
ISPs or Internet Service
Providers.................... Companies formed to provide access to the
Internet to consumer and business customers via
local networks.
Kbps or Kilobits per
second....................... A transmission rate. One kilobit equals 1,024
bits of information.
LAN or Local Area Network.... A data communications network designed to
interconnect personal computers, workstations,
minicomputers, file servers and other
communications and computing devices within a
localized environment.
Leased Lines................. Telecommunications lines dedicated to a
particular customer along predetermined routes.
Mbps or Megabits per
second....................... A transmission rate. One megabit equals 1,024
kilobits.
MMDS......................... Microwave Multipoint Distribution Service.
Modem........................ A device for transmitting digital information
over an analog telephone line.
Network...................... A collection of distributed computers which
share data and information through inter-
connected lines of communication.
NOC or Network Operations
Center....................... Facility where we monitor and manage our
network.
Peering...................... The commercial practice under which nationwide
ISPs exchange each other's traffic, in most
cases without the payment of settlement
charges.
POPs or Points-of-Presence... An interlinked group of modems, routers and
other computer equipment, located in a
particular city or metropolitan area, that
allows a nearby subscriber to access the
Internet through a local telephone call or by
using a short-distance permanent data circuit.
Protocol..................... A formal description of message formats and the
rules two or more machines must follow in order
to communicate.
Router....................... A device that receives and transmits data
packets between segments in a network or
different networks.
Server....................... Software that allows a computer to offer a
service to another computer. Other computers
contact the server program by means of matching
client software. The term also refers to the
computer on which server software runs.
STM-1........................ A data communication circuit capable of
transmitting data at 155 Mb/s.
147
<PAGE>
VPN or Virtual Private
Network...................... A network capable of providing the tailored
services of a private network (i.e., low
latency, high throughput, security and
customization) while maintaining the benefits
of a public network (i.e., ubiquity and
economies of scale).
WAN or Wide Area Network..... A data communications network designed to
interconnect personal computers, workstations,
mini computers, file servers and other
communications and computing devices across a
broad geographic region.
Web or World Wide Web........ A network of computer servers that uses a
special communications protocol to link
different servers throughout the Internet and
permits communication of graphics, video and
sound.
Web-hosting/housing.......... A service in which websites are housed on third
party computers and maintained online using the
Internet.
Websites or Webpages......... A site located on the Web, written in the HTML
or SGML language.
148
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
Independent Auditors' Report............................................ F- 2
Consolidated Balance Sheets December 31, 1998, 1997 and 1996............ F- 3
Consolidated Statements of Loss and Comprehensive Loss years ended
December 31, 1998, 1997 and 1996....................................... F- 4
Consolidated Statements of Cash Flows years ended December 31, 1998,
1997 and 1996.......................................................... F- 5
Consolidated Statements of Shareholders' Equity years ended December 31,
1996, 1997 and 1998.................................................... F- 6
Notes to the Consolidated Financial Statements.......................... F- 7
Consolidated Balance Sheets December 31, 1998 and June 30, 1999
(unaudited)............................................................ F-21
Consolidated Statements of Loss and Comprehensive Loss six months ended
June 30, 1998 and 1999 (unaudited)..................................... F-22
Consolidated Statements of Cash Flows six months ended June 30, 1998 and
1999 (unaudited)....................................................... F-23
Notes to the Consolidated Unaudited Interim Financial Statements
(unaudited)............................................................ F-24
VIANET TELEKOMMUNIKATIONS AG
Independent Auditors' Report............................................ F-27
Balance Sheets December 31, 1998 and 1997............................... F-28
Statements of Operations and Retained Earnings years ended December 31,
1998, 1997 and 1996.................................................... F-29
Statements of Cash Flows years ended December 31, 1998, 1997 and 1996... F-30
Notes to the Financial Statements....................................... F-31
OPEN:NET NETZWERKDIENSTE GMBH
Independent Auditors' Report............................................ F-36
Balance Sheet Year Ended December 31, 1997.............................. F-37
Profit and Loss Statements year ended December 31, 1997 and eight months
ended August 31, 1998 (unaudited)...................................... F-38
Notes to the Financial Statements....................................... F-39
FLASHNET S.P.A.
Independent Auditors' Report............................................ F-42
Balance Sheet December 31, 1998......................................... F-43
Statement of Loss for the year ended December 31, 1998.................. F-44
Statement of Stockholders' Deficit year ended December 31, 1998......... F-45
Statement of Cash Flows year ended December 31, 1998.................... F-46
Notes to the Financial Statements....................................... F-47
Balance Sheets March 31, 1999 and 1998 (unaudited)...................... F-54
Statement of Loss three months ended March 31, 1999 and 1998
(unaudited)............................................................ F-55
Statement of Stockholders' Deficit three months ended March 31, 1999 and
1998 (unaudited)....................................................... F-56
Statement of Cash Flows three months ended March 31, 1999 and 1998
(unaudited)............................................................ F-57
Notes to the Financial Statements (unaudited)........................... F-58
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Cybernet Internet Services International, Inc.:
We have audited the accompanying consolidated balance sheets of Cybernet
Internet Services International, Inc. and its subsidiaries ("the Company") as
of December 31, 1998, 1997 and 1996, and the related consolidated statements of
loss and comprehensive loss, cash flows and changes in shareholders' equity for
each of the three years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company as of
December 31, 1998, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Munich, Germany
March 12, 1999
F-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 27,889 $ 2,238,909 $42,875,877
Short-term investments (Note 4).......... 453,698 817,913 112,503
Accounts receivable -- trade, net of
allowance for doubtful accounts of
$15,164, $33,417 and $361,393 at
December 31, 1996, 1997 and 1998,
respectively............................ 183,513 1,130,981 3,248,754
Other receivables........................ 84,675 285,432 1,793,153
Prepaid expenses and other assets........ 10,607 59,906 423,114
---------- ----------- -----------
Total current assets................. 760,382 4,533,141 48,453,401
Property and equipment, net (Note 5)..... 630,760 2,284,793 7,970,300
Product development costs, net........... 426,996 2,818,069 5,742,793
Goodwill, net............................ -- 1,322,566 6,504,576
Deferred income taxes (Note 12).......... 392,977 1,652,809 8,166,171
Other assets............................. -- 5,679 2,607,488
---------- ----------- -----------
Total Assets......................... $2,211,115 $12,617,057 $79,444,729
========== =========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY
LIABILITIES
Overdrafts and short-term borrowings
(Note 8).............................. $ 71,881 $ 413,625 $ 287,097
Trade accounts payable................. 226,379 1,373,901 3,346,372
Other accrued liabilities.............. 40,953 480,228 1,072,877
Deferred purchase obligations (Note
3).................................... -- 980,693 4,482,967
Current portion long term debt and
capital lease obligations............. -- -- 924,670
Accrued personnel costs................ 81,816 393,667 588,767
---------- ----------- -----------
Total current liabilities............ 421,029 3,642,114 10,702,750
Long-term debt (Note 9)................ -- 41,691 66,829
Capital lease obligations.............. -- -- 1,315,737
Minority interest...................... -- 24,937 --
SHAREHOLDERS EQUITY
Common stock $.001 par value,
50,000,000 shares authorized,
5,160,000, 14,681,891 and 18,762,138
shares issued and outstanding at
December 31, 1996, 1997 and 1998,
respectively ......................... 5,160 14,682 18,762
Preferred stock $.001 par value,
50,000,000 shares authorized,
6,360,000 7,760,000 and 6,360,000
issued and outstanding at December 31,
1996, 1997 and 1998, respectively .... 6,360 7,760 6,360
Subscription receivable................ -- (735,000) (19,210)
Additional paid in capital............. 2,065,899 11,102,257 72,794,936
Accumulated deficit.................... (287,196) (1,271,036) (6,435,676)
Other comprehensive income (loss)...... (137) (210,348) 994,241
---------- ----------- -----------
Total shareholders equity.............. 1,790,086 8,908,315 67,359,413
---------- ----------- -----------
Total Liabilities and Shareholders
Equity.............................. $2,211,115 $12,617,057 $79,444,729
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1996 1997 1998
---------- ----------- ------------
<S> <C> <C> <C>
Revenue
Internet Projects.................... $ 217,296 $ 1,597,869 $ 5,139,110
Network Services..................... 90,377 716,152 3,494,418
---------- ----------- ------------
Total revenues..................... 307,673 2,314,021 8,633,528
Cost of revenues:
Internet Projects.................... 237,037 1,495,234 4,698,557
Network Services..................... 119,297 865,357 4,067,513
Depreciation and amortization........ 6,786 171,196 1,673,938
---------- ----------- ------------
Total cost of revenues............. 363,120 2,531,787 10,440,008
---------- ----------- ------------
Gross loss............................. (55,447) (217,766) (1,806,480)
General and administrative expenses.... 263,175 481,700 1,575,758
Marketing expenses..................... 164,669 1,188,634 3,844,232
Research and development............... 178,994 279,698 2,940,865
Depreciation and amortization.......... 21,263 115,899 879,978
---------- ----------- ------------
Total operating expenses........... 628,101 2,065,931 9,240,833
---------- ----------- ------------
Operating loss......................... (683,548) (2,283,697) (11,047,313)
Interest expense....................... 2,079 39,550 197,243
Interest income........................ -- -- 154,296
---------- ----------- ------------
Loss before taxes and minority
interest.............................. (685,627) (2,323,247) (11,090,260)
Income tax benefit..................... 401,849 1,339,407 6,172,645
---------- ----------- ------------
Net loss before minority interest...... (283,778) (983,840) (4,917,615)
Minority interest...................... -- -- 144,925
Net loss............................... (283,778) (983,840) (4,772,690)
Other comprehensive loss:
Foreign currency translation
adjustments......................... (5,089) (210,211) 1,204,589
---------- ----------- ------------
Comprehensive loss..................... $ (288,867) $(1,194,051) $ (3,568,101)
========== =========== ============
Basic and diluted loss per share....... $ (.12) $ (.12) $ (.30)
========== =========== ============
Number of shares used to compute earn-
ings per share........................ 2,465,782 8,342,297 16,012,653
========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................. $ (283,778) $ (983,840) $(4,772,690)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest....................... -- -- (144,925)
Deferred tax credit..................... (401,849) (1,348,932) (6,172,645)
Depreciation and amortization........... 28,049 287,095 2,553,916
Provision for losses on accounts
receivable............................. 15,456 33,417 120,862
Changes in operating assets and
liabilities:
Trade accounts receivable.............. (203,112) (475,300) (1,295,646)
Other receivables...................... (69,583) (136,141) (1,424,697)
Prepaid expenses and other current
assets................................ (10,847) (32,120) (310,176)
Trade accounts payable................. 231,490 (401,835) 1,027,728
Other accrued expenses and
liabilities........................... 40,826 1,377,685 16,748
Accrued personnel costs................ 83,663 247,539 66,397
---------- ---------- -----------
Total changes in operating assets and
liabilities.......................... 72,437 579,828 (1,919,646)
---------- ---------- -----------
Net cash used in operating
activities........................... (569,685) (1,432,432) (10,355,128)
Cash Flows from Investing Activities:
Purchase of short-term investments....... (727,693) (7,280,037) (104,654)
Proceeds from sale of short term
investments............................. 304,470 6,931,035 810,063
Purchase of property and equipment....... (552,104) (1,707,843) (6,033,959)
Product development costs................ (557,585) (2,464,312) (3,865,930)
Acquisition of businesses, net of cash
acquired................................ -- (269,316) (734,154)
---------- ---------- -----------
Net cash used in investing
activities........................... (1,532,912) (4,790,473) (9,928,634)
Cash Flows from Financing Activities:
Proceeds from issue of common stock,
net..................................... 2,012,903 8,070,427 57,577,376
Repayment of subscription receivable..... -- -- 715,790
Proceeds from borrowings................. 71,881 700,000 2,092,163
Repayments of borrowings................. -- (126,266) (375,161)
---------- ---------- -----------
Net cash provided by financing
activities........................... 2,084,784 8,644,161 60,010,168
---------- ---------- -----------
Net (decrease) increase in cash and cash
equivalents.............................. (17,813) 2,421,256 39,746,406
Cash and cash equivalents at beginning of
year..................................... 49,143 27,889 2,238,909
Translation adjustments................... (3,441) (210,236) 890,562
---------- ---------- -----------
Cash and cash equivalents at end of
year................................... $ 27,889 $2,238,909 $42,875,877
========== ========== ===========
Supplemental disclosure of noncash investing and
financing activities:
Acquisitions (Note 3):
Fair value of assets acquired............ -- $2,230,146 $ 8,800,013
Less:
Cash acquired........................... -- 182,550 129,564
Deferred purchase obligation............ -- -- 4,482,965
Cash paid............................... -- 451,866 863,718
Stock issued............................ -- 1,051,322 1,677,223
---------- ---------- -----------
Liabilities assumed...................... -- $ 544,408 $ 1,646,543
========== ========== ===========
Stock dividend.......................... -- -- (391,950)
Other supplemental cash flow disclosures:
Cash paid for interest.................. (2,079) (39,550) (197,243)
Cash paid for taxes..................... -- 16,550 11,457
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------ ------------------
Additional Accumulated Other Total
Subscription Paid-In Accumulated Comprehensive Stockholders'
Shares Amounts Shares Amount Receivable Capital Deficit Income (Loss) Equity
---------- ------- ---------- ------ ------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
January 1,
1996............ 161,250 $ 161 6,360,000 $6,360 $ 57,995 $ (3,418) $ 4,952 $ 66,050
Issuance of
shares for
cash............ 4,998,750 4,999 2,007,904 2,012,903
Net loss......... (283,778) (283,778)
Currency
translation
adjustment...... (5,089) (5,089)
---------- ------- ---------- ------ --------- ----------- ----------- --------- -----------
Balance
December 31,
1996........... 5,160,000 $ 5,160 6,360,000 $6,360 -- $ 2,065,899 $ (287,196) $ (137) $ 1,790,086
Issuance of
shares in
reverse
acquisition.... 9,521,891 9,522 232,331 241,853
Issuance of
shares for
cash........... 1,400,000 1,400 (735,000) 8,804,027 8,070,427
Currency
translation
adjustment..... (210,211) (210,211)
Net loss........ (983,840) (983,840)
---------- ------- ---------- ------ --------- ----------- ----------- --------- -----------
Balance
December 31,
1997........... 14,681,891 $14,682 7,760,000 $7,760 $(735,000) $11,102,257 $(1,271,036) $(210,348) $ 8,908,315
Conversion of
preferred
stock.......... 1,400,000 1,400 (1,400,000) (1,400)
Stock dividend.. 21,775 22 391,928 (391,950)
Issuance of
shares for
Artwise
acquisition.... 72,620 72 1,052,919 1,052,991
Issuance of
shares for
cash........... 700,000 700 12,599,300 12,600,000
Payment of
subscription
receivable..... 715,790 715,790
Issuance of
shares for
cash........... 1,800,000 1,800 44,975,576 44,977,376
Issuance of
shares for
Open:Net
acquisition.... 58,852 59 1,677,223 1,677,282
Issuance of
shares for
Eclipse
acquisition.... 27,000 27 995,733 995,760
Currency
translation
adjustment..... 1,204,589 1,204,589
Net loss........ (4,772,690) (4,772,690)
---------- ------- ---------- ------ --------- ----------- ----------- --------- -----------
Balance
December 31,
1998........... 18,762,138 $18,762 6,360,000 $6,360 $ (19,210) $72,794,936 $(6,435,676) $ 994,241 $67,359,413
========== ======= ========== ====== ========= =========== =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Cybernet Internet Services International, Inc. ("the Company") (formerly
known as New Century Technologies Corporation) was incorporated under the laws
of the State of Utah on September 27, 1983. The Company changed its state of
incorporation to Delaware in September 1998. Effective September 16, 1997 the
Company acquired Cybernet Internet Dienstleistungen AG ("Cybernet AG"), a
German stock corporation which offers a variety of Internet related
telecommunication and systems integration services to corporate customers.
Cybernet AG was founded in December 1995, and commenced significant operations
in 1996. The acquisition has been accounted for as a reverse acquisition
whereby the Company is considered to be the acquiree even though legally it is
the acquiror. Accordingly, the accompanying financial statements present the
historical financial statements of Cybernet AG from January 1, 1996, through
the acquisition date of September 16, 1997 and the consolidated financial
statements of the Company and Cybernet AG since that date. Since the fair value
of the net assets of the Company were equal to their net book value on
September 16, 1997, the assets and liabilities of the Company remained at their
historical cost following the acquisition.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all majority-
owned subsidiaries of the Company. All significant intercompany investments,
accounts, and transactions have been eliminated.
Foreign Currency
The assets and liabilities for the Company's international subsidiaries are
translated into U.S. dollars using current exchange rates at the balance sheet
dates. Statement of operations items are translated at average exchange rates
prevailing during the period. The resulting translation adjustments are
recorded in the foreign currency translation adjustment account in equity.
Foreign currency transaction gains or losses are included in net earnings
(loss).
Revenue Recognition
The Company offers Internet telecommunication and systems integration
products and network access services. Telecommunication and system integration
products consist of the development of customized business solutions,
installation of hardware and software and production support. Ongoing network
services consist of monthly user fees for network access and related services.
Revenues from telecommunication and systems integration products are
recognized upon completion of the related project and customer acceptance.
Revenues from ongoing network access services are recognized when provided to
customers.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful life of the asset, which ranges
from 4 years (computer equipment and software) to 10 years (leasehold
improvements and furniture and fixtures).
Product Development Costs
The Company capitalizes costs incurred related to the development of products
that will be sold to customers. Costs capitalized include direct labor and
related overhead and third party costs related to
F-7
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
establishing network systems. All costs in the development process are
classified as research and development and expensed as incurred until
technological feasibility has been established. Once technological feasibility
has been established, which is defined as completion of a working model, such
costs are capitalized until the individual products are commercially available.
Amortization, which began in 1997, is calculated using the greater of (a) the
ratio that current gross revenues for a product bear to the total of current
and anticipated future revenues for that product or (b) the straight-line
method over four years. The carrying value of product development costs is
regularly reviewed by the Company and a loss recognized when the net realizable
value falls below the unamortized cost. No such losses have been recognized to
date. Accumulated amortization amounted to $75,494 and $1,016,700 at December
31, 1997 and 1998 respectively.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was $49,906,
$226,763 and $609,948 in the years ended December 31, 1996, 1997 and 1998.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Short Term Investments
In accordance with Statement of Financial Accounting Standard ("SFAS") No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
available-for-sale securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholder's equity.
Realized gains and losses and declines in value judged to be other than
temporary on available-for-sale securities are included in other income. The
Company has classified all debt and equity securities as available-for-sale.
Income Taxes
The Company accounts for income taxes using the liability method. Under this
method, deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when the Company
cannot make the determination that it is more likely than not that some portion
or all of the related tax asset will be realized.
Fair Value of Financial Instruments
The carrying value of financial instruments such as cash, accounts
receivable, short term investments and accounts payable approximate their fair
value based on the short-term maturities of these instruments. The carrying
value of bank debt approximates fair value based on quoted market prices for
the same or similar issues as well as the current rates offered to the Company.
Note 4 contains a detail of short-term investments held by the Company.
Substantially all of the Company's cash is deposited in a local German bank.
Short term investments are comprised of investments in highly liquid mutual
funds. Credit risk in connection with accounts receivable is minimized by the
diverse nature of the Company's customer base.
F-8
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 10 years.
Accumulated amortization totaled $18,693 and $312,436 at December 31, 1997 and
1998, respectively. The Company assesses the recoverability of goodwill by
determining whether the amortization of the related balance over its remaining
life can be recovered through reasonably expected undiscounted future cash
flows. Management evaluates the amortization period to determine whether later
events and circumstances warrant revised estimates of the amortization period.
Stock Compensation
The Company accounts for its stock option compensation under Accounting
Principles Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). The Company presents all disclosures required
by Statement of Financial Accounting Standards No. 123 ("Statement 123") in
Note 11.
Comprehensive Income
In 1998, the Company adopted Financial Accounting Standards Board Statement
130 "Reporting Comprehensive Standards" ("Statement 130"), which requires the
disclosure of the Company's comprehensive income. Comprehensive income is
defined as all changes in shareholders' equity exclusive of transactions with
owners such as capital investments and dividends. All prior periods have been
restated to conform with the reporting requirements of Statement 130.
Segment Disclosures
In 1998, the Company adopted Financial Accounting Standards Board Statement
131 "Disclosures About Segments of an Enterprise and Related Information"
("Statement 131"), which requires disclosures of certain financial information
of the Company's business operating segments. All prior periods have been
restated to conform with the disclosure requirements of Statement 131.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform to the current year presentation.
3. Business Acquisitions
On September 16, 1997, the Company acquired all of the outstanding shares of
the common stock of Cybernet AG in exchange for the issuance of 5,160,000
shares of common stock of the Company, 1,200,000 shares of Series A preferred
stock of the Company and 5,160,000 shares of Series B preferred stock of the
F-9
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company, such shares representing the outstanding shares of the Company at that
date. Generally accepted accounting principles require that the Company be
considered the acquired company for financial statement purposes (a reverse
acquisition) even though the entity will continue to be called Cybernet
Internet Services International, Inc. Therefore, the acquisition has been
recorded as a recapitalization of Cybernet AG. The effects of the reverse
acquisition have been reflected for all share amounts in the accompanying
financial statements. The Company had no operations at the time of the reverse
acquisition.
Effective September 16, 1997, the Company acquired 100% of the outstanding
shares of Artwise GmbH ("Artwise"), for a total consideration of DM 1,710,040
($954,263). DM 475,000 ($265,067) of the purchase price was paid in cash with
the remainder settled in exchange for the issuance of 72,620 shares of the
common stock of the Company in February, 1998. The shares issued in February
1998, which were recorded as additional goodwill, were partially contingent
upon the achievement of certain financial goals by Artwise for the year ended
December 31, 1997. The acquisition has been accounted for using the purchase
method of accounting and accordingly the accompanying financial statements
reflect Artwise's results of operations from September 16, 1997. Goodwill
recorded in connection with the acquisition of Artwise, of DM 1,507,493
($841,188), is being amortized over 10 years.
Effective December 11, 1997, the Company acquired 66% of the outstanding
shares of Eclipse s.r.l. ("Eclipse"), for a total consideration of DM 982,763
($548,386). DM 334,764 ($186,799) of the purchase price was paid in cash with
the remainder to be settled in exchange for the issuance of 27,000 shares of
the common stock of the Company in 1999. The acquisition has been accounted for
using the purchase method of accounting. Eclipse's results of operations for
the period December 11, 1997 through December 31, 1997 are not included in the
accompanying financial statements due to immateriality. Eclipse's results of
operations for the full year 1998 are included in the results of operations of
Cybernet Inc. for the year ended December 31, 1998. Goodwill recorded in
connection with the acquisition of Eclipse, of DM 909,418 ($507,459), is being
amortized over 10 years.
Effective August 15, 1998, the Company acquired 100% of the outstanding
shares of Open:Net Internet Solutions GmbH ("Open:Net") for a total
consideration of DM 4,251,093 ($2,540,091). DM 1,445,000 ($863,718) of the
purchase price was paid in cash with the remainder settled in exchange for the
issuance of 58,825 shares of the common stock of the Company. The acquisition
has been accounted for using the purchase method of accounting and as such the
accompanying financial statements reflect Open:Net's results of operations for
the period August 15, 1998 through December 31, 1998. Goodwill recorded in
connection with the acquisition of Open:Net, of DM 3,520,178 ($2,298,341) is
being amortized over 10 years.
Effective December 28, 1998, the Company acquired 100% of the outstanding
shares of Vianet Telekommunikations AG ("Vianet") for a cash payment of DM
7,500,000 ($4,482,965) and 300,000 shares of the common stock of the Company
which is to be issued to the selling shareholders of Vianet in increments of
60,000 shares over five years contingent upon the continued employment of the
individuals. The acquisition has been accounted for using the purchase method
of accounting. The value of the 300,000 shares will be added to the cost of
acquiring the Company when the shares are issued to the selling shareholders.
Vianet's results of operations subsequent to December 28, 1998 are not included
in the accompanying financial statements due to immateriality. Goodwill
recorded in connection with the acquisition of Vianet, amounting to DM
3,449,307 ($2,061,750), is being amortized over 10 years.
F-10
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following unaudited pro forma consolidated results of operations for the
years ended December 31, 1997 and 1998 assume the acquisitions described above
occurred as of January 1, 1997:
<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenue........................................ $ 7,467,666 $12,589,528
Net loss....................................... (2,065,929) (6,068,365)
Basic and diluted loss per share............... $ (.21) $ (.38)
</TABLE>
4. Short-Term Investments
Short-term investments at cost, which represents the cost to purchase the
securities, consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
BHF Bank Accugeld Fund........................ $453,698 $ -- $112,503
BHF Bank US Dollar Plus Fund.................. -- 802,759 --
Commerzbank Geld Market Fund.................. -- 15,154 --
-------- -------- --------
$453,698 $817,913 $112,503
======== ======== ========
</TABLE>
At December 31, 1996, 1997 and 1998 the estimated fair value of short-term
investments approximated cost. Proceeds from the sale of short-term investments
in 1996, 1997 and 1998 were $263,751, $6,931,035, $810,063, respectively. The
Company did not recognize any gains on the sales of short-term investments in
1996, 1997 or 1998.
5. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998
-------- ---------- -----------
<S> <C> <C> <C>
Computer equipment and software...... $444,695 $1,942,485 $ 7,274,601
Leasehold improvements............... 30,452 75,796 425,786
Furniture and fixtures............... 201,606 478,504 1,979,873
-------- ---------- -----------
676,753 2,496,785 9,680,260
Less accumulated depreciation and
amortization........................ (45,993) (211,992) (1,709,960)
-------- ---------- -----------
Net property and equipment........... $630,760 $2,284,793 $ 7,970,300
======== ========== ===========
</TABLE>
6. Leases
The Company leases facilities and equipment under long-term operating leases.
Future minimum payments under non-cancellable operating leasing with initial
terms of one year or more are as follows:
<TABLE>
<S> <C>
Year ending December 31
1999.............................. $2,105,459
2000.............................. 1,749,784
2001.............................. 1,575,547
2002.............................. 940,702
2003.............................. 635,797
Thereafter........................ 2,167,557
----------
$9,174,846
==========
</TABLE>
F-11
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's rental expense under operating leases in the years ended
December 31, 1996, 1997 and 1998 totaled approximately $56,508, $176,687 and
$1,068,645 respectively.
The Company has financed the acquisition of certain computer equipment
through capital lease agreements with interest rates ranging from 5% to 8%. At
December 31, 1998, the gross value of assets under capital leases is $2,580,307
and related accumulated depreciation was $609,520. The Company had no capital
lease obligations at December 31, 1996 or 1997. Future minimum lease payments
in connection with these leases are as follows:
<TABLE>
<S> <C>
Year ending December 31
1999............................ $ 892,984
2000............................ 892,984
2001............................ 176,536
2002............................ 171,871
2003............................ 133,646
----------
$2,268,021
==========
Less: Interest Portion............ (165,273)
==========
$2,102,748
==========
</TABLE>
7. Commitments
The Company has entered into long term data and voice communications
agreements with several vendors. The agreements enable the Company and its
customers to access data networks necessary for the use of its products and
services. The minimum payments under these agreements aggregate $1,382,228,
$84,806, $84,806, $84,806, $16,139 and $80,693 in 1999, 2000, 2001, 2002, 2003
and thereafter, respectively.
8. Overdrafts and Short-Term Borrowings
Overdrafts represent temporary overdrafts of bank balances. The overdrafts
are not subject to formal agreements with the banks and generally are not
subject to interest.
As of December 31, 1998, the Company had established short-term unsecured
overdraft facilities under which the Company and its subsidiaries could borrow
up to DM 463,340 ($276,952). The facilities are denominated in Deutsche Mark as
to DM 200,000, in Italian Lire as to DM 121,200 and in Austrian Schilling as to
DM 142,140. The interest rate fluctuates based on current lending rates and was
8.25% and 9.75% at December 31, 1997 and 1998, respectively. As of December 31,
1998, DM 342,247 ($204,571) of the overdraft facility was used and DM 121,093
($72,381) was available.
F-12
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1997 1998
------------------------
<S> <C> <C>
Note payable, 5.15% interest, due in monthly
installments of principal and interest through
2001............................................. $ 41,691 $ --
Note payable, 3.75% interest, due in quarterly
installments of principal and interest through
January 2005..................................... -- 41,626
Note payable, 6.2% interest, due in monthly
installments of principal and interest through
June 1999........................................ -- 5,039
Note payable, 6.6% interest, due in monthly
installments of principal and interest through
December 2002.................................... -- 39,409
----------- ------------
41,691 86,074
Less current portion.............................. -- (19,245)
----------- ------------
Long-term portion................................. $ 41,691 $ 66,829
=========== ============
</TABLE>
10. Shareholders Equity
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock. Holders
of Common Stock are entitled to one vote per share on all matters submitted to
a vote of stockholders. The Common Stock is not redeemable and has no
conversion or preemptive rights.
Preferred Stock
The Company is authorized to issue 50,000,000 shares of Preferred Stock with
relative rights, preferences and limitations determined at the time of
issuance. As of December 31, 1998, the Company has issued and outstanding
Series A and B Preferred Stock. All of the Company's previously issued Series C
Preferred Stock was converted to Common Stock in 1998.
Series A Preferred Stock
The holders of the Series A Preferred Stock are entitled to receive dividends
at a rate equal to $0.01 per share per annum before any dividends are paid or
set apart for payment upon any other series of Preferred Stock of the Company,
other than Series B or Series C Preferred Stock, or on the Common Stock of the
Company. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series A Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefor. The dividends on the Series A Preferred
Stock are not cumulative. The holders of the Series A Preferred Stock are not
entitled to vote.
The shares of Series A Preferred Stock may be redeemed by the Company at any
time after January 1, 2000, at a redemption price of one share of the Common
Stock of the Company for each share of Series A Preferred Stock plus any unpaid
dividends earned thereon; provided that all and not less than all of the shares
of Series A Preferred Stock are so redeemed and provided further that if the
Company has not redeemed the Series A Preferred Stock by December 31, 2001, a
holder of Series A Preferred Shares may at any time commencing January 1, 2002,
require the Company to purchase all of the shares of the Series A Preferred
Stock held by him for a purchase price of $3.00 per share plus any dividends
earned but unpaid on such shares.
F-13
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A holder of Series A Preferred Stock may convert each share held by him into
one share of the Common Stock of the Company; provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series A Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series A Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series A Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series A Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
Upon the liquidation, dissolution or winding up, whether voluntary or
involuntary, of the Company, the holders of the Series A Preferred Stock will
be entitled to be paid the sum of $3.00 per share plus an amount equal to any
unpaid accrued dividends before any amount is paid to the holder of any other
series of Preferred Stock, other than the Series B Preferred Stock or the
Series C Preferred Stock, or to the Common Stock of the Company. After payment
of these amounts to the holders of the Series A Preferred Stock, the remaining
assets of the Company will be distributed to the holders of the Common Stock.
Series B Preferred Stock
The holders of the Series B Preferred Stock are entitled to receive dividends
at a rate equal to $0.01 per share per annum before any dividends are paid or
set apart for payment upon any other series of Preferred Stock of the Company
other than the Series C Preferred Stock or on the Common Stock of the Company.
Commencing with the fiscal year beginning on January 1, 1998, the dividend on
the Series B Preferred Stock will be paid for each fiscal year within five
months of the end of each fiscal year, subject to the availability of surplus
or net profits therefor. The dividends on the Series B Preferred Stock will not
be cumulative. The holders of the Series B Preferred Stock are entitled to one
vote per share.
The shares of Series B Preferred Stock may be redeemed by the Company at any
time after January 1, 2000, at a redemption price of one share of the Common
Stock of the Company for each share of Series B Preferred Stock plus any unpaid
dividends earned thereon through the date of redemption; provided that all and
not less than all of the shares of Series B Preferred Stock are so redeemed.
A holder of Series B Preferred Stock may convert each share held by him into
one share of the Common Stock of the Company provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series B Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series B Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series B Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series B Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
Upon the liquidation, dissolution or winding up, whether voluntary or
involuntary, of the Company, the holders of the Series B Preferred Stock will
be entitled to be paid the sum of $3.00 per share plus an amount equal to any
unpaid accrued dividends before any amount is paid to the holder of any other
series of Preferred Stock other than the Series C Preferred Stock or to the
Common Stock of the Company. After payment of these amounts to the holders of
the Series B Preferred Stock, the remaining assets of the Company will be
distributed to the holders of the Common Stock.
Series C Preferred Stock
The holders of the Series C Preferred Stock are entitled to receive dividends
at a rate equal to $0.56 per annum, and no more, before any dividends are paid
or set apart for payment upon any other series of Preferred Stock or on the
Common Stock of the Company. Dividends will begin to accrue on January 1, 1998.
Commencing with the fiscal year beginning on January 1, 1998, the dividend on
the Series C Preferred Stock
F-14
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
will be paid for each fiscal year within five months of the end of each fiscal
year, subject to the availability of surplus or net profits therefor. The
dividends of the Series C Preferred Stock are cumulative.
The holders of the Series C Preferred Stock are not entitled to receive
notice of or to vote on any matter that is the subject of a vote of the
stockholders of the Company, except as otherwise required by the laws of the
State of Delaware.
The shares of Series C Preferred Stock may be redeemed by the Company at any
time at a redemption price of 100% of the $7.00 purchase price paid to the
Company for such shares plus any unpaid accrued dividends thereon so long as
prior to the date of redemption the Company has offered to exchange each share
of Series C Preferred Stock for (a) one share of the Company's Common Stock,
plus (b) one warrant ("Warrant") to purchase the number of shares of Common
Stock equal in the aggregate to one-half the number of shares of Common Stock
received in the exchange, which Warrant will be exercisable at any time through
the first anniversary of the date of issuance of the Warrant at a purchase
price equal to $8.00 per share and a registration statement is in effect
registering the issuance of the Common Stock and Warrants.
A holder of Series C Preferred Stock may convert each share held by him into
one share of the Common Stock of the Company anytime after July 31, 1998;
provided, however, that any conversion be of all the Series C Preferred Shares
held by the shareholder.
In July 1998, holders of 1,400,000 shares of Series C Preferred Stock
(representing the entire amount outstanding) converted their shares into
1,400,000 shares of the Company's Common Stock. Prior to the conversion holders
of Series C Preferred Stock received a stock dividend in Common Stock of the
Company in lieu of a cash dividend. The stock dividend was valued at the
closing price of the Common Stock on the date the dividend was declared.
11. Stock Incentive Plan
In 1998 the Company adopted a stock incentive plan ("Stock Incentive Plan")
which provides for the grant of a variety of stock award instruments to key
employees and members of the Board of Directors.
The Company has reserved 2,000,000 shares of common stock for issuances under
the Stock Incentive Plan. During the year ended December 31, 1998, the Company
granted 285,000 stock options with an exercise price of $31.96 per share and
400,000 stock options with an exercise price of $32.04 pursuant to the Stock
Incentive Plan. All options granted have 10 year terms and vest over three
years. All options were still outstanding at December 31, 1998. None of the
options outstanding at December 31, 1998 were exercisable.
The Company has elected to follow APB 25 and related interpretations in
accounting for the stock options granted under the Stock Incentive Plan. Under
APB 25, as long as the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Pro forma information regarding net income
and earnings per share is required by Statement 123 as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model using a risk-free interest rate of
4.5%, an expected common stock price volatility factor of 0.8, a weighted-
average expected life of the options of 5 years, and a expected dividend yield
of 0%.
The fair value of the options granted in 1998 using the Black-Scholes model
was $13,320,000. Had the Company determined compensation cost for this plan in
accordance with Statement 123, the value of the
F-15
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
options granted would have been amortized over the option vesting period. The
Company's pro forma loss and pro forma basic and diluted earnings per share for
1998 would have been $4,995,690 and $(.31), respectively.
12. Provision for Income Taxes
The Company's principal operations are currently located in Germany. Pretax
loss for the years ended December 31, 1996, 1997 and 1998 was generated in the
following jurisdictions:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1996 1997 1998
--------- ----------- ------------
<S> <C> <C> <C>
Germany................................ $(685,627) $(2,303,448) $(10,655,410)
Others................................. -- (19,799) (434,850)
--------- ----------- ------------
$(685,627) $(2,323,247) $(11,090,260)
========= =========== ============
</TABLE>
The components of the provision for income taxes, substantially all of which
relates to Germany, are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Current................................. $ -- $ 9,525 $ --
Deferred................................ (401,849) (1,348,932) (6,172,645)
--------- ----------- -----------
Income tax benefit...................... $(401,849) $(1,339,407) $(6,172,645)
========= =========== ===========
</TABLE>
The Company has net deferred tax assets as of December 31, 1996, 1997 and
1998 as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1997 1998
-------- ---------- -----------
<S> <C> <C> <C>
Deferred tax assets
Net operating losses...................... $692,694 $3,454,606 $11,695,379
-------- ---------- -----------
692,694 3,454,606 11,695,379
======== ========== ===========
Deferred tax liabilities
Product development costs................. 251,038 1,625,857 3,315,814
Depreciation and amortization............. 44,195 175,454 212,148
Other..................................... 4,484 486 1,246
-------- ---------- -----------
299,717 1,801,797 3,529,208
======== ========== ===========
Net deferred tax assets..................... $392,977 $1,652,809 $ 8,166,171
======== ========== ===========
</TABLE>
As of December 31, 1998, the Company and its subsidiaries had available
combined cumulative tax loss carryforwards of approximately $20,230,048 million
substantially all of which relates to Germany. Under German tax laws, these
loss carryforwards have an indefinite life. The tax loss carryforwards have
been generated during the establishment of the Company's operations. Management
believes that the Company will generate sufficient future taxable income to
realize the entire deferred tax asset and that the realization of the
$8,166,171 net deferred tax asset is more likely than not. However, if the
Company is unable to generate sufficient taxable income in the future through
operating results a valuation allowance will be required to be established
through a charge to income.
F-16
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of income taxes determined using the United States statutory
federal income tax rate of 35% to actual income taxes provided is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Income tax benefit at statutory
rate................................ $(239,969) $ (813,136) $(3,881,591)
Higher foreign tax rates............. (157,694) (529,793) (2,528,579)
Other................................ (4,186) 3,522 237,525
--------- ----------- -----------
Income tax benefit................... $(401,849) $(1,339,407) $(6,172,645)
========= =========== ===========
</TABLE>
13. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Numerator:
Net loss-numerator for basic and
diluted loss per share............... $ (283,778) $ (983,840) $(4,772,690)
========== ========== ===========
Denominator:
Denominator for basic and diluted loss
per share -- weighted average shares
outstanding.......................... 2,465,782 8,342,297 16,012,653
========== ========== ===========
Basic and diluted loss per share........ $ (.12) $ (.12) $ (.30)
========== ========== ===========
</TABLE>
The denominator for diluted earnings per share excludes the convertible
preferred stock and stock options because the inclusion of these items would
have an anti-dilutive effect. The Company's preferred stock is described in
Note 10 and the Company's stock options are described in Note 11.
14. Related Party Transaction
On May 30, 1997, a principal shareholder of Cybernet AG advanced Cybernet AG
an interest free loan of DM 1.5 million ($837,895) due July 31, 1997. On
October 7, 1997, Cybernet AG repaid the loan.
The Company paid DM 17,250 ($11,345), DM 169,804 ($97,470) and DM 173,013
($98,303) to a law firm for legal services where one of the members of the
board of directors is a partner in the years ended December 31, 1996, 1997 and
1998, respectively.
In November 1998, one of the members of the Board of Directors of Cybernet
Inc. and a principal Shareholder advanced an interest free loan to Cybernet
Inc. of DM 2.5 million ($1,494,322). The Company repaid the loan in December
1998.
In December 1998, the Company paid $2,916,000 in underwriting fees in
connection with the public sale of equity, to an investment bank in which one
of the Company's principal shareholders and a former member of the Company's
Board of Directors is a significant shareholder.
15. Segment information
The Company evaluates performance and allocates resources based on the
operating profit of its subsidiaries. The accounting policies of the reportable
segments are the same as those described in the Summary of Significant
Accounting Policies in Note 2.
F-17
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company operates in one line of business, which is providing
international Internet backbone and access services and network business
solutions for corporate customers. The Company's reportable segments are
divided by country since each country's operations are managed and evaluated
separately. The Company does not have any intercompany sales between its
subsidiaries.
Information concerning the Company's geographic locations is summarized as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1997 1998
-------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Germany................................... $307,673 $2,314,021 $ 7,692,555
US........................................ -- -- --
Other..................................... -- -- 940,973
-------- ---------- -----------
Total..................................... $307,673 $2,314,021 $ 8,633,528
======== ========== ===========
Cost of revenues:
Germany................................... $363,120 $2,531,787 $ 9,609,699
US........................................ -- -- --
Other..................................... -- -- 830,309
-------- ---------- -----------
Total..................................... $363,120 $2,531,787 $10,440,008
======== ========== ===========
General and Administrative Expenses:
Germany................................... $263,175 $ 481,700 $ 1,341,077
US........................................ -- -- 186,345
Other..................................... -- -- 48,336
-------- ---------- -----------
Total..................................... $263,175 $ 481,700 $ 1,575,758
======== ========== ===========
Marketing Expenses:
Germany................................... $164,669 $1,188,634 $ 3,708,831
US........................................ -- -- --
Other..................................... -- -- 135,401
-------- ---------- -----------
Total..................................... $164,669 $1,188,634 $ 3,844,232
======== ========== ===========
Research and Development:
Germany................................... $178,994 $ 279,698 $ 2,642,140
US........................................ -- -- --
Other..................................... -- -- 298,725
-------- ---------- -----------
Total..................................... $178,994 $ 279,698 $ 2,940,865
======== ========== ===========
Depreciation and Amortization:
Germany................................... $ 21,263 $ 115,899 $ 721,677
US........................................ -- -- 108,976
Other..................................... -- -- 49,325
-------- ---------- -----------
Total..................................... $ 21,263 $ 115,899 $ 879,978
======== ========== ===========
Interest Expense:
Germany................................... $ 2,079 $ 39,550 $ 180,496
US........................................ -- -- 3,006
Other..................................... -- -- 13,741
-------- ---------- -----------
Total..................................... $ 2,079 $ 39,550 $ 197,243
======== ========== ===========
</TABLE>
F-18
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
---------- ----------- ------------
<S> <C> <C> <C>
Interest Income:
Germany............................. $ -- $ -- $ 30,581
US.................................. -- -- 123,715
Other............................... -- -- --
---------- ----------- ------------
Total............................... $ -- $ -- $ 154,296
========== =========== ============
Loss before Taxes:
Germany............................. $ (685,627) $(2,323,247) $(10,480,794)
US.................................. -- -- (174,612)
Other............................... -- -- (434,854)
---------- ----------- ------------
Total............................... $ (685,627) $(2,323,247) $(11,090,260)
========== =========== ============
Income tax benefit:
Germany............................. $ 401,849 $ 1,339,407 $ 6,172,645
US.................................. -- -- --
Other............................... -- -- --
---------- ----------- ------------
Total............................... $ 401,849 $ 1,339,407 $ 6,172,645
========== =========== ============
Total Assets:
Germany............................. $2,211,115 $12,343,057 $ 28,686,897
US.................................. -- -- 47,688,998
Austria............................. -- -- 1,556,895
Other............................... -- 274,000 1,511,939
---------- ----------- ------------
Total............................... $2,211,115 $12,617,057 $ 79,444,729
========== =========== ============
</TABLE>
The Company's property, plant and equipment by geographic location and
capital expenditures by geographic area are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Long lived assets:
Germany..................................... $630,760 $2,208,781 $6,334,809
US.......................................... -- -- --
Austria..................................... -- -- 699,511
Other....................................... -- 76,012 935,980
-------- ---------- ----------
Total....................................... $630,760 $2,284,793 $7,970,300
======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Capital Expenditures:
Germany..................................... $552,104 $1,707,843 $5,097,077
US.......................................... -- -- --
Other....................................... -- -- 936,882
-------- ---------- ----------
Total....................................... $552,104 $1,707,843 $6,033,959
======== ========== ==========
</TABLE>
F-19
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Recent Pronouncements
In March 1998, the AICPA issued SOP 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". This standard
requires that computer software costs meeting the criteria for internal-use
software be expensed as incurred in the preliminary project stage and
capitalized thereafter. Amounts capitalized are required to be amortized on a
straight line basis over the estimated useful life of the software. The
standard is effective for fiscal years beginning after December 15, 1998.
Earlier application is permitted. The Company does not expect the impact of
this new statement on the Company's consolidated balance sheet or results of
operations to be material.
In April 1998, the AICPA issued SOP 98-5 "Reporting on the Costs of Start-Up-
Activities". This standard requires costs of start-up-activities and
organization costs to be expensed as incurred. The standard is effective for
fiscal years beginning after December 15, 1998. Earlier application is
encouraged. The Company does not expect the impact of this new statement on the
Company's consolidated balance sheet or results of operations to be material.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"). This statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. The statement also requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS No. 133 is effective
for fiscal years beginning after June 15, 1999 and cannot be applied
retroactively. The Company does not expect the impact of this new statement on
the Company's consolidated balance sheets or results of operations to be
material.
17. Subsequent Events
In February 1999, the Company entered into a stock purchase agreement
providing for the purchase of 51% of the outstanding stock of Sunweb Internet
Services SIS AG ("Sunweb"), an Internet service provider located in
Switzerland, for total consideration CHF 1,477,000 ($1,024,182) and 25,000
shares of common stock of the Company. The Stock Purchase Agreement also
contains provisions for put and call options for the sellers and buyers,
respectively, for the remaining 49% of the outstanding stock of Sunweb. The
purchase price per the agreement for the remaining 49% of the shares is based
on a multiple Sunweb's net profit or loss before taxes. The put and call
options both expire on December 31, 2001.
In March 1999, the German government passed new tax legislation which reduced
the corporate income tax rate from 45% to 40%. In accordance with accounting
principles generally accepted in the United States of America, the Company's
deferred tax assets and liabilities related to Germany are calculated using
45%, the rate in effect at December 31, 1998. The impact of remeasuring the
deferred tax assets and liabilities using the new rate is required to be
recorded in the period the rate is enacted. The impact on net income of the
corporate tax rate reduction is estimated to be approximately $522,000 and will
be recorded in the first quarter of 1999.
F-20
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ -----------
(unaudited)
-----------
(in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $42,876 $14,974
Short-term investments............................... 112 482
Accounts receivable, net of allowance for doubtful
accounts of $810 and $361 for June 30, 1999 and
December 31, 1998 respectively...................... 3,249 7,436
Other receivables.................................... 1,793 1,459
Prepaid expenses and other assets.................... 423 1,116
------- -------
Total current assets............................... 48,453 25,467
Property and equipment, net.......................... 7,970 14,429
Product development costs, net....................... 5,743 4,992
Goodwill, net........................................ 6,505 35,805
Deferred income taxes................................ 8,166 12,251
Other assets......................................... 2,608 3,842
------- -------
TOTAL ASSETS....................................... $79,445 $96,786
======= =======
LIABILITIES AND SHAREHOLDERS EQUITY
LIABILITIES
Overdrafts and short-term borrowings................. $ 287 $23,018
Trade accounts payable............................... 3,346 8,105
Other accrued liabilities............................ 1,073 3,622
Deferred purchase obligations........................ 4,483 2
Current portion long term debt and capital lease
obligations......................................... 925 1,173
Accrued personnel costs.............................. 589 1,109
------- -------
Total current liabilities............................ 10,703 37,029
Long-term debt....................................... 67 104
Capital lease obligations............................ 1,316 1,607
Minority interest.................................... -- --
SHAREHOLDERS EQUITY
Common stock $.001 par value, 50,000,000 shares
authorized, 20,729,988 shares issued and outstanding
at June 30, 1999 and 18,762,138 issued and
outstanding at December 31, 1998.................... 19 21
Preferred stock $.001 par value, 50,000,000 shares
authorized, 4,793,440 shares issued and outstanding
at June 30, 1999 and 6,360,000 issued and
outstanding at December 31, 1998.................... 6 5
Subscription receivable.............................. (19) --
Additional paid in capital........................... 72,795 79,335
Accumulated deficit.................................. (6,436) (14,685)
Other Comprehensive income (loss).................... 994 (6,630)
------- -------
Total shareholders equity.......................... 67,359 58,046
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY.......... $79,445 $96,786
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
F-21
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------
1998 1999
------------ ------------
(in thousands,
except per share data)
--------------------------
<S> <C> <C>
Revenue
Internet Projects................................. $ 1,863 $ 2,459
Network Services.................................. 1,489 5,994
------------ ------------
Total revenues.................................. 3,352 8,453
Cost of revenues:
Internet Projects................................. 1,438 2,056
Network Services.................................. 1,747 6,534
Depreciation and amortization..................... 332 1,545
------------
Total cost of revenues.......................... 3,517 10,135
------------ ------------
Gross loss........................................ (165) (1,682)
General and administrative expenses............... 655 3,770
Marketing expenses................................ 1,608 5,147
Research and development.......................... 821 2,146
Depreciation and amortization..................... 272 1,228
------------ ------------
Total operating expenses........................ 3,356 12,291
Interest expense.................................. 106 64
Interest income................................... 12 383
------------ ------------
Loss before taxes and minority interest........... (3,615) (13,654)
Income tax benefit................................ 2,008 5,302
------------ ------------
Net loss before minority interest................. (1,607) (8,352)
Minority interest................................. -- 103
Net loss.......................................... (1,607) (8,249)
Other comprehensive loss:
Foreign currency translation adjustments.......... 12 (7,624)
------------ ------------
Comprehensive loss................................ (1,595) (15,873)
------------ ------------
Basic and diluted loss per share.................. $ (0.11) $ (0.44)
============ ============
Number of shares used to compute earnings per
share............................................ 14,765,777 18,917,582
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-22
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30,
------------------
1998 1999
-------- --------
(in thousands)
------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. $ (1,607) $ (8,249)
Adjustments to reconcile net income to net cash provided
by operations:
Deferred tax credit...................................... (1,101) (5,309)
Depreciation and amortization............................ 338 2,772
Provision for losses on accounts receivable.............. 25 651
Changes in operating assets and liabilities:
Trade accounts receivable................................ (462) (1,759)
Other receivables........................................ (310) 139
Prepaid expenses and other assets........................ (751) (1,943)
Trade accounts payable................................... 1,134 1,757
Other accrued expenses and liabilities................... (547) 517
Accrued personnel costs.................................. 148 80
-------- --------
Total changes in operating assets and liabilities....... (788) (1,209)
-------- --------
Net cash used in operating activities.................... (3,133) (11,344)
Cash Flows from Investing Activities:
Purchase of short term investments........................ -- (403)
Proceeds from sale of short term investments.............. 395 --
Purchase of property and equipment........................ (1,221) (6,587)
Product development costs................................. (626) (686)
Acquisition of businesses, net of cash acquired........... -- (24,192)
Payment of deferred purchase obligations.................. -- (4,172)
-------- --------
Net cash used in investing activities.................... (1,452) (36,040)
Cash Flows from Financing Activities:
Proceeds from issue of common stock, net.................. 724 --
Proceeds from borrowings.................................. 1,975 23,805
-------- --------
Repayment of borrowings
Net cash provided by financing activities................ 2,699 23,805
-------- --------
Net (decrease) increase in cash and cash equivalents...... (1,886) (23,579)
Cash and cash equivalents at beginning of period.......... 1,239 42,876
Translation adjustments................................... 788 (4,323)
-------- --------
Cash and cash equivalents at end of period................ $ 141 $ 14,974
======== ========
Supplemental disclosure of non-cash investing and
financing activities:
Acquisitions (Note 5):
Fair value of assets acquired............................ -- $ 34,344
Less:
Cash Acquired........................................... -- 73
Cash paid............................................... -- 22,850
Stock issued............................................ -- 4,626
-------- --------
Liabilities assumed....................................... -- $ 6,795
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-23
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
1.Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of financial position
and results of operations have been included. Operating results for the six
month period end June 30, 1999 are not necessarily indicative of results to be
expected for the year ended December 31, 1999. For further information, refer
to the Consolidated Financial Statements and notes thereto included in the
Company's annual report of Form 10-K for the year ended December 31, 1998.
2.Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
June 30
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Numerator:
Net loss-numerator for basic and diluted loss per
share (U.S. dollars in thousands).................... $ 1,607 $ 8,249
Denominator:
Denominator for basic and diluted loss per share --
weighted average shares outstanding.................. 14,765,777 18,917,582
Basic and diluted loss per share...................... $ (0.11) $ (0.44)
</TABLE>
The denominator for diluted earnings per share excludes the convertible
preferred stock and stock options because the inclusion of these items would
have an anti-dilutive effect.
3.Segment information
The Company evaluates performance and allocates resources based on the
operating profit of its subsidiaries. The Company operates in one line of
business, which is providing international Internet backbone and access
services and network business solutions for corporate customers. The Company's
reportable segments are divided by country since each country's operations are
managed and evaluated separately. The Company does not have any inter-company
sales between its subsidiaries. Information concerning the Company's geographic
locations is summarized as follows:
<TABLE>
<CAPTION>
June 30
----------------
1998 1999
------- --------
(in thousands)
----------------
<S> <C> <C>
Revenues
Germany....................................................... $ 2,908 $ 5,455
US............................................................ -- --
Other......................................................... 444 2,998
------- --------
Total......................................................... $ 3,352 $ 8,453
Cost of Revenues
Germany....................................................... $ 3,168 $ 8,159
US............................................................ -- 9
Other......................................................... 348 1,967
------- --------
Total......................................................... $ 3,516 $ 10,135
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
June 30
------------------
1998 1999
-------- --------
(in thousands)
------------------
<S> <C> <C>
General and Admin Exp.
Germany................................................... $ 565 $ 2,605
US........................................................ 53 570
Other..................................................... 37 595
-------- --------
Total..................................................... $ 655 $ 3,770
Marketing Expenses
Germany................................................... 1,559 3,851
US........................................................ -- 243
Other..................................................... 49 1,053
-------- --------
Total..................................................... 1,608 5,147
Research & Development
Germany................................................... 788 1,622
US........................................................ -- --
Other..................................................... 33 524
-------- --------
Total..................................................... 821 2,146
Depreciation & Amortization
Germany................................................... 272 933
US........................................................ -- 138
Other..................................................... -- 157
-------- --------
Total..................................................... 272 1,228
Interest Expense
Germany................................................... 97 16
US........................................................ -- 9
Other..................................................... 9 39
-------- --------
Total..................................................... 106 64
Interest Income
Germany................................................... (12) (10)
US........................................................ -- (373)
Other..................................................... -- --
-------- --------
Total..................................................... (12) (383)
Loss before Taxes
Germany................................................... 3,532 11,723
US........................................................ 53 597
Other..................................................... 27 1,334
-------- --------
Total..................................................... 3,612 13,654
Income Tax Benefit
Germany................................................... (2,007) (5,305)
US........................................................ -- --
Other..................................................... -- 3
-------- --------
Total..................................................... $ (2,007) $ (5,302)
</TABLE>
F-25
<PAGE>
4.Income Taxes
In March 1999 the German government passed new tax legislation which reduced
the corporate income tax rate from 45% to 40%. Accordingly, the Company's
deferred tax assets and liabilities related to Germany were re-measured using
40% in the first quarter of 1999. The impact of re-measuring the deferred tax
assets and liabilities using the new rate was recorded as a reduction in the
income tax benefit of approximately $550,000 for the quarter ended March 31,
1999.
5.Business Acquisitions
Effective April 13, 1999, the Company acquired 51% of the outstanding shares
of Sunweb Internet Services SIS AG ("Sunweb") for a total consideration of DM
2,865,550 ($1,513,201). DM 1,806,957 ($954,193) of the purchase price was paid
in cash with the remainder settled in exchange for the issuance of 25,000
shares of the common stock of the Company. The Stock Purchase Agreement also
contains provisions for put and call options for the sellers and buyers,
respectively, for the remaining 49% of the outstanding stock of Sunweb. The
purchase price per the agreement for the remaining 49% of the shares is based
on a multiple of Sunweb's net profit or loss before taxes. The put and call
options expire on December 31, 2001. The acquisition has been accounted for
using the purchase method of accounting and as such the accompanying financial
statements reflect Sunweb's results of operations for the period April 13, 1999
through June 30, 1999. Goodwill recorded in connection with the acquisition of
Sunweb, amounting to DM 2,674,512 ($1,412,320), is being amortized over 10
years.
Effective June 25, 1999, the Company acquired 100% of the outstanding shares
of Flashnet S.p.A. ("Flashnet") for a total consideration of DM 49,166,828
($25,963,367). DM 41,464,040 ($21,895,781) of the purchase price was paid in
cash with the remainder settled in exchange for the issuance of 301,290 shares
of the common stock of the Company. The acquisition has been accounted for
using the purchase method of accounting. Flashnet's results of operations
subsequent to June 25, 1999 are not included in the accompanying financial
statements due to immateriality. Goodwill recorded in connection with the
acquisition of Flashnet, amounting to DM 52,544,954 ($27,747,243), is being
amortized over 10 years.
The following unaudited pro forma consolidated results of operations for the
six months ended June 30, 1998 and 1999 assume the acquisitions of Open:Net,
Vianet and Flashnet had occurred as of January 1, 1998. The unaudited pro forma
consolidated results of operations do not include the results of operations of
Sunweb due to the relative insignificance of the amounts involved.
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenue............................................ $ 7,036,873 $ 12,760,400
Net loss........................................... 2,893,699 10,114,041
Basic and diluted loss per share................... $ (0.19) $ (0.49)
</TABLE>
6.Stockholders Equity
In June 1999, holders of 276,560 shares of Series A Preferred Stock converted
their shares into 276,560 shares of the Company's Common Stock. Also in June
1999, holders of 1,290,000 shares of Series B Preferred Stock converted their
shares into 1,290,000 shares of the Company's Common Stock.
7.Subsequent events
On July 1, 1999, the Company sold 150,000 units consisting of 14.0% Senior
Notes due 2009 and warrants to purchase 4,534,604 shares of Common Stock. The
net proceeds of the unit offering were approximately $144 million.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholder
VIANET Telekommunikations AG
We have audited the accompanying balance sheets of VIANET Telekommunikations
AG as of December 31, 1996, 1997 and 1998 and the related statements of
operations and retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VIANET Telekommunikations AG
as of December 31, 1996, 1997 and 1998 and the results of their operations and
their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
By Ernst & Young
Wirtschaftsprutungs-und
Steuerberatungs gesellschaft mbH
(Gerd Haberfehlner)
(Edith Schmit)
February 12, 1999
F-27
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
BALANCE SHEET
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------
1996 1997 1998
--------- ---------- ----------
(all amounts in ATS)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................. 655,174 100,025 1,524,978
Recoverable taxes and other receivables
(Note 2)................................. 130,747 126,087 45,184
Trade accounts receivable (Note 3)........ 2,943,991 5,573,461 7,927,150
Inventories (Note 4)...................... 109,099 37,404 111,111
Prepaid expenses (Note 5)................. 135,770 246,373 593,997
--------- ---------- ----------
Total current assets.................... 3,974,781 6,083,350 10,202,420
Deposits and Other Assets................... 170,000 241,846 407,300
Fixed Assets (Note 6)
Leasehold improvements.................... 219,220 219,220 383,998
Office furniture and equipment (Note 15).. 2,745,313 6,470,090 12,079,314
--------- ---------- ----------
2,964,533 6,689,310 12,463,311
Accumulated depreciation.................. (669,029) (1,952,565) (3,787,592)
--------- ---------- ----------
2,295,504 4,736,745 8,675,719
Deferred tax asset (Note 12)................ 18,899 4,739
--------- ---------- ----------
TOTAL ASSETS................................ 6,459,184 11,061,941 19,290,177
========= ========== ==========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable.......................... 3,103,262 5,911,889 7,075,048
Current portion of obligations under
capital leases (Note 15)................. 976,858
Overdraft (Note 7)........................ 634,636 794,768
Accrued expenses (Note 8)................. 938,000 1,906,500 2,120,100
Corporate tax (Note 12)................... 7,500 139,200
Other payables............................ 1,069,554 1,015,162 1,744,845
Deferred income (Note 9).................. 841,983 953,178 4,747,993
--------- ---------- ----------
Total Current Liabilities............... 5,960,299 10,560,565 17,459,612
Deferred tax liability (Note 12)............ 26,024
Obligations under capital lease (Note 15)... 1,944,448
Accrued employee benefits (Note 10)......... 25,000 61,000 322,000
--------- ---------- ----------
TOTAL LIABILITIES........................... 5,985,299 10,647.589 19,726,060
--------- ---------- ----------
Shareholders Equity (Deficit) (Note 11)
Share capital............................. 250,000 250,000 750,000
Retained earnings (Accumulated deficit)... 223,885 164,352 (1,185,883)
--------- ---------- ----------
473,885 414,352 (435,883)
--------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY... 6,459,184 11,061,941 19,290,177
========= ========== ==========
</TABLE>
See accompanying notes to financial statements
F-28
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
(all amounts in ATS)
<S> <C> <C> <C>
Total revenues............................ 16,174,241 27,390,233 37,617,683
Costs and Expenses
Costs of products sold.................. 8,588,569 12,403,754 17,051,503
Research and development................ 0 0 1,282,625
General and administrative expenses..... 7,513,498 14,787,656 20,558,892
---------- ---------- ----------
16,102,067 27,191,410 38,893,020
---------- ---------- ----------
Operating profit (loss)................... 77,174 198,823 (1,275,337)
Interest income........................... 23,389 20,972 8,966
Interest expense.......................... (3,726) (86,212) (88,803)
---------- ---------- ----------
19,663 (65,240) (79,837)
---------- ---------- ----------
Income (loss) before income taxes......... 91,837 133,583 (1,355,175)
Provision for income taxes (Note 12)...... 3,899 (193,116) 4,940
---------- ---------- ----------
NET INCOME (LOSS)......................... 95,736 (59,533) (1,350,235)
Retained earnings, beginning.............. 128,149 223,885 164,352
---------- ---------- ----------
Retained earnings (Accumulated deficit),
ending................................... 223,885 164,352 (1,185,883)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-29
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
(all amounts in ATS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss)......................... 95,736 (59,533) (1,350,235)
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation............................. 499,165 1,283,536 2,060,230
Deferred taxes........................... (18,899) 44,923 (30,763)
Change in accounts receivable,
recoverable taxes and other
receivables............................. (145,264) (2,624,810) (2,272,786)
Change in deposits and other assets...... -- (71,846) (165,454)
Change in inventories.................... 34,781 71,695 (73,707)
Change in prepaid expenses............... (12,004) (110,603) (347,624)
Change in accounts payable, accrued
expenses and other current liabilities.. 1,624,620 4,001,630 6,023,057
---------- ---------- ----------
Net cash provided by operating
activities............................ 2,078,135 2,534,992 3,842,718
Investing Activities
Expenditures for property, plant and
equipment............................... (2,059,575) (3,724,777) (3,077,897)
---------- ---------- ----------
Net cash (used in) investing
activities............................ (2,059,575) (3,724,777) (3,077,897)
Financing Activities
Increase share capital................... -- -- 500,000
Change in overdraft...................... -- 634,636 160,132
---------- ---------- ----------
-- 634,636 660,132
(Decrease) Increase in cash and cash
equivalents............................... 18,560 (555,149) 1,424,953
Cash and cash equivalents at beginning of
year...................................... 636,614 655,174 100,025
---------- ---------- ----------
Cash and Cash Equivalents at End of Year... 655,174 100,025 1,524,978
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-30
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
NOTES TO THE FINANCIAL STATEMENTS
As of December 31, 1998
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
Company maintains its financial records in accordance with the Austrian
Commercial Code, which represents generally accepted accounting principles in
Austria ("Austrian GAAP"). Generally, accepted accounting principles in Austria
vary in certain significant respects from U.S. GAAP. Accordingly, the Company
has recorded certain adjustments in order that these financial statements be in
accordance with U.S. GAAP.
Business
VIANET EDV Dienstleistungs Gesellschaft mbH, an Austrian limited liability
company, was established in 1994. As of September 30, 1998 VIANET EDV
Dienstleistungs Gesellschaft mbH was legally transformed into VIANET
Telekommunikations AG, an Austrian joint-stock company ("the Company"). The
share capital of the Company was increased to ATS 1,000,000, of which ATS
750,000 has been paid in. The Company provides Internet services and
connections.
Cash & Cash Equivalents
Highly-liquid investments, with an original maturity of three months or less
from the date of purchase, are classified as cash equivalents.
Inventories
Inventories are valued at the lower of cost or market, with cost determined
on an actual basis.
Property, Plant and Equipment
The Company records fixed assets at cost less accumulated depreciation.
Depreciation, which begins when assets are placed in service, is calculated on
a straight-line basis over the estimated service lives.
Revenue Recognition
The Company's revenues consist of the basic fee that is paid three months in
advance and current fees which are invoiced after the relevant period. Prepaid
amounts are deferred under deferred income and are released into revenue over
the period of three months. Current fees are recognized as income immediately.
Fair Value of Financial Instruments
The carrying value of financial instruments such as cash, accounts receivable
and accounts payable approximate their fair value based on the short-term
maturities of these instruments. The carrying value of bank debt approximates
fair value based on quoted market prices for the same or similar issues as well
as the current rates offered to the Company.
Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-31
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Note 2. Recoverable Taxes and Other Receivables
Recoverable taxes and other receivables consist of (in ATS):
<TABLE>
<CAPTION>
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Capital gains tax receivable.............. 41,150 8,646 --
Value added tax........................... 26,998 38,310 29,860
Employee loans............................ 40,000 40,000 14,861
Other..................................... 22,599 39,131 463
--------- ---------- ----------
130,747 126,087 45,184
========= ========== ==========
Note 3. Trade Accounts Receivable
Total amount of accounts receivable is as follows (in ATS):
<CAPTION>
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Trade accounts receivable--domestic....... 3,542,557 7,419,133 10,360,528
Provision for bad debts................... (598,566) (1,845,672) (2,433,378)
--------- ---------- ----------
2,943,991 5,573,461 7,927,150
========= ========== ==========
</TABLE>
Provisions for bad debts were made for accounts receivable on a specific risk
of collection.
Note 4. Inventory
Inventory consists of hardware devices which are sold to customers. At
December 31, 1997 and 1998, there was no need to record a provision for
obsolete goods.
Note 5. Prepaid Expenses
Prepaid expenses consist principally of prepaid telecommunication fees,
licenses and rent expenses for a trade fair site.
Note 6. Fixed Assets
The range of estimated useful lives for different asset categories are as
follows:
<TABLE>
<S> <C>
Leasehold investments.............. 10 years
Hardware equipment................. 4-8 years
Office equipment................... 4-8 years
Intangible assets.................. 4-7 years
</TABLE>
In the year of acquisition depreciation is provided for a full year basis
when acquisition is in the first half of the year or with a half year rate when
acquisition is in the second half of the year.
Intangible assets relate to EDP software and amount to ATS 36.232,00.
Note 7. Overdraft
Overdrafts represent temporary overdrafts of bank balances. The overdrafts
are not subject to formal agreements and at December 31, 1998 and 1997 carried
interest rates of 7.5% and 14%, respectively.
F-32
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Note 8. Accrued Expenses
Accrued expenses consist of the following (in ATS):
<TABLE>
<CAPTION>
1996 1997 1998
------- --------- ---------
<S> <C> <C> <C>
Unused holidays................................. 111,300 187,600 363,300
Telecommunication fees.......................... 469,000 435,500 --
Professional fees............................... 137,700 629,000 622,000
Lawsuits........................................ -- -- 200,000
Warranties...................................... -- 210,000 210,000
Payroll taxes................................... -- 224,400 419,500
Services not yet invoiced and other accruals.... 230,000 230,000 305,300
------- --------- ---------
948,000 1,906,500 2,120,100
======= ========= =========
</TABLE>
Note 9. Deferred Income
The Company is an Internet provider and concludes contracts with various
private and business customers. Amounts on invoices consist of two parts: the
basic fee which is required to be paid three months in advance and current fees
which are invoiced on a current basis. Prepaid amounts are deferred under
deferred income.
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Deferred revenue................................... 841,983 953,178 4,747,993
</TABLE>
Note 10. Accrued Employee Benefits
According to Austrian labor law, employees are entitled to receive a
termination payment in case of termination of the employment contract by the
employer or upon retirement. The calculation of the amount due depends on the
service time and compensation of the employee. The amount ranges from two
months compensation for three months of services to 12 months compensation for
services of 25 years or longer.
The Company has recorded a provision for termination payments amounting to
ATS 61,000 and ATS 322,000 at December 31, 1997 and 1998, respectively. The
provision was calculated according to Austrian Commercial Code prescribing
application of a discounting method (discount rate 6%, retirement age 55/60 for
women/men).
Note 11. Shareholders Equity
The Company is a joint-stock company under Austrian law.
As of December 31, 1998 the Company's common stock of ATS 1,000,000 has been
paid up to an amount of ATS 750,000.
Dividends may only be declared and paid from the accumulated retained
earnings (after deduction of certain reserves) shown in the Company's annual
Austrian statutory unconsolidated accounts. Such amounts differ from the total
of retained earnings as shown in the accompanying financial statements in
accordance with U.S. GAAP. As of December 31, 1998, the Company's Austrian
statutory unconsolidated accounts reflected no accumulated earnings available
for distribution, and accordingly, the Company's ability to pay dividends in
the future will depend on the future earnings of the Company.
F-33
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Note 12. Provision for Income Taxes
The components of the provisions for income taxes are as follows (in ATS):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Current.......................................... 15,000 148,193 25,823
Deferred......................................... (18,899) 44,923 (30,763)
------- ------- --------
Income tax (benefit)............................. (3,899) 193,116 (4,940)
======= ======= ========
The components of the Company's deferred tax assets and liabilities are as
follows:
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Deferred tax assets
Net operating loss............................. 55,283 -- --
Accrued employee benefits...................... 8,500 20,740 109,480
------- ------- --------
63,783 20,740 109,480
======= ======= ========
Deferred tax liability
Depreciation................................... 44,899 46,764 104,741
------- ------- --------
Net deferred tax asset (liability)............... 18,899 (26,024) 4,739
======= ======= ========
A reconciliation of income taxes using the Austrian statutory federal income
tax rate of 34% to actual income taxes provided is as follows:
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Income tax at statutory rate..................... 31,225 45,418 (457,319)
Permanent differences............................ (31,438) 166,409 351,248
Other............................................ (3,686) (18,711) 101,131
------- ------- --------
(3,899) 193,116 (4,940)
======= ======= ========
</TABLE>
Permanent differences mainly consist of non-deductible entertainment costs
and non-deductible car costs.
Note 13. Commitments
The Company leases certain equipment under operating leases. The commitment
to future minimum lease payments is:
<TABLE>
<S> <C>
1999............................. ATS 591,725
2000............................. ATS 75,798
</TABLE>
Rent expense for operating leases approximated ATS 868,402, ATS 747,484.56
and ATS 535,563.42 for the years ended December 31, 1998, 1997 and 1996,
respectively.
F-34
<PAGE>
VIANET TELEKOMMUNIKATIONS AG
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Note 14. Contingencies
TUV Technischer Uberwachungsdienst Osterreich (TUV) filed a lawsuit against
the Company on December 1, 1997. TUV claimed ATS 210,000 for technical
malfunction of Cisco Routers which were installed and programmed by the
Company. TUV claims that the malfunction resulted in substantially increased
telephone charges. The Company has been advised by its outside counsel that TUV
could claim up to ATS 1,535,000. The company believes that the lawsuit can be
settled for a maximum amount of ATS 250,000 from which an amount of ATS 210,000
has been accrued. During the financial year 1998 no changes occurred in this
matter.
Note 15. Finance Lease
The Company has entered into a capital lease arrangement for the financing of
certain computer equipment. Future minimum lease payments are as follows (in
ATS):
<TABLE>
<S> <C>
1999........................................................... ATS 1,120,524
2000........................................................... ATS 1,120,524
2001........................................................... ATS 933,770
-------------
ATS 3,174,818
Less amount representing interest.............................. ATS 253,513
-------------
Present value of future minimum lease payments................. ATS 2,921,305
=============
Thereof noncurrent obligations................................. ATS 1,944,448
=============
</TABLE>
The net book value of computer equipment under capital lease included in
fixed assets at December 31, 1998 was ATS 2,917,327.
Note 16. Change of Ownership
Effective December 28, 1998, 100% of the Company's outstanding share capital
was acquired by Cybernet Internet Services International, Inc.
F-35
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Management and Shareholders
of OPEN:NET Netzwerkdienste GmbH, Ulm
We have audited the accompanying balance sheet of OPEN:NET Netzwerkdienste
GmbH as of December 31, 1997 and the related profit and loss statement for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Germany and the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OPEN:NET Netzwerkdienste GmbH
at December 31, 1997 and the results of operations for the year then ended, in
conformity with accounting principles generally accepted in Germany.
Accounting principles generally accepted in Germany vary in certain
significant respects from accounting principles generally accepted in the
United States of America to the extent summarized on page F-35-36 of the
financial statements.
/s/ Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
Munich, Germany
November 10, 1998
F-36
<PAGE>
OPEN:NET NETZWERKDIENSTE GmbH, Ulm
BALANCE SHEET
As of December 31, 1997
<TABLE>
<CAPTION>
DM DM
---------- ----------
<S> <C> <C>
ASSETS
A. Fixed Assets
I. Intangible Assets
1. Franchises, trademarks, patents, licenses, and
similar rights and licenses to such rights..... 10,337.00
II. Tangible Assets
1. Other equipment, furniture and fixtures........ 130,152.10
B. Current Assets
I. Inventories
1. Work in process................................ 20,000.00
II. Receivables and Other Assets.
1. Trade accounts receivable due after one year DM
0.00........................................... 476,206.02
2. Other assets due after one year DM 0.00........ 15,942.01 492,198.53
----------
III. Checks, cash on hand, Federal Bank and postal
giro balances, and cash in banks............... 3,191.45
C. Prepaid Expenses and Deferred Charges............. 27,600.00
----------
683,429.08
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
A. Equity
I. Stated Capital................................. 50,000.00
II. Retained Earnings.............................. 5,958.98
B. Accruals
1. Tax accruals................................... 2,700.00
2. Other accruals................................. 38,400.00 41,100.00
----------
D. Liabilities
1. Liabilities due to banks due within one year:
DM 38,211.17................................... 182,181.78
2. Trade accounts payable due within one year: DM
116,257.44..................................... 116,257.44
3. Other liabilities due within one year: DM
287,930.88 thereof due to shareholders DM
136,718.71 thereof for taxes DM 66,352.50
thereof for social security DM 18,892.52....... 287,930.88 586,370.10
---------- ----------
683,429.08
==========
</TABLE>
F-37
<PAGE>
OPEN:NET NETZWERKDIENSTE GmbH, Ulm
PROFIT AND LOSS STATEMENTS
<TABLE>
<CAPTION>
(Unaudited)
Eight Months
Ended Year ended
August 31 December 31
1998 1997
DM DM
------------ ------------
<C> <S> <C> <C>
1. Sales........................................ 1,748,006.37 1,776,454.36
2. Increase/Decrease in work in process......... (20,000.00) 4,600.00
3. Other operating income....................... 9,516.80 35,519.77
------------ ------------
1,737,523.25 1,816,574.13
4. Cost of materials
a) Cost of raw materials, supplies,
production materials and purchased goods.. 613,652.18 628,704.51
5. Personnel expenses
a) Wages and salaries........................ 616,478.27 486,678.69
b) Social security, pension and other benefit
costs thereof for pensions DM 1,816.50 and
DM 9,909.25............................... 97,388.82 61,240.67
------------ ------------
713,867.09 547,919.36
6. Depreciation and amortization
a) on intangible assets and tangible fixed
assets.................................... 66,434.57 72,182.42
7. Other operating expenses..................... 772,177.36 535,918.88
8. Other interest and similar income............ 3.29 203.11
9. Interest and similar expenses................ 5,836.51 15,854.63
------------ ------------
10. Result from ordinary operations.............. (434,441.17) 16,197.44
11. Taxes on income.............................. 9,020.00 10,334.75
------------ ------------
12. Net income for the year...................... (443,461.17) 5,862.69
------------ ------------
13. Profit/Loss carry-forward from prior year.... 5,958.98 96.29
------------ ------------
14. Retained Earnings............................ (437,502.19) 5,958.98
============ ============
</TABLE>
F-38
<PAGE>
OPEN:NET NETZWERKDIENSTE GmbH, Ulm
NOTES TO THE FINANCIAL STATEMENTS
General
The annual financial statements of OPEN: NET Netzwerkdienste GmbH have been
prepared in accordance with Section 242 and subsequent sections and Section 264
and subsequent sections of the German Commercial Code (HGB) as well as in
accordance with the relevant provisions of the Limited Liability Companies Law
(GmbHG). The Company is subject to the requirements for small companies.
The financial statement classifications remained unchanged. The profit and
loss statement was prepared in accordance with the total costs method and in
accordance with Sec. 275 of the German Commercial Code.
The company makes full use of the footnote disclosures exemptions for
smallsized corporations set forth in Sec. 288 of the commercial trade code.
Accounting and Valuation Methods
The following accounting and valuation methods, which remained unchanged in
comparison to the previous year, were used for preparing the financial
statements.
Acquired intangible and tangible assets are capitalized at acquisition cost
and, if they have a limited life, are reduced by ordinary depreciation in
accordance with their useful lives. To the extent permissible under the tax
law, the declining-balance method, otherwise the straight-line method is used.
Low-value assets of a value up to DM 800.00 are fully depreciated in the year
of acquisition with their immediate disposal being assumed. Depreciation on
additions to tangible assets is generally recognized proportionally based on
the month of acquisition. For movable assets, the simplification rule as
defined in R 44 Para. 2 of the Income Tax Guideline (EStR) is used.
Receivables and other assets are stated at their nominal value. All
foreseeable valuation risks are provided for via adequate specific allowances.
General credit risk is provided for through a general allowance.
Other accruals take into account all contingent liabilities and anticipated
losses from pending transactions.
Liabilities are recorded at their repayment value.
Explanations to the Balance Sheet
Fixed Assets
The roll-forward of the individual fixed asset positions including current-
year depreciation is disclosed under "Roll-Forward of Fixed Assets".
F-39
<PAGE>
OPEN:NET NETZWERKDIENSTE GmbH, Ulm
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Fixed Assets Rollforward
<TABLE>
<CAPTION>
Acquisition and Production Cost Accumulated Depreciation Net Book V
------------------------------------------ ---------------------------------------- ----------
01.01.97 Additions Disposals 31.12.97 01.01.97 Additions Disposals 31.12.97 31.12.97
DM DM DM DM DM DM DM DM DM
---------- ---------- --------- ---------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Assets
I. Intangible Assets
I. Franchises,
trademarks,
patents, licenses
and similar rights
and licenses to
such rights........ 5,147.36 10,374.99 0.00 15,522.35 1,358.36 3,826.99 0.00 5,185.35 10,337.00
---------- ---------- ---- ---------- --------- --------- ---- ---------- ----------
II. Tangible Assets
3. Other equipment,
furniture and
fixtures............ 107,558.07 121,852.43 0.00 229,410.50 30,903.07 68,355.43 0.00 99,258.50 130,152.00
========== ========== ==== ========== ========= ========= ==== ========== ==========
112,705.43 132,227.42 0.00 244,932.85 32,261.43 72,182.42 0.00 104,443.85 140,489.00
========== ========== ==== ========== ========= ========= ==== ========== ==========
</TABLE>
Receivables and Other Assets
Other assets include corporate income tax refunds and VAT deductible in 1998.
Tax and other accruals
Tax accruals relate to trade tax on income for 1997.
Other accruals were set up for outstanding vacation and tax consultant fees.
Liabilities due to banks
Liabilities with remaining terms of more than 5 years amount to DM 26,760.00.
Other Liabilities
Other Liabilities include payables due to shareholders, VAT payables,
outstanding invoices and commissions.
The payables due to shareholders amount to DM 136,718.73.
Contingent Liabilities and Other Financial Obligations
There are no contingent liabilities. Other financial obligations amount to DM
52,425.00.
Explanations to the Profit and Loss Statement
Other Operating Expenses
Other expenses primarily contain expenses for premises and equipment, sales
commissions and external services.
F-40
<PAGE>
OPEN:NET NETZWERKDIENSTE GmbH, Ulm
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Other Disclosures
Management
General Managers during the financial year were:
Thomas Egner
Uwe Hagenmeier
Martin Heimann (until January 28, 1997)
Roland Lohmiller (until January 28, 1997)
Recommendation on the Appropriation of Retained Earnings
In agreement with the shareholders management recommends the carry forward
the retained earnings of DM 5,958.98 to the next financial year.
Significant Differences between Generally Accepted Accounting Principles in
Germany and the United States of America
Generally accepted accounting principles in Germany ("German GAAP") vary in
certain respects from generally accepted accounting principles in the United
States of America ("US GAAP"). The significant differences between the
accounting principles applied and those which would be applied under US GAAP
are summarized below:
Cash Flow Statements
Statements of cash flows are required to be presented under US GAAP. Cash
flow statements are not required by German GAAP.
Special accelerated depreciation
Special accelerated depreciation for tax purposes has been recorded in the
accounts and deducted from the book value of fixed assets. Under US GAAP,
accelerated depreciation would not be recorded in the financial statements.
Capitalization of Interest Cost
In application of FAS-51 and under the provisions of FAS-34 certain interest
costs, if material, have to be capitalized and added to the acquisition cost of
assets which require a certain time to get ready for their intended use. German
GAAP does not allow for the capitalization of interest related to constructed
assets.
Gunzburg, August 1998
The management
OPEN NET Netzwerkdienste GmbH
F-41
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Chairman of the Board
Flashnet S.p.A.
Via della Pisana 280/A
Rome, Italy
We have audited the accompanying balance sheet of Flashnet S.p.A. (an Italian
Company) as of December 31, 1998, and the related statements of loss,
stockholders' deficit, and cash flows for the year then ended, expressed in
Italian Lire. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Flashnet S.p.A as of December
31, 1998, and the results of its operations and its cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
May 14, 1999
Grant Thornton S.p.A.
Rome, Italy
F-42
<PAGE>
FLASHNET S.p.A.
BALANCE SHEET
DECEMBER 31, 1998
(amounts in thousands of ITL)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash............................................................. 32,034
Accounts receivable, net of allowance for doubtful accounts of
50,000 (Note 2.c)............................................... 4,499,540
Inventories (Notes 2.d and 3).................................... 174,770
Deferred income taxes (Notes 2.i and 14)......................... 964,301
Prepaid cable rentals............................................ 530,294
Other current assets............................................. 301,985
----------
Total current assets........................................... 6,502,924
Property, plant, and equipment (Notes 2.e and 4)................... 3,647,901
Other assets (Note 5).............................................. 1,288,611
----------
Total Assets................................................... 11,439,436
==========
LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities
Bank overdraft................................................... 716,437
Accounts payable................................................. 4,966,300
Current maturities of long-term debt............................. 365,995
Deferred income (Note 2.j)....................................... 2,774,708
Other current liabilities (Note 6)............................... 1,626,158
----------
Total current liabilities...................................... 10,449,598
Long-term liabilities
Obligations under capital leases (Note 7)........................ 628,885
Severance indemnities (Notes 2.g and 8).......................... 94,344
Bonds payable (Note 9)........................................... 800,000
----------
Total Liabilities.............................................. 11,972,827
----------
Stockholders' deficit..............................................
Common stock, par value ITL 1,000, authorized 2,297,142 shares,
issued, and outstanding 2,182,857 shares (Note 10).............. 2,182,857
Additional paid-in capital....................................... 983,891
Accumulated deficit (Notes 2.h and 11)........................... (3,700,139)
----------
Total Stockholders Deficit..................................... (533,391)
----------
Total Liabilities and Stockholders Deficit..................... 11,439,436
==========
</TABLE>
See accompanying notes.
F-43
<PAGE>
FLASHNET S.p.A.
STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands of ITL)
<TABLE>
<S> <C>
Net sales........................................................... 8,334,043
Cost of sales....................................................... (6,615,614)
----------
Gross profit........................................................ 1,718,429
Operating expenses.................................................. (4,562,098)
----------
Loss from operations................................................ (2,843,669)
Other income (expense)
Interest expense, net............................................. (369,914)
Penalties and interest on late payment of payroll taxes........... (358,780)
Rent income....................................................... 42,000
Others............................................................ 149,691
----------
Total other income (expense).................................... (537,003)
----------
Loss before income taxes............................................ (3,380,672)
Income taxes (Notes 2.i and 14)..................................... 1,015,169
----------
Net loss............................................................ (2,365,503)
==========
</TABLE>
See accompanying notes.
F-44
<PAGE>
FLASHNET S.p.A.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands of ITL)
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated
Total stock capital deficit
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Beginning balance............... (434,636) 900,000 (1,334,636)
Sale of stock................... 2,200,000 282,857 1,917,143
Stock split..................... 1,000,000 (1,000,000)
Shareholders contribution of
additional paid-in capital..... 66,748 66,748
Net loss for the period......... (2,365,503) (2,365,503)
---------- --------- ---------- ----------
Ending balance.................. (533,391) 2,182,857 983,891 (3,700,139)
========== ========= ========== ==========
</TABLE>
See accompanying notes.
F-45
<PAGE>
FLASHNET S.p.A.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(amounts in thousands of ITL)
<TABLE>
<S> <C> <C>
Cash flows from operating activities
Net loss.................................................... (2,365,503)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.............................. 656,685
Change in assets and liabilities
Increase in accounts receivable........................... (2,320,596)
Decrease in inventories................................... 24,663
Increase in deferred tax asset--current................... (388,590)
Increase in deferred tax asset--noncurrent................ (728,197)
Increase in other current assets.......................... (201,760)
Increase in accounts payable.............................. 2,237,870
Increase in deferred income............................... 1,379,045
Increase in other current liabilities..................... 885,468
Increase in severance indemnities, net.................... 62,313
----------
Net cash used in operating activities.................... (758,602)
----------
Cash flows from investing activities
Purchase of property, plant, and equipment................. (1,487,740)
Payment to purchase the assets of Venezia Net Srl, net of
cash acquired............................................. (85,500)
Increase in other assets................................... (16,152)
----------
Net cash used in investing activities.................... (1,589,392)
----------
Cash flows from financing activities
Decrease in bank overdraft................................. (338,985)
Proceeds from sale of common stock......................... 2,200,000
Proceeds from issuance of bonds............................ 800,000
Proceeds from contribution of additional paid-in capital... 66,748
Principal payments under capital lease obligation.......... (366,041)
----------
Net cash provided by financing activities................ 2,361,722
Net change in cash and cash equivalents...................... 13,728
Cash and cash equivalents--beginning of period............... 18,306
----------
Cash and cash equivalents--end of period..................... 32,034
==========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest................................................... 118,727
Income taxes............................................... 87,045
Supplemental schedule of noncash investing and financing
activities:
1. Capital lease obligations of ITL 648,231 were incurred when the Company
entered into 10 leases for new telephone and computer equipment and
vehicles.
2. Additional capital stock was issued as a result of the stock splits
described in Note 11.
3. The Company purchased the assets of Venezia Net Srl for ITL 85,500. In
conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired ........................... 150,528
Cash paid to acquire the assets.......................... (85,500)
----------
Liabilities assumed.................................... 65,028
==========
</TABLE>
See accompanying notes.
F-46
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. General
Flashnet S.p.A., the "Company", was established in Italy in 1995, and is
mainly involved in providing internet and long-distance telephone services.
2. Summary of Significant Accounting Policies
a. Basis of Financial Statements presentation
The company maintains its accounting records in Italian Liras ("ITL") and
prepares its statutory financial statements in confirmity with accounting
principles generally accepted in Italy.
The accompanying financial statements have been restated in order to comply
with accounting principles generally accepted in the United States of America,
for consolidation purposes. The main adjustments have been made to reflect the
provisions of FAS-13 (Accounting for Leases), and SOP 98-1 (Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use).
All information contained in the accompanying financial statements and
related notes are expressed in thousands of ITL ("ITL/000"), unless differently
indicated.
b. Statements of cash flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificate of deposits, and all highly liquid debt instruments with
original maturities of three months or less.
c. Accounts receivable
Accounts receivable are reported at net realizable value. Net realizable
value is equal to the gross amount of receivable less an allowance for doubtful
accounts, based on an estimate of the collectibility of individual accounts and
prior years' bad debt experience.
d. Inventories
Inventories are stated at the lower of cost, determined by the FIFO method,
or market.
e. Property, plant, and equipment
The cost of property, plant, and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets.
Depreciation is computed using the straight line method for both financial
reporting and income tax purposes.
Maintenance and repairs are charged to operations when incurred. Betterment
and renewals are capitalized. When property, plant, and equipment is sold or
otherwise disposed of, the asset account and related accumulated depreciation
account are relieved and any gain or loss is included in operations.
The useful lives of property, plant, and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Computer and telephone equipment ............................... 8.5 years
Office furniture and equipment.................................. 3-8 years
Vehicles........................................................ 4 years
</TABLE>
Property, plant, and equipment costing less than ITL 1,000,000 is entirely
expensed in the year of acquisition.
F-47
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
g. Severance indemnities
Under Italian Law, all employees are entitled to receive severance
indemnities upon termination of their employment, based on salary paid and
increase in cost of living. The severance indemnities accrue approximately at
the rate of 1/13.5 of the gross salaries paid during the year, and are
revaluated applying a cost of living factor established by the Italian
Government.
h. Retained Earnings
Italian corporations are required, under Italian Business Law, to appropriate
to a legal reserve not less than 1/20 of the net income for the period, until
the legal reserve reaches an amount equal to 1/5 of the capital stock. The
legal reserve is not available for distribution.
i. Income taxes
Income taxes are accounted for by the asset/liability approach in accordance
with FASB Statement 109. Deferred taxes arising from taxable temporary
differences and deductible temporary differences are included in the tax
expense in the income statement and in the deferred tax balances in the balance
sheet. Deferred tax assets are subject to reduction by a valuation account if
evidence indicates that it is more likely than not that some or all the
deferred tax assets will not be realized. Income taxes attributable to items
charged or credited directly to shareholders' equity, are charged or credited
to that component of shareholders' equity.
j. Deferred income
The Company collects in advance the subscriptions as provider of Internet
services from customers, and allocates the related revenues based on time
remaining to the end of the contract. Deferred income represents the unearned
portion at the balance sheet date.
k. Goodwill
Goodwill represents the excess of the cost of companies acquired over the
fair value of its net assets at dates of acquisition, and is being amortized on
the straight-line method over five years. The carrying amount of goodwill is
reviewed if the facts and circumstances suggest that it may be impaired.
Negative operating results, negative cash flows from operations, among other
factors, could be indicative of the impairment of goodwill. If this review
indicates that goodwill will not be recoverable, the Company's carrying value
of goodwill would be reduced.
l. Research and development costs and advertising costs
Research and development costs and advertising costs, are charged to
operations when incurred and are included in operating expenses.
3. Inventories
Inventories at December 31, 1998 consist of;
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Finished goods....................................................... 174,770
Less: allowance for obsolete inventory............................... 0
-------
174,770
=======
</TABLE>
F-48
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
4. Property, Plant, and Equipment
Following is a summary of property, plant, and equipment at cost, less
accumulated depreciation at December 31, 1998:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Telephone and computer equipment (owned).......................... 2,111,169
Telephone and computer equipment (leased)......................... 1,454,404
Office furniture and equipment.................................... 283,929
Leasehold improvements............................................ 445,339
Vehicles (leased)................................................. 184,870
---------
4,479,711
Less: accumulated depreciation (831,810)
---------
3,647,901
=========
</TABLE>
Depreciation expense charged to operations for the year ended December 31,
1998 was ITL/000 525,270.
5. Other Assets
Other assets at December 31, 1998 consist of:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Goodwill (net of accumulated amortization of ITL/000 456,416).... 278,527
Deferred income taxes............................................ 991,374
Others........................................................... 18,710
---------
1,288,611
=========
</TABLE>
Amortization of goodwill charged to operations for the year ended December
31, 1998 was ITL/000 131,416.
6. Other Current Liabilities
Other current liabilities at December 31, 1998 consist of:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Provision for penalties and interest on late payment of payroll
taxes.......................................................... 358,780
Income taxes payable............................................ 101,619
Payroll taxes payable........................................... 679,613
Salaries payable................................................ 116,076
VAT payable..................................................... 98,584
Others.......................................................... 271,486
---------
1,626,158
=========
</TABLE>
7. Obligations under Capital Leases
The Company is the lessee of computer and telephone equipment and five
vehicles under capital leases expiring in various years through October 2003.
The assets and liabilities under capital leases are recorded at the fair value
of the leased property, which approximates the present value of the minimum
lease payments.
F-49
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
Depreciation of the assets under capital lease is included in depreciation
expense for the period and is based on the assets estimated useful life.
Accumulated depreciation of as of December 31, 1998 was ITL/000 241,657.
Minimum future lease payments as of December 31, 1998 for each of the next
five years and in the aggregate are:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Year ending December 31:
1999............................................................ 555,536
2000............................................................ 483,909
2001............................................................ 204,843
2002............................................................ 20,438
2003............................................................ 16,174
Subsequent to December 31, 2003................................... 0
---------
Total minimum lease payments...................................... 1,280,900
Less: amount representing interest................................ (286,020)
---------
Present value of minimum lease payments........................... 994,880
=========
</TABLE>
The above payments are computed using the interest rate in effect at December
31, 1998; actual payments may vary because of changes in applicable rates.
All leases provide for purchase options at the expiration of the lease; the
minimum future lease payments above, include the payments required to exercise
the purchase options.
8. Severance Indemnities
The amount shown in the financial statements represents the actual liability
at the balance sheet date. Following is detail of changes during the year ended
December 31, 1998:
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Balance--December 31, 1997.......................................... 32,030
Severance indemnities expense for the year.......................... 72,232
Indemnities paid during the year.................................... (9,918)
------
Balance--December 31, 1998.......................................... 94,344
======
</TABLE>
Severance indemnities expense for the year ended December 31, 1998 includes
the following components:
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Indemnities accrued for the year..................................... 71,494
Revaluation of indemnities accrued at December 31, 1997.............. 738
------
72,232
======
</TABLE>
F-50
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
9. Bonds Payable
Bonds payable consist of 800,000, 5% unsecured convertible bonds, face value
ITL 1,000 per bond, payable in quarterly installments from December 31, 2001 to
December 31, 2003. The bonds are convertible in 114,285 common shares (7-for-
1), par value ITL 1,000 per share.
Maturities as of December 31, 1998 for each of the next 5 years and in the
aggregate are:
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Year ending December 31:
1999............................................................... 0
2000............................................................... 0
2001............................................................... 120,000
2002............................................................... 400,000
2003............................................................... 400,000
-------
920,000
=======
</TABLE>
Interest expense for the year ended December 31, 1998 was ITL/000 14,696.
10. Capital Stock
On August 5, 1998, the Stockholders approved:
a) A 1000-for-1 stock split, thereby increasing the number of issued and
outstanding shares from 900 to 900,000, and decreasing the par value of
each share from ITL 1,000,000 to ITL 1,000.
b) To increase the Company's capital stock from ITL 900,000,000 to ITL
1,182,857,000, issuing 282,857 additional shares of the Company's ITL
1,000 par value common stock, at a price of ITL 7,777.7817 per share.
c) A 1.84541073-for-1 stock split of the Company's ITL 1,000 par value
common stock. As a result of the split, 1,000,000 additional shares were
issued, additional paid-in capital was reduced from ITL 1,917,143,000 to
ITL 917,143,000, and common stock was increased from ITL 1,182,857,000
to ITL 2,182,857,000.
d) A capital contribution of ITL 66,748,000 as additional paid-in capital.
11. Accumulated Deficit
As described in Note 2.i, Italian corporations are required to maintain a
legal reserve that is not available for distribution, and only the
unappropriated retained earnings resulting from the statutory financial
statements prepared in accordance with Italian GAAP are available for
distribution.
Accumulated deficit as of December 31, 1998 consists of:
<TABLE>
<CAPTION>
ITL/000
----------
<S> <C>
Legal reserve (restricted)....................................... 175
Net loss for the period--Italian GAAP basis...................... (1,207,286)
Increase in accumulated deficit due to US GAAP adjustments....... (2,493,028)
----------
(3,700,139)
==========
</TABLE>
F-51
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
12. Business combinations
On November 26, 1998, the Company acquired the assets of Venezia Net S.r.l.
in a business combination accounted for as a purchase. Venezia Net S.r.l. is
primarily engaged in providing internet services. The results of operations of
Venezia Net S.r.l. are included in the accompanying financial statements since
the date of acquisition. The total cost of the acquisition was ITL/000 94,477,
which exceeded the fair value of the net assets of Venezia Net S.r.l. by
ITL/000 84,943. As indicated in Note 2.k, the excess is being amortized on the
straight-line method over five years.
13. Related-Party Transactions
The Company sells Internet services, purchases part of its computer
equipment, and leases part of its office to a minority stockholder. The Company
is also indebted with two minority stockholders because of the bonds and
related interest, described in Note 9. Following is a summary of transactions
and balances at December 31, 1998:
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Purchases from stockholder........................................... 375,092
=======
Sales to stockholder................................................. 57,410
=======
Rent income.......................................................... 42,000
=======
Interest on bonds.................................................... 14,696
=======
Due from stockholder (included in accounts receivable)............... 351,641
=======
Bonds payable........................................................ 800,000
=======
</TABLE>
14. Income Taxes
Income tax expense for the year ended December 31, 1998 consists of:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Current........................................................... (101,618)
Deferred.......................................................... 1,116,787
---------
1,015,169
=========
</TABLE>
The following temporary differences gave rise to the current and noncurrent
deferred tax asset at December 31, 1998:
<TABLE>
<CAPTION>
ITL/000
-------
<S> <C>
Service income deferred for financial accounting purposes......... 964,301
-------
Total Deferred Tax Asset--Current................................. 964,301
=======
Lease capitalized for financial accounting purposes but expensed
for tax purposes................................................. (83,007)
Intangible assets expensed for financial accounting purposes and
deferred for tax purposes........................................ 839,381
Net operating loss carryforward................................... 235,000
-------
Total Deferred Tax Asset--Noncurrent.............................. 991,374
=======
</TABLE>
F-52
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
15. Research and Development Costs
Research and development costs charged to operations for the year ended
December 31, 1998 were ITL/000 834,041.
16. Commitments and Contingencies
a. At December 31, 1998, the Company is contingently liable for penalties
and interest relating to late payment of payroll taxes. Accordingly, a
provision of ITL/000 358,780 has been charged to operations in the
accompanying financial statements.
b. The Company leases office space under operating leases expiring in
various years through January 2004. Minimum future rental payments under
non-cancelable operating leases having remaining terms in excess of 1
year as of December 31, 1998 for each of the next 5 years and in the
aggregate are:
<TABLE>
<CAPTION>
ITL/000
---------
<S> <C>
Year ending December 31:
1999............................................................. 344,252
2000............................................................. 344,252
2001............................................................. 344,252
2002............................................................. 344,252
2003............................................................. 57,780
Subsequent to December 31, 2003.................................. 1,050
---------
Total minimum future rental payments............................. 1,435,838
=========
</TABLE>
Rental expense under operating leases for the year ended December 31, 1998
was ITL/000 118,820.
17. Subsequent Events
On April 9, 1999, the Stockholders approved:
a. To increase the Company's capital stock from ITL 2,182,857,000 to ITL
2,690,937,000, issuing 427,080 additional shares of the Company's ITL
1,000 par value common stock, at a price of ITL 4,214.667 par share.
b. To issue at no cost 171,428 warrants to purchase 171,428 shares of the
Company's common stock, ITL 1,000 par value, at ITL 7,000.0233 per
share. On the same date the Stockholders authorized the issuance of
171,428 additional shares of the Company's ITL 1,000 par value common
stock, that were reserved for that purpose. The warrants are exercisable
through December 31, 2001.
F-53
<PAGE>
FLASHNET S.p.A.
BALANCE SHEETS
MARCH 31, 1999 AND 1998
(amounts in thousands of ITL)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Cash................................................. 45,333 21,563
Accounts receivable (Note 2.c and 3)................. 5,886,650 2,127,182
Inventories (Notes 2.d and 4)........................ 489,895 197,190
Deferred income taxes (Notes 2.i and 13)............. 993,775 517,243
Prepaid cable rentals................................ 200,808 53,096
Other current assets................................. 403,341 61,276
---------- ----------
Total current assets............................... 8,019,802 2,977,550
Property, plant, and equipment (Notes 2.e and 5)....... 3,962,956 2,304,606
Other assets (Note 6).................................. 1,611,896 856,432
---------- ----------
Total Assets....................................... 13,594,654 6,138,588
========== ==========
LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities
Bank overdraft....................................... 534,966 1,089,447
Accounts payable..................................... 7,585,701 2,999,429
Current maturities of long-term debt................. 401,217 220,614
Deferred income (Note 2.j)........................... 2,886,431 1,267,735
Other current liabilities (Note 7)................... 1,995,149 1,209,351
---------- ----------
Total current liabilities.......................... 13,403,464 6,786,576
Long-term liabilities
Obligations under capital leases (Note 8)............ 623,106 516,395
Severance indemnities (Notes 2.g and 9).............. 134,638 38,867
Bonds payable (Note 10).............................. 800,000 0
---------- ----------
Total Liabilities.................................. 14,961,208 7,341,838
---------- ----------
Stockholders deficit
Common stock, par value ITL 1,000 in 1999 and ITL
1,000,000 in 1998, authorized 2,297,142 shares in
1999 and 900 shares in 1998, issued and outstanding
2,182,857 shares in 1999 and 900 shares in 1998..... 2,182,857 900,000
Additional paid-in capital........................... 983,891 0
Accumulated deficit (Notes 2.h and 11)............... (4,533,302) (2,103,250)
---------- ----------
Total Stockholders Deficit......................... (1,366,554) (1,203,250)
---------- ----------
Total Liabilities and Stockholders Deficit......... 13,594,654 6,138,588
========== ==========
</TABLE>
See accompanying notes.
F-54
<PAGE>
FLASHNET S.p.A.
STATEMENTS OF LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(amounts in thousands of ITL)
(unaudited)
<TABLE>
<S> <C> <C>
Net sales............................................. 3,174,987 1,243,465
Cost of sales......................................... (2,735,912) (1,129,140)
----------- ----------
Gross profit.......................................... 439,075 114,325
Operating expenses.................................... (1,510,442) (815,964)
----------- ----------
Loss from operations.................................. (1,071,367) (701,639)
----------- ----------
Other income (expense)
Interest expense, net .............................. (113,646) (104,334)
Penalties and interest on late payment of payroll
taxes.............................................. (11,341) (222,547)
Rent income......................................... 10,500 10,500
Others.............................................. 13,185 9,119
----------- ----------
Total other income (expense)...................... (101,302) (307,262)
----------- ----------
Loss before income taxes.............................. (1,172,669) (1,008,901)
Income taxes (Notes 2.i and 13)....................... 339,506 240,287
----------- ----------
Net loss.............................................. (833,163) (768,614)
=========== ==========
</TABLE>
See accompanying notes.
F-55
<PAGE>
FLASHNET S.p.A.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(amounts in thousands of ITL)
(unaudited)
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated
Total stock capital deficit
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, Jan. 1, 1998 ITL/000.... (434,636) 900,000 (1,334,636)
Net loss for the period ......... (768,614) (768,614)
---------- --------- ------- ----------
Balance, Mar. 31, 1998 ITL/000... (1,203,250) 900,000 (2,103,250)
========== ========= ======= ==========
Balance, Jan. 1, 1999 ITL/000.... (533,391) 2,182,857 983,891 (3,700,139)
Net loss for the period ......... (833,163) (833,163)
---------- --------- ------- ----------
Balance, Mar. 31, 1999 ITL/000... (1,366,554) 2,182,857 983,891 (4,533,302)
========== ========= ======= ==========
</TABLE>
See accompanying notes.
F-56
<PAGE>
FLASHNET S.p.A.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(amounts in thousands of ITL)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Cash flows from operating activities
Net loss................................................ (833,163) (768,614)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization.......................... 208,548 111,937
Change in assets and liabilities
(Increase) decrease in accounts receivable............ (1,387,110) 51,762
(Increase) decrease in inventories.................... (315,125) 2,243
(Increase) decrease in deferred tax asset-current..... (29,474) 58,468
(Increase) decrease in deferred tax asset-noncurrent.. (360,032) (298,755)
Decrease in other current assets...................... 228,130 516,147
Increase in accounts payable.......................... 2,619,401 270,999
Increase (decrease) in deferred income................ 111,723 (127,928)
Increase in other current liabilities................. 368,991 468,661
Increase in severance indemnities, net................ 40,294 6,836
---------- --------
Net cash provided by operating activities............ 652,183 291,756
---------- --------
Cash flows from investing activities.....................
Purchase of property, plant, and equipment.............. (343,545) (240,668)
---------- --------
Net cash used in investing activities................ (343,545) (240,668)
---------- --------
Cash flows from financing activities.....................
(Decrease) increase in bank overdraft................... (181,471) 34,025
Principal payments under capital lease obligations...... (113,868) (81,856)
---------- --------
Net cash used in financing activities................ (295,339) (47,831)
---------- --------
Net change in cash and cash equivalents.................. 13,299 3,257
Cash and cash equivalents--beginning of period........... 32,034 18,306
---------- --------
Cash and cash equivalents--end of period................. 45,333 21,563
========== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest.............................................. 28,643 9,174
Income taxes.......................................... 0 0
Supplemental schedule of noncash investing and financing
activities:
The following capital obligations were incurred when
the Company entered into new leases for new telephone
and computer equipment................................ 143,311 106,175
</TABLE>
See accompanying notes.
F-57
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 and 1998
(unaudited)
1. General
Flashnet S.p.A., the "Company", was established in Italy in 1995, and is
mainly involved in providing internet and long-distance telephone services.
2. Summary of Significant Accounting Policies
a. Basis of Financial Statements presentation
The Company maintains its accounting records in Italian Liras ("ITL") and
prepares its statutory financial statements in conformity with accounting
principles generally accepted in Italy. The accompanying financial statements
have been restated in order to comply with accounting principles generally
accepted in the United States of America, for consolidation purposes. The main
adjustments have been made to reflect the provisions of FAS-13 (Accounting for
Leases), and SOP 98-1 (Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use).
All information contained in the accompanying financial statements and
related notes are expressed in thousands of ITL ("ITL/000"), unless otherwise
indicated.
b. Statement of cash flows
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificate of deposits, and all highly liquid debt instruments with
original maturities of three months or less.
c. Accounts receivable
Accounts receivable are reported at net realizable value. Net realizable
value is equal to the gross amount of receivable less an allowance for doubtful
accounts, based on an estimate of the collectibility of individual accounts and
prior years' bad debt experience.
d. Inventories
Inventories are stated at the lower of cost, determined by the FIFO method,
or market.
e. Property, plant, and equipment
The cost of property, plant, and equipment is depreciated over the estimated
useful lives of the related assets. Leasehold improvements are depreciated over
the lesser of the term of the related lease or the estimated useful lives of
the assets. Depreciation is computed using the straight line method for both
financial reporting and income tax purposes.
Maintenance and repairs are charged to operations when incurred. Betterment
and renewals are capitalized. When property, plant, and equipment is sold or
otherwise disposed of, the asset account and related accumulated depreciation
account are relieved and any gain or loss is included in operations.
The useful lives of property, plant, and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Computer and telephone equipment................................. 8.5 years
Office furniture and equipment................................... 3-8 years
Vehicles......................................................... 4 years
</TABLE>
Property, plant, and equipment costing less than ITL 1,000,000 is entirely
expensed in the year of acquisition.
F-58
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
g. Severance indemnities
Under Italian Law, all employees are entitled to receive severance
indemnities upon termination of their employment, based on salary paid and
increase in cost of living. The severance indemnities accrue approximately at
the rate of 1/13.5 of the gross salaries paid during the year, and are
revaluated applying a cost of living factor established by the Italian
Government.
h. Retained Earnings
Italian corporations are required, under Italian Business Law, to appropriate
to a legal reserve not less than 1/20 of the net income for the period, until
the legal reserve reaches an amount equal to 1/5 of the capital stock. The
legal reserve is not available for distribution.
i. Income taxes
Income taxes are accounted for by the asset/liability approach in accordance
with FASB Statement 109. Deferred taxes arising from taxable temporary
differences and deductible temporary differences are included in the tax
expense in the income statement and in the deferred tax balances in the balance
sheet. Deferred tax assets are subject to reduction by a valuation account if
evidence indicates that it is more likely than not that some or all the
deferred tax assets will not be realized. Income taxes attributable to items
charged or credited directly to shareholders' equity, are charged or credited
to that component of shareholders' equity.
j. Deferred income
The Company collects in advance the subscriptions as provider of internet
services from customers, and allocates the related revenues based on time
remaining to the end of the contract. Deferred income represents the unearned
portion at the balance sheet date.
k. Goodwill
Goodwill represents the excess of the cost of companies acquired over the
fair value of its net assets at dates of acquisition, and is being amortized on
the straight-line method over five years. The carrying amount of goodwill is
reviewed if the facts and circumstances suggest that it may be impaired.
Negative operating results, negative cash flows from operations, among other
factors, could be indicative of the impairment of goodwill. If this review
indicates that goodwill will not be recoverable, the Company's carrying value
of goodwill would be reduced.
I. Research and development costs and advertising costs
Research and development costs and advertising costs, are charged to
operations when incurred and are included in operating expenses.
3. Accounts Receivable
Following is a summary of accounts receivable at March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C> <C>
Trade accounts............................... ITL/000 5,936,650 2,177,182
Less: allowance for doubtful accounts........ (50,000) (50,000)
--------- ---------
ITL/000 5,886,650 2,127,182
========= =========
</TABLE>
F-59
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
4. Inventories
Inventories at March 31, 1999 and 1998 consist of:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C> <C>
Finished goods............................. ITL/000 489,895 197,190
Less: allowance for obsolete inventory..... 0 0
---------- ---------
ITL/000 489,895 197,190
========== =========
5. Property, Plant, and Equipment
Following is a summary of property, plant, and equipment at cost, less
accumulated depreciation at March 31, 1999 and 1998:
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C> <C>
Telephone and computer equipment (owned)... ITL/000 2,327,829 1,387,880
Telephone and computer equipment (leased).. 1,597,715 1,097,218
Office furniture and equipment............. 377,630 147,301
Leasehold improvements..................... 477,990 58,633
Vehicles (leased).......................... 185,403 0
---------- ---------
4,966,567 2,691,032
Less: accumulated depreciation............. (1,003,611) (386,426)
---------- ---------
ITL/000 3,962,956 2,304,606
========== =========
Depreciation expenses charged to operations for the three months ended March
31, 1999 and 1998, was ITL/000 171,801 and ITL/000 79,437, respectively.
6. Other Assets
Other assets at March 31, 1999 and 1998 consist of:
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C> <C>
Goodwill (net of accumulated amortization
of ITL/000 493,163 in 1999 and ITL/000
357,500 in 1998).......................... ITL/000 241,780 292,500
Deferred income taxes...................... 1,351,406 561,932
Others..................................... 18,710 2,000
---------- ---------
ITL/000 1,611,896 856,432
========== =========
</TABLE>
Amortization of goodwill charged to operations for the three months ended
March 31, 1999 and 1998, was ITL/000 36,747 and ITL/000 32,500, respectively.
F-60
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
7. Other Current Liabilities
Other current liabilities at March 31, 1999 and 1998 consist of:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C> <C>
Provision for penalties and interest on late
payment of payroll taxes..................... ITL/000 370,121 222,547
Income taxes payable.......................... 71,031 22,967
Payroll taxes payable......................... 656,738 449,682
Salaries payable.............................. 147,419 42,146
VAT payable................................... 101,407 158,655
Others........................................ 648,433 313,354
--------- ---------
ITL/000 1,995,149 1,209,351
========= =========
</TABLE>
8. Obligations Under Capital Leases
The Company is the lessee of computer and telephone equipment and five
vehicles under capital leases expiring in various years through December 2003.
The assets and liabilities under capital leases are recorded at the fair value
of the leased property, which approximates the present value of the minimum
lease payments.
Depreciation of the assets under capital lease is included in depreciation
expense for the period and is based on the assets estimated useful life.
Accumulated depreciation of as of March 31, 1999 and 1998 was ITL/000 298,994
and ITL/000 103,146, respectively.
Minimum future lease payments as of March 31, 1999 for each of the next five
years and in the aggregate are:
<TABLE>
<S> <C> <C>
Year ending March 31:
1999...................................................... ITL/000 585,557
2000...................................................... 451,600
2001...................................................... 196,200
2002...................................................... 49,805
2003...................................................... 19,148
Subsequent to March 31, 2003.............................. 0
---------
Total minimum lease payments.............................. 1,302,310
Less: amount representing interest........................ (277,987)
---------
Present value of minimum lease payments................... ITL/000 1,024,323
=========
</TABLE>
The above payments are computed using the interest rate in effect at December
31, 1998; actual payments may vary because of changes in applicable rates.
All leases provide for purchase options at the expiration of the lease; the
minimum future lease payments above, include the payments required to exercise
the purchase options.
F-61
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
9. Severance Indemnities
The amount shown in the financial statements represents the actual liability
at the balance sheet date. Following is detail of changes during the three
months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C> <C>
Balance--beginning of period........................ ITL/000 94,344 32,030
Severance indemnities expense for the period........ 42,474 10,244
Indemnities paid during the period.................. (2,180) (3,407)
------- ------
Balance--end of period.............................. ITL/000 134,638 38,867
======= ======
</TABLE>
Severance indemnities expense for the three months ended March 31, 1999 and
1998, includes the following components:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C> <C>
Revaluation of indemnities accrued at the beginning
of the year ....................................... ITL/000 616 232
Indemnities accrued for the period.................. 41,858 10,012
------ ------
ITL/000 42,474 10,244
====== ======
</TABLE>
10. Bonds Payable
Bonds payable consist of 800,000, 5% unsecured convertible bonds, face value
ITL 1,000 per bond, payable in quarterly installments from December 31, 2001 to
December 31, 2003. The bonds are convertible in 114,285 common shares (7-for-
1), par value ITL 1,000 per share.
Maturities as of March 31, 1999 for each of the next 5 years and in the
aggregate are:
<TABLE>
<S> <C> <C>
Year ending March 31:
1999....................................................... ITL/000 0
2000....................................................... 0
2001....................................................... 220,000
2002....................................................... 400,000
2003....................................................... 300,000
-------
ITL/000 920,000
=======
</TABLE>
Interest expense for the three months ended March 31, 1999 and 1998 was
ITL/000 9,864 and ITL/000 -0-, respectively.
11. Accumulated Deficit
As described in Note 2.i, Italian corporations are required to maintain a
legal reserve that is not available for distribution, and only the
unappropriated retained earnings resulting from the statutory financial
statements prepared in accordance with Italian GAAP are available for
distribution.
Accumulated deficit as of March 31, 1999 and 1998 consists of:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C> <C>
Legal reserve (restricted)................. ITL/000 175 175
Net loss of prior periods-Italian GAAP
basis..................................... (1,207,286) (66,748)
Net loss for the period--Italian GAAP
basis..................................... (772,995) (987,066)
Increase in accumulated deficit due to US
GAAP adjustments.......................... (2,553,196) (1,049,611)
---------- ----------
ITL/000 (4,533,302) (2,103,250)
========== ==========
</TABLE>
F-62
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
12. Related Party Transactions
The Company sells internet services, purchases part of its computer
equipment, and leases part of its office to a minority stockholder.
The Company is also indebted with two minority stockholders because of the
bonds and related interest, described in Note 9.
Following is a summary of transactions and balances at March 31, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C> <C>
Purchases from stockholder......................... ITL/000 71,022 60,966
======= =======
Sales to stockholder............................... 82,193 14,085
======= =======
Rent income........................................ 10,500 10,500
======= =======
Interest on bonds.................................. 9,864 0
======= =======
Due from stockholder (included in accounts
receivable)....................................... 613,898 514,524
======= =======
Due to stockholder (included in accounts payable).. 144,734 173,419
======= =======
Bonds payable...................................... ITL/000 800,000 0
======= =======
</TABLE>
13. Income Taxes
Income tax expense for the three months ended March 31, 1999 and 1998
consists of:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C> <C>
Current............................................. ITL/000 (50,000) 0
Deferred............................................ 389,506 240,287
------- -------
ITL/000 339,506 240,287
======= =======
</TABLE>
The following temporary differences gave rise to the current and noncurrent
deferred tax asset at March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C> <C>
Service income deferred for financial
accounting purposes........................... ITL/000 993,775 517,243
--------- -------
Total Deferred Tax Asset--Current.............. ITL/000 993,775 517,243
========= =======
<CAPTION>
1999 1998
--------- -------
<S> <C> <C> <C>
Lease capitalized for financial accounting
purposes but expensed for tax purposes........ ITL/000 (94,152) (39,578)
Intangible assets expensed for financial
accounting purposes and deferred for tax
purposes...................................... 970,558 363,278
Net operating loss carryforward................ 475,000 238,232
--------- -------
Total Deferred Tax Asset--Noncurrent....... ITL/000 1,351,406 561,932
========= =======
</TABLE>
F-63
<PAGE>
FLASHNET S.p.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
March 31, 1999 and 1998
(unaudited)
14. Research and Development Costs
Research and development costs charged to operations for the three months
ended March 31, 1999 and 1998 were ITL/000 113,504 and ITL/000 212,639.
15. Commitments and Contingencies
a) At March 31, 1999, the Company is contingently liable for penalties and
interest relating to late payment of payroll taxes. The accompanying
financial statements at March 31, 1999, include a provision of ITL/000
370,121 with regards to such contingency.
b) The Company leases office space under operating leases expiring in
various years through January 2004. Minimum future rental payments under
non-cancelable operating leases having remaining terms in excess of 1
year as of March 31, 1999 for each of the next 5 years and in the
aggregate are:
<TABLE>
<S> <C> <C>
Year ending March 31:
1999................................................... ITL/000 344,252
2000................................................... 344,252
2001................................................... 344,252
2002................................................... 272,634
2003................................................... 43,598
Subsequent to March 31, 2003............................. 788
---------
Total minimum future rental payments..................... ITL/000 1,349,776
=========
</TABLE>
Rental expense under operating leases for the three months ended March 31,
1999 and 1998 was ITL/000 102,155 and ITL/000 61,144, respectively.
16. Subsequent Events
On April 9, 1999, the Stockholders approved:
a) To increase the Company's capital stock from ITL 2,182,857,000 to ITL
2,609,937,000, issuing 427,080 additional shares of the Company's ITL
1,000 par value common stock, at a price of ITL 4,214.667 per share.
b) To issue, at no-cost, 171,428 warrants to purchase 171,428 shares of the
Company's common stock, ITL 1,000 par value, at ITL 7,000.0233 per
share. On the same date the Stockholders authorized the issuance of
171,428 additional shares of the Company's ITL 1,000 par value common
stock, that were reserved for that purpose. The warrants are exercisable
through December 31, 2001.
F-64
<PAGE>
Head Office of the Company
Stefan-George-Ring 19-23
D-81929 Munich
Germany
Auditors to the Company
Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Eschersheimer Landstrasse 14
D-60322 Frankfurt
Germany
Trustee
The Bank of New York
101 Barclay Street
New York, New York 10286
U.S.A.
Principal Paying Agent
The Bank of New York
101 Barclay Street
New York, New York 10286
U.S.A.
Legal Advisors to the Company
as to U.S. law
as to German law
Powell, Goldstein, Frazer & Murphy Besner Kreifels Weber
LLP 41 Widenmayerstrasse
1001 Pennsylvania Ave, NW D-80538 Munich
Washington, DC 20004 Germany
U.S.A.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD DIRECT ALL TENDERED OUTSTANDING NOTES, EXECUTED LETTERS OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS TO THE EXCHANGE AGENT. YOU SHOULD
DIRECT ALL QUESTIONS AND REQUESTS FOR ASSISTANCE AND REQUEST FOR ADDITIONAL
COPIES OF THIS PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS TO THE EXCHANGE AGENT.
The exchange agent for this exchange offer is:
The Bank of New York
<TABLE>
<S> <C> <C>
By Registered or Certified
Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
The Bank of New York (For Eligible Institutions Only) The Bank of New York
101 Barclay Street (212) 815-6339 101 Barclay Street
Bond Redemption Unit, 7E Bond Redemption Unit, 7E
New York, New York 10286 To Confirm by Telephone or For New York, New York 10286
Attention: Enrique Lopez Information Call: Attention: Enrique Lopez
Reorganization Department (212) 815-2742 Reorganization Department
</TABLE>
(YOU SHOULD PROMPTLY SEND ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL.)
---------------
UNTIL , 2000 (180 DAYS AFTER THE COMMENCEMENT OF THIS EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
---------------
OFFER TO EXCHANGE ANY AND ALL
OUTSTANDING
14.0% SENIOR NOTES
DUE 2009
FOR
14.0% SENIOR NOTES
DUE 2009
[CYBERNET LOGO APPEARS HERE]
---------------
PROSPECTUS
---------------
Dated , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits indemnification
of directors, officers, employees and agents of corporations for liabilities
arising under the Securities Act of 1933, as amended.
The registrant's Certificate of Incorporation and By-laws provide for
indemnification of the registrant's directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law.
Statutory Provisions
Section 102(b)(7) of the Delaware General Corporation Law enables a
corporation in its certificate of incorporation to eliminate or limit the
personal liability of members of its Board of Directors to the corporation or
its stockholders for monetary damages for violations of a director's fiduciary
duty of care. The provision would have no effect on the availability of
equitable remedies, such as an injunction or rescission, for breach of
fiduciary duty. In addition, no provision may eliminate or limit the liability
misconduct or knowingly violating a law, paying an unlawful dividend or
approving an illegal stock repurchase, or obtaining an improper personal
benefit.
Section 145 of the Delaware General Corporation Law empowers a corporation to
indemnify any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. No indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for expenses which the court shall deem proper. Additionally, a
corporation is required to indemnify its directors and officers against
expenses to the extent that the directors or officers have been successful on
the merits or otherwise in any action, suit or proceeding or in defense of any
claim, issue or matter.
An indemnification can be made by the corporation only upon a determination
that indemnification is proper in the circumstances because the party seeking
indemnification has met the applicable standard of conduct as set forth in the
Delaware General Corporation Law. The indemnification provided by the Delaware
General Corporation Law shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. A corporation
also has the power to purchase and maintain insurance on behalf of any person,
whether or not the corporation would have the power to indemnify him against
such liability. The indemnification provided by the Delaware General
Corporation Law shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of the person.
The Company's Charter Provision
Our Company's Certificate of Incorporation limits a director's liability for
monetary damages to our Company and our stockholders for breaches of fiduciary
duty except under the circumstances outlined in the Delaware General
Corporation Law as described above under "Statutory Provisions."
Our Company's Certificate of Incorporation extends indemnification rights to
the fullest extent authorized by the Delaware General Corporation Law to
directors and officers involved in any action, suit or proceeding where the
basis of the involvement is the person's alleged action in an official capacity
or in any other capacity while serving as a director or officer of our Company.
II-1
<PAGE>
Item 21. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Amended Underwriting Agreement (Incorporated by reference as Exhibit
1.1 to the Form S-1/A Registration Statement filed with the Commission
on November 25, 1998).
1.2** Purchase Agreement dated July 1, 1999 by and among the Company, Lehman
Brothers International (Europe) and Morgan Stanley & Co. International
Limited relating to the Company's $150,000,000 in Units comprised of
14% Senior Notes due 2009 and Warrants.
1.3** Purchase Agreement dated as of August 19, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's ^25,000,000 Convertible Senior Subordinated Pay-In-Kind
Notes due 2009.
1.4** Purchase Agreement dated as of August 19, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's $35,000,000 13.0% Convertible Senior Subordinated Discount
Notes due 2009.
1.5** Purchase Agreement dated as of August 23, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's $15,002,183 13.0% Convertible Senior Subordinated Discount
Notes due 2009.
3.1* Certificate of Incorporation. (Incorporated by reference as Exhibit
3.1 to the Form S-1 Registration Statement filed with the Commission
on September 18, 1998).
3.2* Bylaws (Incorporated by reference as Exhibit 3.2 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
4.1** Unit Agreement dated as of July 8, 1999 by and among the Company,
Lehman Brothers International (Europe) and Morgan Stanley & Co.
International Limited.
4.2** Indenture dated as of July 8, 1999 by and between the Company and The
Bank of New York, relating to the Company's notes contained in the
Units.
4.3** Collateral Agreement dated as of July 8, 1999 by and among the
Company, Lehman Brothers International (Europe) and Morgan Stanley &
Co. International Limited, relating to the Unit Agreement.
4.4** Registration Rights Agreement dated as of July 8, 1999 by and among
the Company, Lehman Brothers International (Europe) and Morgan Stanley
& Co. International Limited, relating to the Company's notes contained
in the Units.
4.5** Warrant Agreement, dated as of July 8, 1999 by and among Cybernet
Internet Services International, Inc., Lehman Brothers International
(Europe) and Morgan Stanley & Co. International Limited, relating to
the Company's warrants contained in the Units.
5.1*** Opinion of Powell, Goldstein, Frazer & Murphy LLP.
8.1*** Opinion of Schitag Ernst & Young re tax matters.
10.1* Sale and Assignment of Business Shares of the Artwise GmbH Software
Losugen dated September 18, 1997 by and among Mr. Stefan
Heiligensetzer, Mr. Frank Marchewicz, Mr. Rolf Strehle, Mr. Gerhard
Schonenberger, Mr. Lothar Bernecker, Artwise GmbH Software Solutions,
Cybernet Internet--Dienstleistungen AG and Cybernet Internet--
Beteiligungs GmbH (Incorporated by reference as Exhibit 10.1 to the
Form S-1 Registration Statement filed with the Commission on September
18, 1998).
10.2* Sale and Assignment of Shares in OpenNet Internet Solutions GmbH dated
August 12, 1998 by and among Mr. Thomas Egner, Mr. Uwe Hagenmeier, Mr.
Markus Kress, Mr. Oliver Schaffer, Cybernet Internet Dienstleistungen
AG, and Cybernet Internet--Beteiligungs GmbH (Incorporated by
reference as Exhibit 10.2 to the Form S-1 Registration Statement filed
with the Commission on September 18, 1998).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.3* Private Agreement for the Sale of Company Shareholdings and Increase
of Share Capital dated December 4, 1997 by and among Cybernet Internet
Dienstleistung ag, Mr. Robert Loro, Stefano Longano, Domenico Loro,
Angelo Longano, Emma Pontara, Maria Teresa Francesconi and Mauro
Longano (Incorporated by reference as Exhibit 10.3 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.4* Stock Purchase Agreement dated June 17, 1998 among the Company,
Tristan Libischer, and Alexander Wiesmuller (Incorporated by reference
as Exhibit 10.4 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.5* Stock Purchase Agreement, dated June 11, 1997, among the Company,
Cybermind Interactive Europe AG, Rudolf Strobl, Roland Manger, Thomas
Schulz, Andreas Eder, and Holger Timm (Incorporated by reference as
Exhibit 10.5 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.6* Pooling and Trust Agreement dated August 18, 1997 among Cybermind
Interactive Europe AG, Andreas Eder, Roland Manger, Thomas Schulz,
Rudolf Strobl, Holger Timm, and Dr. Hurbert Besner, as trustee
(Incorporated by reference as Exhibit 10.6 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.7* Pooling and Trust Agreement dated August 1, 1998 between Stefan
Heiligensetzer and Dr. Hubert Besner, as trustee (Incorporated by
reference as Exhibit 10.7 to the Form S-1 Registration Statement filed
with the Commission on September 18, 1998).
10.7.1* Schedule of Additional Artwise Pooling Agreements, referencing
agreements of Mr. Marchewicz, Mr. Strehle, Mr. Schonenberger and Mr.
Bernecker (Incorporated by reference as Exhibits 10.7 and 10.7.1 to
the Form S-1 Registration Statement filed with the Commission on
September 18, 1998).
10.8* Consulting Agreement dated December 15, 1997 between Cybernet
Internet--Dienstleistungen AG and Eiderdown Trading Ltd. (Incorporated
by reference as Exhibit 10.8 to the Form S-1 Registration Statement
filed with the Commission on September 18, 1998).
10.9* Employment Contract dated February 23, 1998 between Cybernet
Internet--Dienstleistungen Aktiengesellschaft and Andreas Eder
(Incorporated by reference as Exhibit 10.9 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.10* Employment Contract dated May 15, 1997 between Cybernet Internet--
Dienstleistungen Aktiengesellschaft and Alessondro Giacalone
(Incorporated by reference as Exhibit 10.10 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.11* Employment Contract dated April 28, 1997 between Cybernet Internet
Dienstleistungen AG and Christian Moosmann (Incorporated by reference
as Exhibit 10.11 to the Form S-1 Registration Statement filed with the
commission on September 18, 1998).
10.12* Employment Contract dated February 23, 1998 between Cybernet
Internet--Dienstleistungen Aktiengesellschaft and Rudolf Strobl
(Incorporated by reference as Exhibit 10.12 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.13* Sublease for business premises office dated February 29, 1996 between
KG Bayerische Hausbau GmbH and Co. and Cybernet AG.i.G. (Incorporated
by reference as Exhibit 10.13 to the Form S-1 Registration Statement
filed with the Commission on September 18, 1998).
10.14* Full Amortization leasing Agreement No. 13 00 00 for Hard- and
Software with purchase, extension and return options between CyberNet
Internet--Dienstleistungen AG and Miller Leasing Miete GMbH dated
January 22, 1998 (Incorporated by reference as Exhibit 10.14 to the
Form S-1 Registration Statement filed with the Commission on September
18, 1998).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.15* Agreement on the use of Data Communication Installations of Info AG
dated July 29, 1996 between Info AG and CyberNet Internet--
Dienstleistungen Ag (Incorporated by reference as Exhibit 10.15 to
the Form S-1 Registration Statement filed with the Commission on
September 18, 1998).
10.15.1*** Agreement of Use, dated December 19, 1997, between Info AG and
Cybernet Internet--Dienstleistungen AG.
10.16* Ebone Internet Access Contract dated February 26, 1997 between
Ebone Inc. and Cybernet AG (Incorporated by reference as Exhibit
10.16 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.17* Agreement, undated, between feratel International GmbH and Cybernet
Internet--Dienstleistungen AG (Incorporated by reference as Exhibit
10.17 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.18* Cybernet Internet Services International, Inc. 1998 Stock Incentive
Plan (Incorporated by reference as Exhibit 10.18 to the Form S-1/A
Registration Statement filed with the Commission on November 5,
1998).
10.19* Cybernet Internet Services International, Inc. 1998 Outside
Directors' Stock Option Plan (Incorporated by reference as Exhibit
10.19 to the Form S-1/A Registration Statement filed with the
Commission on November 5, 1998).
10.20* Agreement and Plan of Merger, dated October 9, 1998, between the
Company, a Utah corporation, and Cybernet Internet Services
International, Inc., a Delaware corporation (Incorporated by
reference as Exhibit 2.1 to the Form S-1/A Registration Statement
filed on November 5, 1998).
10.23** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Limited relating
to the Company's ^25,000,000 Convertible Senior Subordinated Pay-
In-Kind Notes due 2009.
10.24** Indenture dated August 26, 1999 by and between the Company and The
Bank of New York relating to the Company's ^25,000,000 Convertible
Senior Subordinated Pay-In-Kind Notes due 2009.
10.26** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Limited relating
to the company's $35,000,000 13.0% Convertible Senior Subordinated
Discount Notes due 2009
10.27** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Ltd. relating to
the company's $15,002,183 13.0% Convertible Senior Subordinated
Discount Notes due 2009.
10.28** Indenture dated August 26, 1999 by and between the Company and The
Bank of New York relating to the company's $35,000,000 and
$15,002,183 13.0% Convertible Senior Subordinated Discount Notes
due 2009.
12.1*** Statements re computation of ratios.
21.1** Subsidiaries.
23.1** Consent of Schitag Ernst & Young.
23.2** Consent of Ernst & Young, Wirtschaftsprufungs-Und,
Steuerberatungsellschaft MBH.
23.3** Consent of Grant Thornton S.p.A.
24.1 Power of Attorney (included in the signature page hereto).
25.1** Statement of Eligibility of Trustee.
27.1** Financial Data Schedule.
</TABLE>
- --------
* Previously filed
** Filed herewith
*** To be filed by amendment
II-4
<PAGE>
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement related to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of this chapter at the start of any delayed offering
or throughout a continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be furnished,
provided, that the registrant includes in the prospectus, by means of a
post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to the
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Form F-3.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In
II-5
<PAGE>
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed by the undersigned, thereunto
duly authorized, in the City of Munich, Germany, on September 10, 1999.
Cybernet Internet Services
International, Inc.
/s/ Andreas Eder
By: ___________________________________
Andreas Eder
Chairman of the Board of Directors,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the persons whose signature
appears below appoints and constitutes Robert Fratarcangelo and Andreas Eder,
and each of them, his true and lawful attorney-in-fact and agent, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to execute any and all
amendments (including post-effective amendments) to the within registration
statement, and to file the same, together with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission and such other agencies, offices and persons as may be required by
applicable law, granting unto each said attorney-in-fact and agent, each acting
alone, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact and agent, each acting alone may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Andreas Eder Chairman of the Board of September 10,
- ---------------------------- Directors, President and 1999
Andreas Eder Chief Executive Officer
(Principal Executive
Officer)
/s/ Robert Eckert Chief Financial Officer and September 10,
- ---------------------------- Treasurer (Principal 1999
Robert Eckert Financial and Accounting
Officer)
/s/ Dr. Alessandro Director and Chief September 10,
Giacalone Operating Officer 1999
- ----------------------------
Dr. Alessandro Giacalone
/s/ Robert Fratarcangelo Director and Secretary September 10,
- ---------------------------- 1999
Robert Fratarcangelo
/s/ Dr. Hubert Besner Director September 10,
- ---------------------------- 1999
Dr. Hubert Besner
/s/ Tristan Libischer Director September 10,
- ---------------------------- 1999
Tristan Libischer
/s/ G. W. Norman Wareham Director September 10,
- ---------------------------- 1999
G. W. Norman Wareham
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Amended Underwriting Agreement (Incorporated by reference as Exhibit
1.1 to the Form S-1/A Registration Statement filed with the Commission
on November 25, 1998).
1.2** Purchase Agreement dated July 1, 1999 by and among the Company, Lehman
Brothers International (Europe) and Morgan Stanley & Co. International
Limited relating to the Company's $150,000,000 in Units comprised of
14% Senior Notes due 2009 and Warrants.
1.3** Purchase Agreement dated as of August 19, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's ^25,000,000 Convertible Senior Subordinated Pay-In-Kind
Notes due 2009.
1.4** Purchase Agreement dated as of August 19, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's $35,000,000 13.0% Convertible Senior Subordinated Discount
Notes due 2009.
1.5** Purchase Agreement dated as of August 23, 1999 by and between the
Company and Morgan Stanley & Co. International Limited relating to the
Company's $15,002,183 13.0% Convertible Senior Subordinated Discount
Notes due 2009.
3.1* Certificate of Incorporation. (Incorporated by reference as Exhibit
3.1 to the Form S-1 Registration Statement filed with the Commission
on September 18, 1998).
3.2* Bylaws (Incorporated by reference as Exhibit 3.2 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
4.1** Unit Agreement dated as of July 8, 1999 by and among the Company,
Lehman Brothers International (Europe) and Morgan Stanley & Co.
International Limited.
4.2** Indenture dated as of July 8, 1999 by and between the Company and The
Bank of New York, relating to the Company's notes contained in the
Units.
4.3** Collateral Agreement dated as of July 8, 1999 by and among the
Company, Lehman Brothers International (Europe) and Morgan Stanley &
Co. International Limited, relating to the Unit Agreement.
4.4** Registration Rights Agreement dated as of July 8, 1999 by and among
the Company, Lehman Brothers International (Europe) and Morgan Stanley
& Co. International Limited, relating to the Company's notes contained
in the Units.
4.5** Warrant Agreement, dated as of July 8, 1999 by and among Cybernet
Internet Services International, Inc., Lehman Brothers International
(Europe) and Morgan Stanley & Co. International Limited, relating to
the Company's warrants contained in the Units.
5.1*** Opinion of Powell, Goldstein, Frazer & Murphy LLP.
8.1*** Opinion of Schitag Ernst & Young re tax matters.
10.1* Sale and Assignment of Business Shares of the Artwise GmbH Software
Losugen dated September 18, 1997 by and among Mr. Stefan
Heiligensetzer, Mr. Frank Marchewicz, Mr. Rolf Strehle, Mr. Gerhard
Schonenberger, Mr. Lothar Bernecker, Artwise GmbH Software Solutions,
Cybernet Internet--Dienstleistungen AG and Cybernet Internet--
Beteiligungs GmbH (Incorporated by reference as Exhibit 10.1 to the
Form S-1 Registration Statement filed with the Commission on September
18, 1998).
10.2* Sale and Assignment of Shares in OpenNet Internet Solutions GmbH dated
August 12, 1998 by and among Mr. Thomas Egner, Mr. Uwe Hagenmeier, Mr.
Markus Kress, Mr. Oliver Schaffer, Cybernet Internet Dienstleistungen
AG, and Cybernet Internet--Beteiligungs GmbH (Incorporated by
reference as Exhibit 10.2 to the Form S-1 Registration Statement filed
with the Commission on September 18, 1998).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.3* Private Agreement for the Sale of Company Shareholdings and Increase
of Share Capital dated December 4, 1997 by and among Cybernet Internet
Dienstleistung ag, Mr. Robert Loro, Stefano Longano, Domenico Loro,
Angelo Longano, Emma Pontara, Maria Teresa Francesconi and Mauro
Longano (Incorporated by reference as Exhibit 10.3 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.4* Stock Purchase Agreement dated June 17, 1998 among the Company,
Tristan Libischer, and Alexander Wiesmuller (Incorporated by reference
as Exhibit 10.4 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.5* Stock Purchase Agreement, dated June 11, 1997, among the Company,
Cybermind Interactive Europe AG, Rudolf Strobl, Roland Manger, Thomas
Schulz, Andreas Eder, and Holger Timm (Incorporated by reference as
Exhibit 10.5 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.6* Pooling and Trust Agreement dated August 18, 1997 among Cybermind
Interactive Europe AG, Andreas Eder, Roland Manger, Thomas Schulz,
Rudolf Strobl, Holger Timm, and Dr. Hurbert Besner, as trustee
(Incorporated by reference as Exhibit 10.6 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.7* Pooling and Trust Agreement dated August 1, 1998 between Stefan
Heiligensetzer and Dr. Hubert Besner, as trustee (Incorporated by
reference as Exhibit 10.7 to the Form S-1 Registration Statement filed
with the Commission on September 18, 1998).
10.7.1* Schedule of Additional Artwise Pooling Agreements, referencing
agreements of Mr. Marchewicz, Mr. Strehle, Mr. Schonenberger and Mr.
Bernecker (Incorporated by reference as Exhibits 10.7 and 10.7.1 to
the Form S-1 Registration Statement filed with the Commission on
September 18, 1998).
10.8* Consulting Agreement dated December 15, 1997 between Cybernet
Internet--Dienstleistungen AG and Eiderdown Trading Ltd. (Incorporated
by reference as Exhibit 10.8 to the Form S-1 Registration Statement
filed with the Commission on September 18, 1998).
10.9* Employment Contract dated February 23, 1998 between Cybernet
Internet--Dienstleistungen Aktiengesellschaft and Andreas Eder
(Incorporated by reference as Exhibit 10.9 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.10* Employment Contract dated May 15, 1997 between Cybernet Internet--
Dienstleistungen Aktiengesellschaft and Alessondro Giacalone
(Incorporated by reference as Exhibit 10.10 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.11* Employment Contract dated April 28, 1997 between Cybernet Internet
Dienstleistungen AG and Christian Moosmann (Incorporated by reference
as Exhibit 10.11 to the Form S-1 Registration Statement filed with the
commission on September 18, 1998).
10.12* Employment Contract dated February 23, 1998 between Cybernet
Internet--Dienstleistungen Aktiengesellschaft and Rudolf Strobl
(Incorporated by reference as Exhibit 10.12 to the Form S-1
Registration Statement filed with the Commission on September 18,
1998).
10.13* Sublease for business premises office dated February 29, 1996 between
KG Bayerische Hausbau GmbH and Co. and Cybernet AG.i.G. (Incorporated
by reference as Exhibit 10.13 to the Form S-1 Registration Statement
filed with the Commission on September 18, 1998).
10.14* Full Amortization leasing Agreement No. 13 00 00 for Hard- and
Software with purchase, extension and return options between CyberNet
Internet--Dienstleistungen AG and Miller Leasing Miete GMbH dated
January 22, 1998 (Incorporated by reference as Exhibit 10.14 to the
Form S-1 Registration Statement filed with the Commission on September
18, 1998).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.15* Agreement on the use of Data Communication Installations of Info AG
dated July 29, 1996 between Info AG and CyberNet Internet--
Dienstleistungen Ag (Incorporated by reference as Exhibit 10.15 to
the Form S-1 Registration Statement filed with the Commission on
September 18, 1998).
10.15.1*** Agreement of Use, dated December 19, 1997, between Info AG and
Cybernet Internet--Dienstleistungen AG.
10.16* Ebone Internet Access Contract dated February 26, 1997 between
Ebone Inc. and Cybernet AG (Incorporated by reference as Exhibit
10.16 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.17* Agreement, undated, between feratel International GmbH and Cybernet
Internet--Dienstleistungen AG (Incorporated by reference as Exhibit
10.17 to the Form S-1 Registration Statement filed with the
Commission on September 18, 1998).
10.18* Cybernet Internet Services International, Inc. 1998 Stock Incentive
Plan (Incorporated by reference as Exhibit 10.18 to the Form S-1/A
Registration Statement filed with the Commission on November 5,
1998).
10.19* Cybernet Internet Services International, Inc. 1998 Outside
Directors' Stock Option Plan (Incorporated by reference as Exhibit
10.19 to the Form S-1/A Registration Statement filed with the
Commission on November 5, 1998).
10.20* Agreement and Plan of Merger, dated October 9, 1998, between the
Company, a Utah corporation, and Cybernet Internet Services
International, Inc., a Delaware corporation (Incorporated by
reference as Exhibit 2.1 to the Form S-1/A Registration Statement
filed on November 5, 1998).
10.23** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Limited relating
to the Company's ^25,000,000 Convertible Senior Subordinated Pay-
In-Kind Notes due 2009.
10.24** Indenture dated August 26, 1999 by and between the Company and The
Bank of New York relating to the Company's ^25,000,000 Convertible
Senior Subordinated Pay-In-Kind Notes due 2009.
10.26** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Limited relating
to the company's $35,000,000 13.0% Convertible Senior Subordinated
Discount Notes due 2009
10.27** Registration Rights Agreement dated August 26, 1999 by and between
the Company and Morgan Stanley & Co. International Ltd. relating to
the company's $15,002,183 13.0% Convertible Senior Subordinated
Discount Notes due 2009.
10.28** Indenture dated August 26, 1999 by and between the Company and The
Bank of New York relating to the company's $35,000,000 and
$15,002,183 13.0% Convertible Senior Subordinated Discount Notes
due 2009.
12.1*** Statements re computation of ratios.
21.1** Subsidiaries.
23.1** Consent of Schitag Ernst & Young.
23.2** Consent of Ernst & Young, Wirtschaftsprufungs-Und,
Steuerberatungsellschaft MBH.
23.3** Consent of Grant Thornton S.p.A.
24.1 Power of Attorney (included in the signature page hereto).
25.1** Statement of Eligibility of Trustee.
27.1** Financial Data Schedule.
</TABLE>
- --------
* Previously filed
** Filed herewith
*** To be filed by amendment
<PAGE>
EXHIBIT 1.2
EXECUTION COPY
$150,000,000
Cybernet Internet Services International, Inc.
150,000 Units Consisting of 14% Senior Notes due 2009
and Warrants to Purchase 4,534,604 shares of Common Stock
PURCHASE AGREEMENT
------------------
July 1, 1999
Lehman Brothers International (Europe)
One Broadgate
London EC2M 7HA
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
Ladies and Gentlemen:
Cybernet Internet Services International, Inc., a Delaware corporation,
(the "Company") proposes to issue and sell to the several initial purchasers
-------
listed on Schedule I hereto (the "Initial Purchasers") 150,000 Units (the
------------------
"Units") each consisting of $1,000 aggregate principal amount of its 14% Senior
- ------
Notes due 2009 (the "Notes") and one warrant (the "Warrants") to purchase
----- --------
30.2310693 shares of common stock of the Company, par value $0.001 per share
(the "Common Stock"). The Units are to be issued under a Unit Agreement, dated
------------
as of July 8, 1999 (the "Unit Agreement"), among the Company, The Bank of New
--------------
York, as Unit Agent (in such capacity, the "Unit Agent"), the Trustee referred
----------
to below and the Warrant Agent referred to below. The Notes are to be issued
under an Indenture, dated as of July 8, 1999 (the "Indenture"), between the
---------
Company and The Bank of New York, as Trustee (in such capacity, the "Trustee").
-------
The Warrants are to be issued under a Warrant Agreement, dated as of July 8,
1999 (the "Warrant Agreement"), between the Company and The Bank of New York, as
-----------------
Warrant Agent (in such capacity, the "Warrant Agent"). The shares of Common
-------------
Stock issuable upon exercise of the Warrants are herein referred to as the
"Warrant Shares." The Units, the Notes, the Warrants and the Warrant Shares are
- ---------------
collectively referred to herein as the "Securities."
----------
The Units will be offered and sold to the Initial Purchasers without being
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions therefrom. The Company has
- ---------------
prepared a preliminary offering memorandum dated June 12, 1999 (the "Preliminary
-----------
Offering Memorandum") and has prepared an offering memorandum dated the date
- -------------------
hereof (the "Offering Memorandum") setting forth information concerning the
-------------------
Company, its subsidiaries and the Securities. Copies of the Preliminary
Offering Memorandum have been, and copies of the Offering Memorandum will be,
delivered by the Company to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed
<PAGE>
to include all amendments and supplements thereto, unless otherwise noted. The
Company hereby confirms that it has authorized the use of the Preliminary
Offering Memorandum and the Offering Memorandum in connection with the offering
and resale of the Units by the Initial Purchasers in accordance with Section 2.
Holders of the Notes (including the Initial Purchasers and their direct and
indirect transferees) will be entitled to the benefits of a Registration Rights
Agreement, substantially in the form attached hereto as Annex A (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
- ------------------------------
file with the U.S. Securities and Exchange Commission (the "Commission") (i) a
----------
registration statement under the Securities Act (the "Exchange Offer
--------------
Registration Statement") registering senior notes of the Company (the "Exchange
- ---------------------- --------
Notes") which are identical in all material respects to the Notes (except that
- -----
the Exchange Notes will not contain terms with respect to transfer restrictions)
and (ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
----------------------------
This Agreement, the Unit Agreement, the Indenture, the Warrant Agreement,
the Registration Rights Agreement and the escrow agreement, to be entered into
and to be dated as of July 8, 1999 in favor of holders of each of the Notes (the
"Escrow Agreement"), among the Company, the Trustee and The Bank of New York, as
----------------
escrow agent (in such capacity, the "Escrow Agent"), are referred to herein
------------
collectively as the "Operative Documents."
-------------------
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and the Offering
Memorandum, as of the Closing Date (as defined in Section 2 hereof), will
not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that the Company does not make any
representation or warranty as to information contained in or omitted from
the Preliminary Offering Memorandum or the Offering Memorandum in reliance
upon and in conformity with the written information furnished to the
Company by the Initial Purchasers specifically for inclusion therein and
described in Section 7(e).
(b) Assuming the accuracy of the representations and warranties
of the Initial Purchasers contained in Section 3 and their compliance with
the agreements set forth therein, it is not necessary, in connection with
the issuance and sale of the Units to the Initial Purchasers and the offer,
resale and delivery of the Units by the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum, to register the
Securities under the Securities Act or to qualify the Indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
-------------------
(c) The Company has been duly incorporated, is validly existing
and in good standing under Delaware law; the Company is solvent, is not in
bankruptcy, liquidation or receivership and is duly qualified to do
business in each jurisdiction in which its ownership or lease of property
or the conduct of its business requires
2
<PAGE>
such qualification, except where the failure to so qualify would not
reasonably be expected to have, singularly or in the aggregate, a material
adverse effect on the financial position, shareholders' equity, results of
operations, business or prospects of the Company and its subsidiaries; and
the Company has all power and authority necessary to own or hold its
respective property and to conduct the business in which it is engaged.
(d) Each of the subsidiaries (as defined in Section 14 hereof)
of the Company has been duly organized, is validly existing and in good
standing under the laws of its jurisdiction of organization or
incorporation, is solvent, is not in bankruptcy, liquidation or
receivership and is duly qualified to do business in each jurisdiction in
which its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to so qualify would
not reasonably be expected to have, singularly or in the aggregate, a
material adverse effect on the financial position, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and each has all power and authority necessary to own or hold
its respective property and to conduct the business in which it is engaged.
(e) The Company has an authorized and issued share capital and
capitalization as set forth in the Offering Memorandum under the heading
"Capitalization," except for (i) the one-for-one conversion of shares of
Series A Preferred Stock, par value $0.001 per share (the "Series A
--------
Preferred Stock"), and of shares of Series B Preferred Stock, par value
---------------
$0.001 per share (the "Series B Preferred Stock"), occurring after June 9,
------------------------
1999, for Common Stock and (ii) the issuance of 25,000 shares of Common
Stock in connection with the acquisition of Sunweb Internet Services SIS AG
("Sunweb AG"); all outstanding shares of capital stock of the Company have
---------
been duly authorized and are validly issued and fully paid and
nonassessable; the Warrant Shares have been duly authorized and, when the
Warrant Shares are issued in accordance with the terms and conditions
contained in the Warrant Agreement upon exercise of the Warrants, such
Warrant Shares will be validly issued and fully paid and nonassessable and
holders of the Warrant Shares will have no liability for any debt or other
obligation of the Company towards third parties in their capacity as
holders of the Warrant Shares; and the shareholders of the Company have no
preemptive rights with respect to the Warrant Shares which have not been
validly excluded prior to the date hereof, and there is no other
conflicting right, contingent or otherwise, of any person to purchase or be
offered for purchase any of the Warrant Shares and no depositary receipts
have been issued with respect to the Warrant Shares offered by the Company;
the Warrant Shares have been duly reserved for issuance in accordance with
the terms of the Warrants and the Warrant Agreements.
(f) The Company has no Indebtedness (as defined in the Offering
Memorandum) other than (i) as set forth on the March 31, 1999 Consolidated
Balance Sheets of the Company set forth in the Offering Memorandum, (ii) in
connection with the Interim Loan Agreement, dated June 30, 1999, among the
Company, the several banks and other financial institutions or entities
from time to time parties thereto, Lehman Brothers Inc. and Morgan Stanley
Senior Funding,
3
<PAGE>
Inc., as arrangers, and Lehman Commercial Paper Inc., as documentation and
administrative agent (the "Interim Loan Agreement"), in an aggregate amount
----------------------
not exceeding C 21,860,554.46 and (iii) in connection with Indebtedness in
an aggregate amount not exceeding $2,000,000 assumed in connection with the
acquisition of Flashnet S.p.A. ("Flashnet").
--------
(g) The execution, delivery and performance of the Operative
Documents by the Company and the consummation of the transactions
contemplated hereby and thereby, and the deposit by the Company of the
Pledged Securities (as defined in the Escrow Agreement) in the Escrow
Account (as defined in the Escrow Agreement) for the benefit of the Trustee
and the holders of the Units and/or Notes, as the case may be, will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement, shareholders agreement or other material
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 or to
which any of the properties or assets of the Company or any of its
subsidiaries are subject, nor will such actions result in any violation of
the provisions of the Certificate of Incorporation or By-laws or equivalent
constitutive documents of the Company or any of its subsidiaries or any
statute, license, legislation, authorization, or any order, rule or
regulation of any court or governmental agency or body (including, without
limitation, any statutes, rules, orders or regulations promulgated by the
Federal Communications Commission or the Commission of the European
Community) having jurisdiction over the Company or any of its subsidiaries
or any of their properties or assets subject, other than with respect to
violations of the provisions of the Certificate of Incorporation or By-laws
or equivalent constitutive documents of the Company or any of its
subsidiaries, to such exceptions as, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
financial position, shareholders' equity, results of operations, business
or prospects of the Company and its subsidiaries. No consent, approval,
authorization or order of, or filing or registration with, any such court
or governmental agency or body (including, without limitation, any
statutes, rules, orders or regulations promulgated by the Federal
Communications Commission or the Commission of the European Community) is
required for the execution, delivery and performance of the Operative
Documents by the Company and the consummation of the transactions
contemplated hereby and thereby except (A) as have been obtained or made,
(B) with respect to the transactions contemplated by the Registration
Rights Agreement, as may be required under the Securities Act, the Trust
Indenture Act and the rules and regulations of the Commission thereunder
and (C) as required by state or foreign securities or "Blue Sky" laws.
(h) The Company has full power and authority to enter into this
Agreement; this Agreement has been duly authorized, executed and delivered
by the Company and, when duly authorized, executed and delivered by the
Initial Purchasers, will constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or
4
<PAGE>
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing, and except, with respect to the
rights of indemnification and contribution thereunder, where enforcement
thereof may be limited by public policy.
(i) The Company has full power and authority to enter into the
Unit Agreement; the Unit Agreement has been duly authorized by the Company
and will conform, in all material respects, to the description thereof
contained in the Offering Memorandum; and when executed and delivered by
the Company (assuming due authorization, execution and delivery by the Unit
Agent, the Trustee and the Warrant Agent), the Unit Agreement will have
been duly executed and delivered and will be a valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair
dealing.
(j) The Company has full power and authority to offer and sell
the Units; the Units have been duly authorized by the Company for issuance,
and when executed by the Company and countersigned by the Unit Agent, the
Trustee and the Warrant Agent in accordance with the provisions of the Unit
Agreement, and delivered to and paid for by the Initial Purchasers in
accordance with the terms hereof, will have been duly executed, issued and
delivered and will be entitled to the benefits of the Unit Agreement, the
Indenture and the Warrant Agreement and will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, except that the enforcement thereof may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair
dealing.
(k) The Company has full power and authority to enter into the
Indenture; the Indenture has been duly authorized by the Company and upon
effectiveness of the Exchange Offer Registration Statement and the Shelf
Registration Statement (if applicable) will be qualified under the Trust
Indenture Act; and, on the Closing Date (as defined below), the Indenture
will have been duly executed and delivered by the Company and will conform,
in all material respects, to the description thereof contained in the
Offering Memorandum and, assuming due authorization, execution and delivery
of the Indenture by the Trustee, the Indenture will constitute a valid and
legally binding obligation of the Company, enforceable in accordance with
its terms, except that the enforcement thereof may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair
dealing.
5
<PAGE>
(l) The Company has full power and authority to offer and sell
the Notes; the Notes have been duly authorized by the Company; and, when
the Notes are delivered to and paid for by the Initial Purchasers pursuant
to this Agreement on the Closing Date, such Notes will have been duly
executed, authenticated, issued and delivered (assuming due authentication
of the Notes by the Trustee) and will conform, in all material respects, to
the description thereof contained in the Offering Memorandum and, assuming
due authentication of the Notes by the Trustee, such Notes will constitute
valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable in accordance with their terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(m) The Company has full power and authority to enter into the
Warrant Agreement; the Warrant Agreement has been duly authorized by the
Company and will conform, in all material respects, to the description
thereof contained in the Offering Memorandum; and when executed and
delivered by the Company (assuming due authorization, execution and
delivery by the Warrant Agent), the Warrant Agreement will have been duly
executed and delivered and will be a valid and legally binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(n) The Company has full power and authority to offer and sell
the Warrants; the Warrants have been duly authorized by the Company for
issuance, and when executed by the Company and countersigned by the Warrant
Agent in accordance with the provisions of the Warrant Agreement, and
delivered to and paid for by the Initial Purchasers in accordance with the
terms hereof, will have been duly executed, issued and delivered and will
conform, in all material respects, to the description thereof contained in
the Offering Memorandum, will be entitled to the benefits of the Warrant
Agreement and will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except that
the enforcement thereof may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(o) The Company has full power and authority to enter into the
Registration Rights Agreement; the Registration Rights Agreement has been
duly authorized by the Company and will conform, in all material respects,
to the description thereof contained in the Offering Memorandum; and when
executed and delivered by the Company (assuming due authorization,
execution and delivery by the Initial Purchasers) will have been duly
executed and delivered and
6
<PAGE>
will be a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing, and except, with respect to the
rights of indemnification and contribution thereunder, where enforcement
thereof may be limited by public policy.
(p) The Company has full power and authority to enter into the
Escrow Agreement; the Escrow Agreement has been duly authorized by the
Company and will conform, in all material respects, to the description
thereof contained in the Offering Memorandum; and when executed and
delivered by the Company (assuming due authorization, execution and
delivery by the Escrow Agent and the Trustee), will have been duly executed
and delivered and will be a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing; the Trustee
will have a first priority perfected security interest in the Pledged
Securities in the Escrow Account.
(q) No stamp or other issuance taxes or duties are payable by or
on behalf of the Initial Purchasers as a consequence of the issue of the
Securities, the sale of the Units to the Initial Purchasers and/or the
initial resale of the Securities to investors.
(r) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Offering Memorandum, any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree; and, since such date, there has not been any
change in the share capital (except for the one-for-one conversion of
shares of Series A Preferred Stock and of shares of Series B Preferred
Stock, occuring after June 9, 1999, for Common Stock and the issuance of
25,000 shares of Common Stock in connection with the acquisition of Sunweb
AG) or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity, results of operations or
prospects of the Company and its subsidiaries, otherwise than as set forth
in the Offering Memorandum.
(s) The consolidated financial statements of the Company
(including the related notes) included in the Offering Memorandum comply in
all material respects with the requirements that would be applicable to a
registration statement on Form S-1 under the Securities Act and were
prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP")
---------
7
<PAGE>
consistently applied throughout the periods involved and present fairly the
financial condition and results of operations of the entities purported to
be shown thereby, at the dates and for the periods indicated (subject in
the case of interim statements to normal year-end audit adjustments). The
financial information contained in the Offering Memorandum under the
headings "Summary - Summary Consolidated Financial and Operating Data",
"Capitalization", "Selected Consolidated Financial and Operating
Information", "Unaudited Pro Forma Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are derived from the accounting records of the Company and its
subsidiaries and fairly present the information purported to be shown
thereby. The summary financial and other data and selected financial and
other data included in the Offering Memorandum have been accurately
extracted from the financial statements of the Company. The pro forma
financial information contained in the Offering Memorandum has been
prepared on a basis consistent with the historical financial statements
contained in the Offering Memorandum (except for the pro forma adjustments
specified therein), includes all material adjustments to the historical
financial information required by Rule 11-02 of Regulation S-X under the
Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act")
------------
to reflect the transactions described in the Offering Memorandum, gives
effect to assumptions made on a reasonable basis and fairly presents the
historical and proposed transactions contemplated by the Offering
Memorandum and the Operative Documents. The other historical financial and
statistical information and data included in the Offering Memorandum are,
in all material respects, fairly presented.
(t) Schitag Ernst & Young, AG and Grant Thornton S.p.A., who
have audited the consolidated financial statements of the Company and
Flashnet, respectively, whose reports appear in the Offering Memorandum and
who will deliver the initial letters referred to in Section 4(q) hereof
dated the date of the Offering Memorandum, are each independent public
accountants with respect to the Company and Flashnet, respectively, within
the meaning of the Securities Act and the rules and regulations promulgated
thereunder.
(u) The Company and each of its subsidiaries has good and
marketable title to all personal property owned by them, subject to such
exceptions that, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the financial position,
results of operations, business or prospects of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries. Neither the Company
nor any of its subsidiaries owns any title to real property or buildings,
and all real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
8
<PAGE>
(v) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the
Company has reasonably concluded is sufficient based upon experience and
industry practice and is adequate for the conduct of their respective
businesses and the value of their respective properties.
(w) The Company and each of its subsidiaries own or possess
adequate rights to use all material intellectual property, including
without limitation, patents, inventions, processes, technology and know-
how, trade mark registrations, service mark registration, copyrights and
works of authorship in any media, including computer hardware, software,
systems, databases, documentation, files and Internet site content,
trademarks, service marks, trade names, domain names, URLs, e-mail
addresses, logos, slogans and trade dress, trade secrets and all
confidential or proprietary information and materials, and all related
registrations, applications, recordings and licenses ("Intellectual
------------
Property") necessary for the conduct of their respective businesses except
--------
for such Intellectual Property the lack of possession of which could not
reasonably be expected to have a material adverse effect on the financial
position, results of operations, business or prospects of the Company and
its subsidiaries. The Company has no reason to believe that its
Intellectual Property infringes, misappropriates or impairs ("Infringes"),
---------
or is being so Infringed by, the Intellectual Property of any third party,
and has not received any notice alleging such Infringement by any third
party. No legal or government proceeding is pending, and no law, ordinance,
rule, regulation, order, judgment or decree is pending that limits or
challenges the ownership, use, validity or enforceability of any
Intellectual Property owned or used by the Company or any of its
subsidiaries, and the Company has no knowledge of a valid basis for any of
the foregoing. The Company and each of its subsidiaries take all reasonable
steps to protect and maintain their Intellectual Property (including any
confidential Intellectual Property), and have taken all necessary actions,
made all necessary filings and paid all necessary fees in connection with
the foregoing. Any licenses, sublicenses, royalty or other agreements
concerning Intellectual Property to which the Company or any of its
subsidiaries is a party are valid and in full force and effect, no party
thereto is, or is alleged to be in default thereunder, and no event exists
that, with notice or lapse of time or both, would constitute an event of
default thereunder or result in a right to accelerate, or loss of rights
thereunder, except for licences, sublicense, royalty or other agreements
the lack of validity or enforceability of which or the default under which
could not reasonably be expected to have a material adverse effect on the
financial position, results of operations, business or prospects of the
Company and its subsidiaries.
(x) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property or asset of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its subsidiaries,
might reasonably be expected to have a material adverse effect on the
financial position, shareholders' equity, results of operations, business
or prospects of the Company and its subsidiaries; and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
9
<PAGE>
(y) Except as otherwise disclosed in the Offering Memorandum,
there are no business relationships or other related-party transactions of
the nature described in Item 404 of Regulation S-K of the Commission ("Item
----
404") involving the Company or any other party referred to in Item 404,
---
except for transactions that would be considered immaterial under Item 404.
(z) No transaction or relationship exists which would have been
required to be described in the Offering Memorandum by the Securities Act
and the rules and regulations thereunder if such Offering Memorandum were a
prospectus included in a registration statement on Form S-1 under the
Securities Act, which is not so described.
(aa) Except as disclosed in the Offering Memorandum, the Company
and its subsidiaries have duly filed with the appropriate taxing
authorities all tax returns, reports and other information required to be
filed through the date hereof and have paid all taxes due thereon, except
where (i) (A) extensions have been properly obtained or are being contested
in good faith and for which adequate reserves have been provided for in
accordance with U.S. GAAP and (B) such extensions referred to in clause
(i)(A) are disclosed in the Offering Memorandum and (ii) the failure to so
file or pay could not reasonably be expected to have a material adverse
effect on the financial position, shareholders' equity, results of
operations, business or prospects of the Company and its subsidiaries; each
such tax return, report or other information was, when filed, accurate and
complete in all material respects; the Company has no knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, might reasonably be expected to have a material adverse
effect on the financial position, shareholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(ab) All interest payments payable on the Notes may be paid by
the Company in U.S. dollars and all dividends and other distributions
declared and payable on the Warrant Shares may be paid by the Company in
U.S. dollars and all such payments will not be subject to income,
withholding or other taxes under the laws and regulations of the United
States or Germany or any political subdivision or taxing authority thereof
or therein and will otherwise be free and clear of any other tax, duty,
withholding or deduction in the United States or Germany or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in the United States
or Germany or any political subdivision or taxing authority thereof or
therein.
(ac) Since the date as of which information is given in the
Offering Memorandum through the Closing Date (except for the one-for-one
conversion of shares of Series A Preferred Stock and of shares of Series B
Preferred Stock, occuring after June 9, 1999, for Common Stock and the
issuance of 25,000 shares of Common Stock in connection with the
acquisition of Sunweb AG), and except as may otherwise be disclosed in the
Offering Memorandum, the Company has not (i) issued or granted any
securities, including, without limitation, any options
10
<PAGE>
or warrants, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred in
the ordinary course of business, (iii) entered into any transaction not in
the ordinary course of business or (iv) declared or paid any dividend on
its issued share capital.
(ad) There are no contracts or agreements between the Company
and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities to be registered
pursuant to the Registration Rights Agreement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act.
(ae) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective Certificate of Incorporation or By-laws or
equivalent constitutive documents, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject,
other than such defaults which could not reasonably be expected to have a
material adverse effect on the financial condition, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries or (iii) in violation in any respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its properties
or assets may be subject or has failed to obtain any license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its properties or assets or to the conduct of
its business, other than such violations or failures which could not
reasonably be expected to have a material adverse effect on the financial
condition, shareholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.
(af) The Company (i) makes and keeps books and records which are
accurate and complete in all material respects and (ii) maintains internal
accounting controls which provide reasonable assurance that transactions
are executed in accordance with management's authorization, transactions
are recorded as necessary to permit preparation of its financial statements
and to maintain accountability for its assets, access to its assets is
permitted only in accordance with management's authorization and the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(ag) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or, to the Company's knowledge, other
person associated with or acting on behalf of the Company or any of its
subsidiaries, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate
funds, (iii) violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or (iv)
11
<PAGE>
made any bribe, rebate (other than legal price concessions to customers in
the ordinary course of business), payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.
(ah) The Company is not in violation in any respect of any
applicable environmental law, ordinance, rule, regulation, order, judgment,
decree or permit in any jurisdiction with respect to the properties of the
Company or any of its subsidiaries, other than such violations which could
not reasonably be expected, singularly or in the aggregate, to have a
material adverse effect on the financial condition, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries.
(ai) Except as described in the Offering Memorandum, there are
no material acquisitions of businesses or assets by the Company or any of
its subsidiaries pending or currently being negotiated.
(aj) No labor disturbance by employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is imminent
which might reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations, business
or prospects of the Company or its subsidiaries.
(ak) All computer hardware, software, databases, automated
systems and other computer and telecommunications equipment owned or
licensed by the Company or any of its subsidiaries can be used prior to,
during and after the calendar year 2000 and will operate during each such
time period and at least as effectively during each such time period
without material error relating to the processing, calculating, comparing,
sequencing or other use of date-related data function (the foregoing
ability, "Year 2000 Compliant"). The Company reasonably believes, after
-------------------
due inquiry, that suppliers, vendors, customers or other material third
parties used or served by the Company and its subsidiaries are or will be
Year 2000 Compliant in a timely manner, except as would not have a material
adverse effect on the financial position, shareholders' equity, results of
operations, business prospects or operations of the Company and its
subsidiaries. The Company has no reason to believe, and does not believe,
that there are any issues related to the Company's ability to be Year 2000
Compliant that are of a character required to be described or referred to
in the Offering Memorandum.
(al) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940, as amended (the "Investment Company Act"), nor is it a closed-
----------------------
end investment company required to be registered, but not registered,
thereunder; and the Company is not and, after giving effect to the offering
and sale of the Units and the application of the proceeds thereof as
described in the Offering Memorandum, will not be an "investment company"
as defined in the Investment Company Act and the rules and regulations of
the Commission thereunder.
12
<PAGE>
(am) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act including, without limitation, the
requirement that Warrants have an "effective exercise premium" (as such
term is defined in Rule 144A) of ten percent or greater.
(an) Neither the Company nor any subsidiary has incurred any
liability for a fee, commission, or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement.
(ao) Neither the Company nor any subsidiary has taken, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
or which would otherwise be prohibited by Regulation M under the Exchange
Act in connection with the offering of the Securities.
(ap) Neither the Company nor any of its affiliates, nor any
agent acting on its or their behalf has offered or sold or will offer or
sell any of the Securities in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act. The
Company has not entered, and will not enter, into any contractual
arrangement with respect to the distribution of the Securities except for
this Agreement and the agreements contemplated hereby.
(aq) Neither the Company nor any of its Affiliates (as defined
in Rule 501(b) of Regulation D promulgated under the Securities Act) has
directly, or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any "security" (as defined in
the Securities Act) which is or will be integrated with the sale of
Securities in a manner that would require the registration under the
Securities Act of the Securities.
(ar) The Company owns no capital stock of, or other equity
interests in, any Person (as defined in each Indenture), other than all of
the issued and outstanding share capital of Cybernet Internet-
Dienstleistungen AG ("Cybernet AG"), Flashnet, Vianet Telekommunications
-----------
AG ("Vianet") and Cybernet E-Commerce GmbH ("Cybernet E-Commerce") and 51%
------ -------------------
of the issued and outstanding share capital of Sunweb AG; none of Cybernet
AG, Flashnet, Vianet, Cybernet E-Commerce and Sunweb AG owns any capital
stock of, or other equity interests in, any Person, except that (i)
Cybernet AG owns all the issued and outstanding share capital of Open:Net
Internet Solutions GmbH ("Open:Net") and of Cybernet Internet Beteiligungs
--------
GmbH ("Cybernet GmbH") and 66% of the issued and outstanding share capital
-------------
of Eclipse s.r.l. ("Eclipse") and (ii) Sunweb AG owns all the issued and
-------
outstanding share capital of Sunweb Internet Services GmbH ("Sunweb GmbH").
-----------
Open:Net, Cybernet GmbH, Eclipse and Sunweb GmbH do not own any capital
stock of, or other equity interests in, any Person.
13
<PAGE>
(as) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
-----
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
-----
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(at) The Company and its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have made
all declarations and filings with, the appropriate federal, state or
foreign regulatory agencies or bodies which are necessary or desirable for
the ownership of their respective properties or the conduct of their
respective businesses as described in the Offering Memorandum, except where
the failure to possess or make the same would not, singularly or in the
aggregate, have a material adverse effect on the financial position,
shareholders' equity, results of operations, business prospects or
operations of the Company and its subsidiaries, and neither the Company nor
any subsidiary has received notification of any revocation or modification
of any such license, certificate, authorization or permit or has any reason
to believe that any such license, certificate, authorization or permit will
not be renewed in the ordinary course.
(au) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any foreign or U.S. federal or state court of
competent jurisdiction has been issued with respect to the Company which
would prevent or suspend the issuance or sale of the Securities or the use
of the Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Company, threatened against or affecting the Company
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, which could reasonably be expect ed to
interfere with or adversely affect the issuance of the Securities or in any
manner draw into question the validity or enforceability of any of the
Operative Documents or any action taken or to be taken pursuant thereto;
and the Company has complied with any and all requests by any securities
authority in any jurisdiction for additional information to be included in
the Preliminary Offering Memorandum and the Offering Memorandum.
(av) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) contained in
the
14
<PAGE>
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in
good faith.
(aw) The Company has filed on a timely basis with the
Commission, to the extent required, (i) all annual and quarterly financial
statements and other information required to be contained in a filing with
the Commission on Forms 10-K and 10-Q and (ii) all current reports required
to be filed with the Commission on Form 8-K.
(ax) The Company has full power and authority to enter into the
Interim Loan Agreement; the Interim Loan Agreement has been duly authorized
by the Company and will conform, in all material respects, to the
description thereof contained in the Offering Memorandum; and the Interim
Loan Agreement was duly executed and delivered and is a valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing. The Company has taken all necessary corporate or other action
to authorize the borrowings thereunder on the terms and conditions of the
Interim Loan Agreement.
(ay) The Company acquired all of the issued and outstanding
ordinary shares of Flashnet, free and clear of all liens, encumbrances and
defects, pursuant to the Acquisition Documentation (as defined in the
Interim Loan Agreement) and without waiver of any of the terms thereof.
2. Purchase, Sale and Delivery of Securities. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Initial
Purchasers, and each Initial Purchaser, severally but not jointly, agrees to
purchase from the Company, the number of Units set forth opposite such Initial
Purchaser's name on Schedule I hereto at a purchase price of $970 per Unit (of
which $626.88 is attributable to the Notes and $343.12 is attributable to the
Warrants), plus accrued interest, if any, from July 8, 1999, to the Closing
Date.
The Company will deliver, against payment of the purchase price, Units
in the form of one or more certificates in global or definitive form. If the
Units are offered in global form, beneficial interests in the Units will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by The Depository Trust Company ("DTC") and its
---
participants, including, as applicable, Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System and Cedel Bank,
societe anonyme. Payment for the Units shall be made by or on behalf of the
Initial Purchasers in same day funds by wire transfer to an account previously
designated to the Initial Purchasers by the Company at a bank reasonably
acceptable to the Initial Purchasers at 4:00 p.m. (London time), on July 8,
1999, or at such other time not later than seven full business days thereafter
as the Initial Purchasers and the Company determine, such time being herein
referred to as the "Closing Date", against
------------
15
<PAGE>
delivery at the office of Simpson Thacher & Bartlett (London) at least 24 hours
prior to the Closing Date to the Unit Agent.
3. Representations by Initial Purchasers; Resale by Initial
Purchasers.
(a) Each of the Initial Purchasers represents and warrants to
the Company that it is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
(b) The Initial Purchasers acknowledge that the Securities have
not been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from the registration requirements
of the Securities Act. Each of the Initial Purchasers represents and
agrees that it has offered and sold the Securities and will offer and sell
the Securities as part of its distribution at any time only in accordance
with Rule 144A under the Securities Act ("Rule 144A").
---------
(c) Each of the Initial Purchasers agrees that it and each of
its affiliates have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Securities except with
the prior written consent of the Company.
(d) Each of the Initial Purchasers and each of its affiliates
has not solicited offers for nor offered or sold and each agrees that it
will not solicit offers for nor offer or sell the Securities in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act, including, but
not limited to, (i) any advertising, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising. Each of
the Initial Purchasers agrees, with respect to initial resales made in
reliance on Rule 144A of any of the Securities, to deliver either with the
confirmation of such initial resale or otherwise prior to settlement of
such initial resale a notice (which may be included in the Offering
Memorandum) to the effect that the initial resale of such Securities has
been made in reliance upon the exemption from the registration requirements
of the Securities Act provided by Rule 144A.
(e) Each of the Initial Purchasers represents and agrees that it
(i) has not solicited, and will not solicit, offers to purchase any of the
Securities from, (ii) has not sold, and will not sell, any of the
Securities to, and (iii) has not distributed, and will not distribute, the
Offering Memorandum to, any person or entity in any jurisdiction outside of
the United States except, to the best of the Initial Purchaser's knowledge
and belief, in compliance in all material respects with all applicable
laws. For the purpose of this Agreement, "United States" means the United
-------------
States of America, its territories, its possessions and other areas subject
to its jurisdiction.
4. Further Agreements of the Company. The Company agrees as follows:
16
<PAGE>
(a) The Company will advise the Initial Purchasers promptly of
any proposal to amend or supplement the Offering Memorandum and will not
effect such amendment or supplement to which the Initial Purchasers shall
reasonably object after being given notice thereof and reasonable time for
review. If, at any time prior to completion of the resale of the Units by
the Initial Purchasers, any event shall occur or condition exist as a
result of which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Company, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading, or if
it is necessary to amend or supplement the Offering Memorandum to comply
with applicable law, to promptly prepare such amendment or supplement as
may be necessary to correct such untrue statement or omission or so that
the Offering Memorandum, as so amended or supplemented, will comply with
applicable law. Neither the Initial Purchasers' consent to, nor their
delivery to offerees or investors of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to the Initial Purchasers copies of
the Offering Memorandum (and all amendments and supplements thereto) as
soon as available and in such quantities as the Initial Purchasers shall
reasonably request for internal use and for distribution to prospective
purchasers, and the Company will furnish to the Initial Purchasers as soon
as practicable four copies of the Offering Memorandum signed by a duly
authorized officer of the Company, one of which will include the
independent accountants' reports therein manually signed by such
independent accountants. For so long as any of the Securities are
outstanding, if the Company is ever not subject to Section 13 or 15(d) of
the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-
2(b) under the Exchange Act, the Company will promptly furnish or cause to
be furnished to the Initial Purchasers and the holders of the Securities,
and, upon request of prospective purchasers of the Securities, to such
purchasers, copies of the information required to be delivered to holders
and prospective purchasers of the Securities pursuant to Rule 144A(d)(4)
under the Securities Act (or any successor provision thereto) in order to
permit compliance with Rule 144A in connection with resales by such holders
of the Securities. The Company will pay the expenses of printing and
distributing to the Initial Purchasers all such documents.
(c) The Company will file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission and whether or
not the Company has a class of securities registered under the Exchange
Act, (i) all annual and quarterly financial statements and other financial
information required to be contained in a filing with the Commission on
Forms 10-K and 10-Q (which financial statements shall be prepared in
accordance with U.S. GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual financial information, a report thereon by the
Company's certified independent accountants and (ii) all current reports
17
<PAGE>
required to be filed with the Commission on Form 8-K, whether or not the
Company has such a class of securities registered under the Exchange Act.
Such quarterly financial information shall be filed with the Commission
within 45 days following the end of each fiscal quarter of the Company, and
such annual financial information shall be furnished within 90 days
following the end of each fiscal year of the Company. Such annual
financial information shall include the geographic segment financial
information required to be disclosed by the Company under Item 101(d) of
Regulation S-K under the Securities Act. The Company will also be required
(a) to file with the Trustee, and provide to each holder, without cost to
such holder, copies of such reports and documents within 15 days after the
date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing
such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the
Company's cost copies of such reports and documents to any prospective
holder promptly upon request.
(d) The Company will promptly from time to time exercise best
efforts to take such action as the Initial Purchasers may reasonably
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Initial Purchasers may request
and to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the resale of the Units; provided, however, that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general consent
to service of process in any jurisdiction (other than pursuant to an
Operative Document) in which it is not now so subject or otherwise subject
itself to taxation in any jurisdiction in which it is not otherwise so
qualified or subject.
(e) Until the second anniversary of the Closing Date, the
Company will, upon request, furnish to the Initial Purchasers and any
holder of Securities, a copy of the restrictions on transfer which the
Company believes are applicable to the Securities; provided, however, that
nothing contained herein shall obligate the Company to track or trace
particular Securities held by anyone other than the Company or any of its
affiliates (as defined in Rule 144 under the Securities Act).
(f) In connection with the offering, until the Initial
Purchasers shall have notified the Company of the completion of the resale
of the Units, neither the Company nor any of its affiliates have bid for or
purchased or will bid for or purchase, either alone or with one or more
other persons, for any account in which they or any of their affiliates
have a beneficial interest any Units nor have they attempted or will they
attempt to induce any person to purchase any Units; and neither they nor
any of their affiliates will make bids or purchases for the purpose of
creating actual, or apparent, active trading in, or of raising the price
of, the Units.
(g) For a period of 90 days after the date hereof, neither the
Company nor any of its direct or indirect subsidiaries will (i) offer,
sell, contract to sell, pledge
18
<PAGE>
or otherwise dispose of, directly or indirectly, any debt securities issued
or guaranteed by the Company or any such subsidiary and having a maturity
of more than one year from the date of issue other than pursuant to
obligations under registration rights agreements or (ii) directly or
indirectly, offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result
in the disposition or purchase by any person at any time in the future of)
any shares of Common Stock (other than shares issued through private
placements in connection with the acquisition of the capital stock or
assets of another company, shares issued pursuant to employee benefit
plans, qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding options,
warrants or rights), or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of options
pursuant to option plans existing on the date hereof), in each case,
without the prior written consent of the Initial Purchasers. Neither the
Company nor any of its direct or indirect subsidiaries will at any time
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act or the safe harbor of Regulation S
thereunder to cease to be applicable to the offer and sale of the
Securities.
(h) The Company will indemnify and hold harmless the Initial
Purchasers against any documentary, stamp or similar issuance tax,
including any interest and penalties, on the creation, issuance and sale of
the Securities and on the initial resale thereof by the Initial Purchasers
and on the execution and delivery of this Agreement. All payments to be
made by the Company hereunder shall be made without withholding or
deduction for or on account of any present or future taxes, duties or
governmental charges whatsoever unless the Company is compelled by law to
deduct or withhold such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be necessary in order that
the net amounts received after such withholding or deduction shall equal
the amounts that would have been received if no withholding or deduction
had been made.
(i) The Company will apply the net proceeds from the sale of the
Units as set forth in the Offering Memorandum under the caption "Use of
Proceeds."
(j) The Company will enter into the Escrow Agreement pursuant to
which it shall pledge to the Trustee for the benefit of the holders of the
Units and the Notes and deposit in the escrow account (the "Escrow
------
Account") held by the Escrow Agent, for the benefit of the Trustee and the
-------
holders of the Units and the Notes, U.S. dollar denominated government
securities in such amount as shall be sufficient upon scheduled interest
and principal payments of such U.S. government securities to provide for
the payment in full of the first six scheduled interest payments on the
Units and/or the Notes, as applicable (excluding any Additional Amounts and
any Liquidated Damages (each as defined in the Indenture)).
(k) Between the date hereof and the Closing Date (both dates
inclusive), the Company will notify and consult with the Initial
Purchasers, and cause its
19
<PAGE>
subsidiaries and all other parties acting on its or their behalf to notify
and consult with the Initial Purchasers, prior to issuing any announcement
which could be material in the context of the distribution of the
Securities.
(l) The Company will promptly inform the Initial Purchasers of
any communications received by it from any governmental or regulatory
agency or authority, including, without limitation, any German or Italian
regulatory authority, the Luxembourg Stock Exchange, or the Commission,
relating to the offering of the Securities and to furnish the Initial
Purchasers with copies thereof.
(m) The Company will take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall become an
"investment company" within the meaning of such term under the Investment
Company Act and the rules and regulations of the Commission thereunder.
(n) The Company will not take, directly or indirectly, any
action which is designed to stabilize or manipulate, or which constitutes
or which might reasonably be expected to cause or result in stabilization
or manipulation, of the price of any security of the Company in connection
with the offering of the Securities.
(o) The Company will use its best efforts to have the Units
admitted to trading on the Luxembourg Stock Exchange as promptly as
practicable after the date hereof; the Company will use its best efforts to
have the Notes admitted to trading on the Luxembourg Stock Exchange as
promptly as practicable after the Separation Date (as defined in the
Offering Memorandum); the Company will use its best efforts to maintain the
listing of Units and, following the Separation Date, of Notes on the
Luxembourg Stock Exchange. If the Units or, following the Separation Date,
the Notes ceases to be listed on the Luxembourg Stock Exchange, the Company
shall endeavor promptly to list such Units or Notes, as the case may be, on
a stock exchange to be agreed between the Company and the Initial
Purchasers.
(p) The Company will use its best efforts to cause the Units,
Notes and Warrants to be eligible for inclusion in the Private Offerings,
Resale and Trading through Automated Linkages Market of The Nasdaq Stock
Market, Inc. (the "PORTAL Market").
-------------
(q) The Company will cause each of Schitag Ernst & Young, AG and
Grant Thornton S.p.A. to deliver an initial comfort letter, dated the date
hereof, to the Initial Purchasers in form and substance reasonably
satisfactory to the Initial Purchasers at or prior to the time copies of
the Offering Memorandum are furnished to the Initial Purchasers.
5. Expenses. The Company agrees, to pay: (a) the costs incident to
the authorization, issuance, sale and delivery of the Securities and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and distributing of the Preliminary Offering Memorandum and the Offering
Memorandum and any amendment or supplement thereto, all as provided in this
Agreement; (c) any fees charged by investment rating agencies for
20
<PAGE>
the rating of the Securities; (d) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided in
Section 4(d) and of preparing, printing and distributing a Blue Sky Memorandum
(including reasonable related fees and expenses of counsel to the Initial
Purchasers); (e) the costs of preparing certificates evidencing the Securities;
(f) all expenses and fees in connection with the application for inclusion of
the Securities in the PORTAL Market, and the obtaining of any approval from any
other relevant authority in Germany or Luxembourg; (g) the fees and expenses
(including fees and disbursements of counsel) of the Trustee; (h) the fees and
expenses (including fees and disbursements of counsel) of the Warrant Agent
appointed under the Warrant Agreement; (i) the fees and expenses (including fees
and disbursements of counsel) of the Escrow Agent appointed under the Escrow
Agreement; (j) the fees and expenses of any Authorized Agent (as defined in
Section 16 hereof); (k) the cost and charges of any transfer agent or registrar;
(l) all stamp or other issuance or transfer taxes or governmental duties, if
any, payable by the Initial Purchasers in connection with the offer and sale of
the Units to the Initial Purchasers; and (m) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement not otherwise specifically provided for in this Section, including,
without limitation, the fees and expenses of Schitag Ernst & Young, AG, the
Company's independent accountants, and Grant Thornton S.p.A., Flashnet's
independent accountants, and the fees and expenses of Powell, Goldstein, Frazer
& Murphy LLP, U.S. counsel to the Company, Besner Kreifels Weber, German counsel
to the Company, and Italian counsel and Austrian counsel to the Company as
described under Sections 6(d)(2) and 6(d)(3); provided that, except as provided
in this Section 5 and in Section 10, the Initial Purchasers shall pay their own
costs and expenses and any transfer taxes on the Securities which they may sell.
6. Conditions of the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers hereunder are subject to the accuracy,
when made and on the Closing Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchasers shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains any untrue
statement of a fact which, in the opinion of counsel to the Initial
Purchasers, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Unit
Agreement, the Indenture, the Warrant Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Offering Memorandum or any amendment
or supplement thereto, and all other legal matters relating to this
Agreement, the Unit Agreement, the Indenture, the Warrant Agreement, the
Registration Rights Agreement and the Escrow Agreement, and the
transactions contemplated hereby and thereby shall be reasonably
satisfactory in all material respects to counsel to the Initial Purchasers,
and the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon
such matters.
21
<PAGE>
(c) Powell, Goldstein Frazer & Murphy LLP shall have furnished
to the Initial Purchasers its written opinion, as U.S. counsel to the
Company, addressed to the Initial Purchasers and dated the Closing Date, in
form and substance satisfactory to the Initial Purchasers, to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is duly qualified to do business and is in good standing
as a foreign corporation in each U.S. jurisdiction in which its
ownership or lease of property or the conduct of its businesses
requires such qualification, and has all power and authority necessary
to own or hold its properties and conduct the businesses in which it
is engaged;
(ii) The Company has an authorized capitalization as set
forth in the Offering Memorandum and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued, are fully paid and nonassessable and conform to the
description thereof contained in the Offering Memorandum;
(iii) To the best of such counsel's knowledge there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property or assets of
the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, might
have a material adverse effect on the financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iv) The Company has full right, power and authority to
execute and deliver each of the Operative Documents and to perform its
obligations thereunder; and all corporate action required to be taken
for the due and proper authorization, execution and delivery of each
of the Operative Documents and the consummation of the transactions
contemplated thereby has been duly and validly taken;
(v) Each of the Operative Documents is in proper legal form
for the enforcement thereof against the Company without further action
on the part of the Initial Purchasers, the holders of the Securities,
the Unit Agent, the Trustee or the Warrant Agent;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery by the Initial Purchasers, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a
22
<PAGE>
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing, and except, with respect to the rights of
indemnification and contribution thereunder, where enforcement thereof
may be limited by public policy;
(vii) The Unit Agreement has been duly authorized, executed
and delivered by the Company and, assuming due authorization,
execution and delivery of the Unit Agreement by the Unit Agent, the
Warrant Agent and the Trustee, constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) or an implied
covenant of good faith and fair dealing;
(viii) The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery of the Indenture by the Trustee, constitutes a valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied covenant of good faith
and fair dealing;
(ix) The Indenture conforms in all material respects with
the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture eligible to
be qualified thereunder;
(x) The Warrant Agreement has been duly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery of the Warrant Agreement by the Warrant Agent,
constitutes a valid and legally binding agreement of the Company
enforceable against the Company in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) or an implied covenant of good faith and fair dealing;
(xi) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Registration Rights
Agreement by the Initial Purchasers, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency fraudulent conveyance,
reorganization,
23
<PAGE>
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied covenant of good faith
and fair dealing, and except, with respect to the rights of
indemnification and contribution thereunder, where enforcement thereof
may be limited by public policy;
(xii) The Escrow Agreement has been duly authorized,
executed and delivered by the Company and, assuming due execution and
delivery of the Escrow Agreement by the Escrow Agent and the Trustee,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) or an implied covenant of good faith and fair dealing;
(xiii) The certificates used to evidence the Units, the
Notes and the Warrants are in due and proper form and comply with all
applicable statutory requirements of U.S. federal, Delaware and New
York law;
(xiv) The Units have been duly authorized, executed and
delivered by the Company and, assuming due authentication thereof by
the Unit Agent, the Warrant Agent and the Trustee, upon payment and
delivery in accordance with this Agreement and the Unit Agreement,
will be duly and validly issued and outstanding and will constitute
valid and legally binding obligations of the Company entitled to the
benefits of the Unit Agreement, the Indenture and the Warrant
Agreement and enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) or an implied covenant of good faith
and fair dealing;
(xv) The Notes have been duly authorized, executed and
delivered by the Company and, assuming due authentication thereof by
the Trustee, upon payment and delivery in accordance with this
Agreement and the Indenture, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent, conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing;
24
<PAGE>
(xvi) The Warrants have been duly authorized, executed and
delivered by the Company and, assuming due execution thereof by the
Warrant Agent in accordance with the provisions of the Warrant
Agreement, upon payment and delivery in accordance with this Agreement
and the Warrant Agreement, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations
of the Company, entitled to the benefits of the Warrant Agreement and
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) or an implied covenant of good faith and fair dealing;
(xvii) The Warrant Shares issuable upon exercise of the
Warrants have been duly authorized and, when issued in accordance with
the terms and conditions contained in the Warrant Agreement upon
exercise of the Warrants, will be validly issued in accordance with
the laws of the State of Delaware and the provisions of the
Certificate of Incorporation and By-laws of the Company and will be
fully paid and nonassessable and holders of such Warrant Shares will
have no other liability for any debt or other obligation of the
Company towards third parties in their capacity as holders of such
Warrant Shares; such Warrant Shares, when issued, will not be subject
to any preemptive or similar rights and will be free and clear of all
liens, encumbrances, equities and claims or restrictions on
transferability;
(xviii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Common Stock or pursuant to the
Company's Certificate of Incorporation or By-Laws or any agreement or
other instrument known to such counsel;
(xix) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities to be registered pursuant to the
Registration Rights Agreement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act.
(xx) The execution, delivery and performance of the
Operative Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby, do not and will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any material
25
<PAGE>
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any of its
subsidiaries is subject, nor will such actions result in any violation
of (A) the provisions of the Certificate of Incorporation or By-laws
or equivalent constitutive documents of the Company or any of its
subsidiaries, (B) any existing applicable law, rule or regulation of
any court or governmental agency or body of the United States or the
State of New York or any Delaware governmental agency or body acting
pursuant to the Delaware General Corporation Law (other than state
securities or Blue Sky laws as to which we have not been requested to
express any opinion) or (C) any order, known to such counsel, of any
government, governmental instrumentality or court of the United States
or the State of New York having jurisdiction over the Company or any
of its properties or assets or any Delaware governmental agency or
body acting pursuant to the Delaware General Corporation Law;
(xxi) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body of the United States or the State of New York or any
Delaware governmental agency or body acting pursuant to the Delaware
General Corporation Law is required for the consummation of the
transactions contemplated by the Operative Documents in connection
with the issuance or sale of the Units by the Company and the deposit
by the Company of the Pledged Securities in the Escrow Account
(assuming compliance with the terms of the Operative Documents by the
parties thereto), except, with respect to the transactions
contemplated by the Registration Rights Agreement, as may be required
under the Securities Act, the Trust Indenture Act and the rules and
regulations of the Commission thereunder, and otherwise except as may
be required by state or foreign securities or "Blue Sky" laws (as to
which such counsel expresses no opinion);
(xxii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings and contracts and other
documents are accurate in all material respects to the extent the
foregoing concern the federal laws of the United States, the laws of
the State of New York and the Delaware General Corporation Law; the
statements set forth in the Offering Memorandum under the captions
"Description of the Units," "Description of the Notes" and
"Description of the Warrants" insofar as such statements purport to
constitute a summary of the terms of the Unit Agreement, the
Indenture, the Warrant Agreement, the Registration Rights Agreement
and the Escrow Agreement fairly summarize such terms, agreements and
other documents in all material respects; and the statements set forth
in the Offering Memorandum under the caption "Certain United States
Federal Income Tax Consequences" insofar as they purport to constitute
summaries of matters of U.S. federal income tax law and legal
conclusions with respect thereto constitute accurate summaries of the
matters described therein all material respects;
26
<PAGE>
(xxiii) The Company is not an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, nor is it a closed-end investment company required to be
registered, but not registered, thereunder; and the Company is not
and, after giving effect to the offering and sale of the Units and the
application of the proceeds thereof as described in the Offering
Memorandum, will not be an "investment company" as defined in the
Investment Company Act and the rules and regulations of the Commission
thereunder;
(xxiv) No New York State or any New York City stamp or
documentary taxes payable by or on behalf of the Initial Purchasers or
the Company are required to be paid with respect to the execution of
the Indenture and the Warrant Agreement and the authorization,
issuance, sale and delivery of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement;
(xxv) The Company can sue and be sued in its own name.
(xxvi) The Company has, pursuant to Section 16 of this
Agreement, legally, validly and irrevocably submitted to the personal
jurisdiction of any state or federal court located in the Borough of
Manhattan, The City of New York, New York in any action arising out of
or relating to this Agreement or the transactions contemplated
thereby, and has legally, validly and effectively appointed the
Authorized Agent as its authorized agent for the purposes described in
Section 16 of this Agreement;
(xxvii) The Securities satisfy the eligibility requirements
of Rule 144A(d)(3) under the Securities Act;
(xxviii) Neither the Company nor any of its Affiliates (as
defined in Rule 501(b) of Regulation D promulgated under the
Securities Act) has directly, or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Securities Act) which is or will be
integrated with the sale of Securities in a manner that would require
the registration under the Securities Act of the Securities; and
(xxix) No registration of the Securities under the
Securities Act, and no qualification of an indenture under the Trust
Indenture Act, is required in connection with the offer and sale of
the Units by the Company to the Initial Purchasers or in connection
with the initial resale of the Units by the Initial Purchasers in the
manner contemplated in this Agreement and the Offering Memorandum.
Such counsel shall also have furnished to the Initial Purchasers
a written statement, addressed to the Initial Purchasers and dated the
Closing Date, in form and substance satisfactory to the Initial Purchasers,
to the effect that (i) the
27
<PAGE>
Offering Memorandum conforms in all material respects to the requirements
of, and contained all information that would be required to be presented
by, the Securities Act and the rules and regulations promulgated thereunder
that would have been applicable thereto if such Offering Memorandum were a
prospectus included in a registration statement on Form S-1 under the
Securities Act, however, had the Company submitted the Offering Memorandum
to the staff of the Commission, there may have been comments from the staff
requiring amendments before it was declared effective, and (ii) (x) such
counsel has acted as counsel to the Company in connection with the
preparation of the Offering Memorandum and (y) based on the foregoing, no
facts have come to the attention of such counsel which gave it reason to
believe that the Offering Memorandum (other than the financial statements,
statistical and other financial data contained therein or omitted
therefrom, as to which such counsel has not been requested to comment), as
of its date or the Closing Date, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary
to make that statement therein, in the light of circumstances under which
they were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel does not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum except for the statements
made in the Offering Memorandum under the captions "Description of the
Units," "Description of the Notes," "Description of the Warrants" and
"Certain United States Federal Income Tax Consequences" insofar as such
statements relate to the provisions of the Securities, this Agreement, the
Unit Agreement, the Indenture, the Warrant Agreement, the Registration
Rights Agreement and the Escrow Agreement, or concern legal matters.
In rendering such opinion, such counsel may (i) state that its
opinion is limited to matters governed by the federal laws of the United
States of America, the laws of the State of New York and the General
Corporation Law of the State of Delaware (and may contain such assumptions
and qualifications as are satisfactory in form and substance to the Initial
Purchasers) and (ii) rely (to the extent such counsel deems proper and
specifies in its opinion) as to matters involving the application of the
laws of Germany, Italy and Austria upon the opinions of Besner Kreifels
Weber, Italian counsel to the Company and Austrian counsel to the Company,
respectively, referred to in Sections 6(d)(1), (2) and (3) below.
(d) (1) Besner Kreifels Weber shall have furnished to the
Initial Purchasers its written opinion, as German counsel to the Company,
addressed to the Initial Purchasers and dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers, to the effect that:
(i) Each of Cybernet AG, Cybernet GmbH, Cybernet E-Commerce
and Open:Net (the "German Subsidiaries") has been duly incorporated
-------------------
and is validly existing as a corporation (and, in the case of Cybernet
E-Commerce, is a limited partnership validly existing as a limited
partnership) in good standing under the laws of Germany, is duly
qualified to do business and is in good standing as a foreign
corporation
28
<PAGE>
in each jurisdiction in which its ownership or lease of property or
the conduct of its business requires such qualification and has all
power and authority necessary to own or hold its properties and
conduct the businesses in which it is engaged;
(ii) All of the issued shares of capital stock of the
German Subsidiaries have been duly and validly authorized and issued
and are fully paid, nonassessable and are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims;
(iii) To the best of such counsel's knowledge and other
than as set forth in the Offering Memorandum there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries might have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iv) The execution, delivery and performance of the
Operative Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby, do not and will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which the Company or any of
its subsidiaries is subject, nor will such actions result in any
violation of (A) the provisions of the Articles of Association or
bylaws or equivalent constitutive documents of any of the German
Subsidiaries, (B) any existing applicable law, rule or regulation of
any court or governmental agency or body of Germany or (C) any order,
known to such counsel, of any government, governmental instrumentality
or court of Germany having jurisdiction over the Company or any of its
properties or assets;
(v) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
of Germany or any political subdivision thereof is required for the
consummation of the transactions contemplated by the Operative
Documents in connection with the issuance or sale of the Units by the
Company and the deposit by the Company of the Pledged Securities in
the Escrow Account (assuming compliance with the terms of the
Operative Documents by the parties thereto), except, with respect to
the transactions contemplated by the Registration Rights Agreement;
29
<PAGE>
(vi) Under German law, the Company would be deemed to have
had sufficient contacts with the United States and would be recognized
as a validly existing Delaware corporation and as the holding company
and owner of all the issued shares of capital stock of Cybernet AG and
the other German Subsidiaries.
(vii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings and contracts and other
documents are accurate in all material respects to the extent the
foregoing concern the laws of Germany; the statements set forth in
the Offering Memorandum under the captions "Risk Factors - There May
be Questions about our Status Under German Law," "Risk Factors - We
are Subject to Regulation" and "Business - Regulation," to the extent
that they constitute summaries of matters of German law or regulation
or legal conclusions, fairly summarize the matters described therein
in all material respects;
(viii) Any judgment obtained in a United States federal or
state court of competent jurisdiction sitting in New York City arising
out of or in relation to the obligations of the Company under the
Operative Documents would be enforced against the Company in the
courts of Germany without substantive reexamination or relitigation on
the merits of the subject matter thereof;
(ix) The Initial Purchasers would be permitted to commence
proceedings against the Company in German courts based on this
Agreement, and the holders of Units, Notes, Warrants and Warrant
Shares (or the Unit Agent, Trustee or Warrant Agent acting on their
behalf) (collectively, the "Holders") would be permitted to commence
-------
proceedings against the Company in German courts based on the
Operative Documents (to the extent that such Initial Purchasers and
Holders have direct contractual rights against the Company under such
Operative Documents, Units, Notes, Warrants or Warrant Shares, as
appropriate, which arise as a result of valid and binding obligations
of the Company under such documents in accordance with the laws of the
State of New York), and such German courts would recognize the choice
of law provisions of the Operative Documents;
(x) Under German law, the agreement of the Company that
Operative Documents shall be governed by the laws of the State of New
York will, if it constitutes a binding agreement under the laws of the
State of New York, be recognized by the courts of Germany;
(xi) The indemnification and contribution provisions set
forth in Section 7 herein do not contravene the public policy or laws
of Germany;
(xii) Under German law, the submission by the Company to
the jurisdiction of the United States federal or New York state courts
sitting
30
<PAGE>
in New York City set forth in each of the Operative Documents, is
enforceable against the Company, and service of process effected in
the manner set forth in the Operative Documents, assuming validity
under the laws of the State of New York, will be effective, insofar as
German law is concerned;
(xiii) All real property and buildings held under lease by
the Company and the German Subsidiaries are held by them under valid
subsisting and enforceable leases; and
(xiv) No stamp, registration or other similar taxes or
duties are payable in Germany by or on behalf of the Initial
Purchasers upon or in connection with the sale and delivery to or by
the Initial Purchasers of the Units as contemplated by the Offering
Memorandum, and it is not necessary, prior to the Initial Purchasers
seeking enforcement of any of the Operative Documents in Germany, that
any stamp or similar tax be paid.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by German law (and may contain such
assumptions and qualifications as are satisfactory in form and substance to
the Initial Purchasers) and shall state that each of Powell, Goldstein,
Frazer & Murphy LLP and Simpson Thacher & Bartlett may rely upon its
opinion with respect to matters of German law.
(2) Italian counsel to the Company, satisfactory to the Initial
Purchasers, shall have furnished to the Initial Purchasers its written
opinion, addressed to the Initial Purchasers and dated the Closing Date, in
form and substance satisfactory to the Initial Purchasers, to the effect
that:
(i) Flashnet and Eclipse (the "Italian Subsidiaries") have
--------------------
been duly incorporated and are validly existing as corporations in
good standing under the laws of Italy, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their ownership or lease of property or the
conduct of their businesses requires such qualification and have all
power and authority necessary to own or hold their properties and
conduct the businesses in which they are engaged; and
(ii) All of the issued shares of capital stock of the
Italian Subsidiaries have been duly and validly authorized and issued
and are fully paid and nonassessable; and all of the issued shares of
capital stock of Flashnet and 66% of the issued shares of capital
stock of Eclipse are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Italian law (and may contain such
assumptions and qualifications as are satisfactory in form and substance to
the Initial Purchasers) and shall state that each of Powell, Goldstein,
Frazer & Murphy LLP
31
<PAGE>
and Simpson Thacher & Bartlett may rely upon its opinion with respect to
matters of Italian law.
(3) Austrian counsel to the Company satisfactory to the Initial
Purchasers shall have furnished to the Initial Purchasers its written
opinion addressed to the Initial Purchasers and dated the Closing Date, in
form and substance satisfactory to the Initial Purchasers, to the effect
that:
(i) Vianet has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Austria,
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification
and has all power and authority necessary to own or hold its
properties and conduct the businesses in which it is engaged; and
(ii) All of the issued shares of capital stock of Vianet
have been duly and validly authorized and issued and are fully paid
and nonassessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Austrian law (and may contain
such assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchasers) and shall state that each of Powell,
Goldstein, Frazer & Murphy LLP and Simpson Thacher & Bartlett may rely upon
its opinion with respect to matters of Austrian law.
(e) The Unit Agent shall have furnished to the Initial
Purchasers an officer's certificate, dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers to the effect that (i) the
Unit Agreement has been duly authorized, executed and delivered by the Unit
Agent, (ii) each person who, on behalf of the Unit Agent, executed and
delivered the Unit Agreement was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer or
authorized signatory of the Unit Agent and duly authorized to perform such
acts at the respective times of such acts and the signatures of such
persons appearing on such document are their genuine signatures and (iii)
such other matters reasonably requested by the Initial Purchasers to be
included in such officer's certificate. Attached to such officer's
certificate shall be an extract of the bylaws of the Unit Agent, duly
adopted by its Board of Directors, respecting the signing authority of the
persons mentioned in clause (ii) above and a letter from an officer of the
Unit Agent authorizing, pursuant to such bylaws, such signing authority,
which bylaws and letter at the Closing Date are in full force and effect.
(f) The Trustee shall have furnished to the Initial Purchasers
an officer's certificate, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers to the effect that (i) the
Indenture, the Escrow Agreement and the Unit Agreement have been duly
authorized, executed and delivered by the Trustee, (ii)
32
<PAGE>
each person who, on behalf of the Trustee, executed and delivered the
Indenture and the Escrow Agreement was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer or
authorized signatory of the Trustee and duly authorized to perform such
acts at the respective times of such acts and the signatures of such
persons appearing on such document are their genuine signatures and (iii)
such other matters reasonably requested by the Initial Purchasers to be
included in such officer's certificate. Attached to such officer's
certificate shall be an extract of the bylaws of the Trustee, duly adopted
by its Board of Directors, respecting the signing authority of the persons
mentioned in clause (ii) above and a letter from an officer of the Trustee
authorizing, pursuant to such bylaws, such signing authority, which bylaws
and letter at the Closing Date are in full force and effect.
(g) The Warrant Agent shall have furnished to the Initial
Purchasers an officer's certificate, dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers to the effect that (i) the
Warrant Agreement has been duly authorized, executed and delivered by the
Warrant Agent, (ii) each person who, on behalf of the Warrant Agent,
executed and delivered the Warrant Agreement was at the date thereof and is
now duly elected, appointed or authorized, qualified and acting as an
officer or authorized signatory of the Warrant Agent and duly authorized to
perform such acts at the respective times of such acts and the signatures
of such persons appearing on such document are their genuine signatures and
(iii) such other matters reasonably requested by the Initial Purchasers to
be included in such officer's certificate. Attached to such officer's
certificate shall be an extract of the bylaws of the Warrant Agent, duly
adopted by its Board of Directors, respecting the signing authority of the
persons mentioned in clause (ii) above and a letter from an officer of the
Warrant Agent authorizing, pursuant to such bylaws, such signing authority,
which bylaws and letter at the Closing Date are in full force and effect.
(h) The Escrow Agent shall have furnished to the Initial
Purchasers an officer's certificate, dated the Closing Date, in form and
substance satisfactory to the Initial Purchasers to the effect that (i) the
Escrow Agreement has been duly authorized, executed and delivered by the
Escrow Agent, (ii) each person who, on behalf of the Escrow Agent, executed
and delivered the Escrow Agreement was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer or
authorized signatory of the Escrow Agent and duly authorized to perform
such acts at the respective times of such acts and the signatures of such
persons appearing on such document are their genuine signatures and (iii)
such other matters reasonably requested by the Initial Purchasers to be
included in such officer's certificate. Attached to each officer's
certificate shall be an extract of the bylaws of the Escrow Agent, duly
adopted by its Board of Directors, respecting the signing authority of the
persons mentioned in clause (ii) above and a letter from an officer of the
Escrow Agent authorizing, pursuant to such bylaws, such signing authority,
which bylaws and letter at the Closing Date are in full force and effect.
(i) With respect to each of the letters of Schitag Ernst &
Young, AG and Grant Thornton S.p.A. delivered to the Initial Purchasers and
dated the date
33
<PAGE>
hereof referred to in Section 4(q) (as used in this paragraph, the "initial
-------
letters"), the Company shall have furnished to the Initial Purchasers
-------
letters (as used in this paragraph, the "bring-down letters") of such
------------------
accountants, addressed to the Initial Purchasers and dated the Closing Date
(i) confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission, (ii) stating, as of the date of each
such bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more than
five days prior to the date of each such bring-down letter), the
conclusions and findings of each such firm with respect to the financial
information and other matters covered by its initial letter and (iii)
confirming in all material respects the conclusions and findings set forth
in its initial letter.
(j) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of Andreas Eder, Chairman, President
and Chief Executive Officer, and Robert Eckert, Chief Financial Officer and
Treasurer, stating, on behalf of the Company, that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the Closing Date; and
the Company has complied with all its agreements contained herein; and
(ii) (A) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth in
the Offering Memorandum nor (B) since such date has there been any
change in the share capital (except for the one-for-one conversion of
shares of Series A Preferred Stock and of shares of Series B Preferred
Stock occuring after June 9, 1999, for Common Stock and the issuance
of 25,000 shares of Common Stock in connection with the acquisition of
Sunweb AG) or long-term debt of the Company or any of its subsidiaries
or any change in or generally affecting the affairs, management,
financial position, shareholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth in the
Offering Memorandum; and
(ii) They have carefully examined the Offering Memorandum
and, in their opinion (A) the Offering Memorandum, as of its date, did
not include any untrue statement of a material fact and did not omit
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and (B) since such date
no event has occurred which should have been set forth in a supplement
or amendment to the Offering Memorandum so that the Offering
Memorandum, as so amended or supplemented, would not include any
untrue statement of a material fact and would not omit to state a
material fact required to be
34
<PAGE>
stated therein or necessary in order to make the statements therein,
in the light of the circumstances in which they were made, not
misleading.
(k) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Offering
Memorandum or (ii) since such date there shall not have been any change in
the share capital (except for the one-for-one conversion of shares of
Series A Preferred Stock and of shares of Series B Preferred Stock,
occuring after June 9, 1999, for Common Stock and the issuance of 25,000
shares of Common Stock in connection with the acquisition of Sunweb AG) or
long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
in the Offering Memorandum, the effect of which, in any such case described
in clause (i) or (ii), is, in the judgment of the Initial Purchasers, so
material and adverse as to make it impracticable or inadvisable to proceed
with the offering of the Securities on the terms and in the manner
contemplated in the Offering Memorandum.
(l) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, Inc., or the Nasdaq
National Market System, or trading in any securities of the Company on any
exchange, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by New
York State or U.S. federal authorities or by authorities in Germany or
European Union authorities, (iii) the United States or Germany shall have
become engaged in hostilities (other than currently existing hostilities in
Kosovo), there shall have been an escalation in hostilities involving the
United States or Germany or there shall have been a declaration of a
national emergency or war by the United States or Germany (including the
currently existing hostilities in Kosovo) or (iv) there shall have occurred
such a material adverse change in general, United States, or German
economic, political or financial conditions or in currency exchange rates,
taxation, exchange controls or foreign investment regulations (or the
effect of international conditions on the financial markets in the United
States or Germany shall be such) as to make it, in the judgment of the
Initial Purchasers, impracticable or inadvisable to proceed with completion
of the offering or sale of and payment for the Securities.
(m) The Initial Purchasers shall have received on the Closing
Date a counterpart of the Registration Rights Agreement which shall have
been executed and delivered by the duly authorized officers of the Company.
(n) The Indenture (in form and substance satisfactory to the
Initial Purchasers) shall have been duly executed and delivered by the
Company and the
35
<PAGE>
Trustee on the Closing Date and shall be in full force and effect on such
date and the Notes shall have been duly executed and delivered by the
Company and duly authenticated by the Trustee on the Closing Date.
(o) The Unit Agreement (in form and substance satisfactory to
the Initial Purchasers) shall have been duly executed and delivered by the
Company, the Unit Agent, the Trustee and the Warrant Agent on the Closing
Date and shall be in full force and effect on such date and the Units shall
have been duly executed and delivered by the Company and duly authenticated
by the Unit Agent, the Trustee and the Warrant Agent on the Closing Date.
(p) The NASD shall have accepted the Securities for trading in
the PORTAL Market.
(q) [Reserved.]
(r) The Company and the Warrant Agent shall have executed and
delivered the Warrant Agreement (in form and substance satisfactory to the
Initial Purchasers) and the Warrant Agreement shall be in full force and
effect on the Closing Date.
(s) The Units, Notes and Warrants shall have been duly
authorized, executed and delivered by the Company.
(t) The Company, the Escrow Agent and the Trustee shall have
executed and delivered the Escrow Agreement (in form and substance
satisfactory to the Initial Purchasers), the Escrow Agreement shall be in
full force and effect on the Closing Date, and the Trustee and the Escrow
Agent shall have received an opinion of counsel to the Company pursuant to
Section 2(d)(ii) of the Escrow Agreement.
(u) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Securities as contemplated hereby.
(v) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Units; and no injunction, restraining order or
order of any other nature by any court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance or sale
of the Units.
(w) The Company shall have furnished to the Initial Purchasers
such further information, certificates and documents as the Initial
Purchasers may reasonably request.
36
<PAGE>
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchasers.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each of the
Initial Purchasers, its officers and employees and each person, if any, who
controls each of the Initial Purchasers within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which each of the Initial
Purchasers, its officers, employees or controlling persons may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Preliminary Offering Memorandum or the Offering Memorandum, or in
any amendment or supplement thereto, (ii) the omission or alleged omission
to state in the Preliminary Offering Memorandum, the Offering Memorandum or
in any amendment or supplement thereto any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (iii) any act
or failure to act, or any alleged act or failure to act, by the Initial
Purchasers in connection with, or relating in any manner to, the Securities
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable in the case of any matter covered by this
clause (iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act undertaken or
omitted to be taken by the Initial Purchasers through their gross
negligence or wilful misconduct), and shall reimburse each of the Initial
Purchasers and such officer, employee and controlling person promptly upon
demand for any legal or other expenses reasonably incurred by such Initial
Purchaser, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Offering Memorandum, or in any
such amendment or supplement, in reliance upon and in conformity with the
written information furnished to the Company by the Initial Purchasers
specifically for inclusion therein and described in Section 7(e). The
foregoing indemnity agreement is in addition to any liability which the
Company may otherwise have to the Initial Purchasers or to any officer,
employee or controlling person of the Initial Purchasers.
37
<PAGE>
(b) The Initial Purchasers, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees, each
of its directors and each person, if any, who controls the Company within
the meaning of the Securities Act, from and against any loss, claim, damage
or liability, joint or several, or any action in respect thereof, to which
the Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Preliminary Offering Memorandum or the Offering Memorandum or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state in the Preliminary Offering Memorandum or the Offering Memorandum or
in any amendment or supplement thereto any material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, but in each
case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with the written information furnished to the Company by or on
behalf of the Initial Purchasers specifically for inclusion therein and
described in Section 7(e), and shall reimburse the Company and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company, as the case may be, or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which the Initial Purchasers may
otherwise have to the Company or any such director, officer or controlling
person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 7 except to the extent it has been materially prejudiced by such
failure and, provided, further, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7. If any such claim
or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, any indemnified party shall have the
right to employ separate counsel in any such action and to participate in
the defense thereof but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the
38
<PAGE>
employment thereof has been specifically authorized by the indemnifying
party in writing, (ii) such indemnified party shall have been advised by
such counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii)
the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which
case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to one
separate firm of attorneys as local counsel, if appropriate under the
circumstances) at any time for all such indemnified parties, which firm
shall be designated in writing by the Initial Purchasers, if the
indemnified parties under this Section 7 consist of the Initial Purchasers
or any of their officers, employees or controlling persons, or by the
Company, if the indemnified parties under this Section consist of the
Company or any of its directors, officers, employees or controlling
persons. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 7(a) and 7(b), shall use its reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld)
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent (a) includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (b) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party, or (ii) be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss of liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and
the
39
<PAGE>
Initial Purchasers on the other from the offering of the Securities or if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Initial Purchasers on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchasers on the other with
respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under
this Agreement (before deducting expenses but after deducting discounts and
commissions) received by the Company on the one hand, and the total
discounts and commissions received by the Initial Purchasers with respect
to the Securities purchased under this Agreement, on the other hand, bear
to the total gross proceeds from the offering of the Securities under this
Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or the Initial
Purchasers on the other hand, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section
7(d) were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(d) shall be deemed to include,
for purposes of this Section 7(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7(d), the Initial Purchasers shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Securities purchased by it were resold exceeds the amount of any damages
which the Initial Purchasers have otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Initial Purchasers confirm that the statements with
respect to the offering of the Units set forth in the first and tenth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum are correct and constitute the only information furnished in
writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the Offering Memorandum.
8. Defaulting Initial Purchasers. If any Initial Purchaser defaults
in the performance of its obligations under this Agreement, the remaining non-
defaulting Initial Purchasers shall be obligated to purchase the aggregate
number of Units which the defaulting
40
<PAGE>
Initial Purchaser agreed but failed to purchase in the respective proportions
which the total aggregate number of Units set opposite the name of each
remaining non-defaulting Initial Purchaser in Schedule I hereto bears to the
total aggregate number of Units set opposite the names of all the remaining non-
defaulting Initial Purchasers in Schedule I hereto; provided, however, that the
remaining non-defaulting Initial Purchasers shall not be obligated to purchase
any Units if the total aggregate number of Units which the defaulting Initial
Purchasers agreed but failed to purchase on such date exceeds 9.09% of the total
number of Units to be purchased, and any remaining non-defaulting Initial
Purchaser shall not be obligated to purchase more than 110% of the number of
Units which it agreed to purchase pursuant to the terms of Section 2. If the
foregoing maximums are exceeded, the remaining non-defaulting Initial
Purchasers, or those other initial purchasers satisfactory to the remaining non-
defaulting Initial Purchasers who so agree, shall have the right, but shall not
be obligated, to purchase, in such proportion as may be agreed upon among them,
the total number of Units to be purchased. If the remaining Initial Purchasers
or other initial purchasers satisfactory to the remaining non-defaulting Initial
Purchasers do not elect to purchase the number of Units which the defaulting
Initial Purchaser agreed but failed to purchase, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchasers or the
Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 5 and 10. As used in this
Agreement, the term "Initial Purchaser" includes, for all purposes of this
-----------------
Agreement unless the context requires otherwise, any party not listed in
Schedule I hereto who, pursuant to this Section 8, purchases Units which a
defaulting Initial Purchaser agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company for damages caused by its default.
If other Initial Purchasers are obligated or agree to purchase the Units of a
defaulting or withdrawing Initial Purchaser, either the remaining non-defaulting
Initial Purchasers or the Company may postpone the Closing Date for up to seven
full business days in order to effect any changes that in the opinion of counsel
to the Company or counsel to the Initial Purchasers may be necessary in the
Offering Memorandum or in any other document or arrangement.
9. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 6(k) or 6(l) shall have
occurred or if the Initial Purchasers shall decline to purchase the Securities
for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If this Agreement
shall be terminated by the Initial Purchasers because of any failure or refusal
on the part of the Company to comply with the terms or to fulfil any of the
conditions of Section 6 (other than Subsections 6(k), (l) and (t)) of this
Agreement, the Company shall reimburse the Initial Purchasers for fees and
expenses of its counsel and for such other out-of-pocket expenses as shall have
been reasonably incurred by it in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Company shall pay the
full amount thereof to the Initial Purchasers.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
41
<PAGE>
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to: (i) Lehman Brothers Inc., Three
World Financial Center, New York, NY 10285, Attention: Syndicate
Department (Fax: 1-212-528-8822) and (ii) Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, NY 10036, Attention: Syndicate
Department (Fax: 1-212-761-0192);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate, 21/st/ Floor,
London, EC2M 3YH, Attention: William R. Dougherty, Esq.
(Fax: +44-171-422-4022);
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to Cybernet Internet Services International Inc.,
Stefan-George-Ring 19-23, 81929 Munich, Germany, Attention: Robert Eckert,
Chief Financial Officer and Treasurer (Fax: +49-89-993-15199);
With a copy to Powell Goldstein, Frazer & Murphy LLP, 1001 Pennsylvania
Avenue, N.W., Washington D.C. 20004, Attention: Joseph M. Berl, Esq.
(Fax: 1-202-624-7222).
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of the Initial Purchasers and the person or persons, if any, who
control the Initial Purchasers within the meaning of Section 15 of the
Securities Act and the indemnity agreement of the Initial Purchasers contained
in Section 7(b) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 12, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Initial Purchasers contained in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect regardless of any investigation made by or
on behalf of any of them or any person controlling any of them.
14. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, the term "business day" means any day on which the
------------
Nasdaq National Market System is open for trading and the term "subsidiary" has
----------
the meaning set forth in Rule 405 under the Securities Act.
15. Governing Law. This Agreement and the rights and duties of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
16. Submission to Jurisdiction; Appointment of Agent for Service;
Waiver; Currency Indemnity. To the fullest extent permitted by applicable law,
the Company irrevocably
42
<PAGE>
submits to the non-exclusive jurisdiction of any federal or state court in the
Borough of Manhattan in the City of New York, County and State of New York,
United States of America, in any suit or proceeding based on or arising under
this Agreement, and irrevocably agrees that all claims in respect of such suit
or proceeding may be determined in any such court. The Company, to the fullest
extent permitted by applicable law, irrevocably and fully waives the defense of
an inconvenient forum to the maintenance of such suit or proceeding and hereby
irrevocably designates and appoints CSC, at New York, New York (the "Authorized
----------
Agent"), for a period of ten years from the date hereof or until such time as no
- -----
Units, Notes or Warrants are outstanding, as its authorized agent upon whom
process may be served in any such suit or proceeding. The Company represents
that it has notified the Authorized Agent of such designation and appointment
and that the Authorized Agent has accepted the same in writing. The Company
hereby irrevocably authorizes and directs its Authorized Agent to accept such
service. The Company further agrees that service of process upon its Authorized
Agent and written notice of said service to the Company mailed by first class
mail or delivered to its Authorized Agent shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the right of any person to serve process in any
other manner permitted by law. The Company agrees that a final action in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Agreement or the transactions contemplated hereby may also be
instituted by the Initial Purchasers, their respective officers and employees or
any person who controls each of the Initial Purchasers within the meaning of the
Securities Act in any competent court in Germany and the Company expressly
accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 16(a) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchasers and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(a) The Company shall indemnify the Initial Purchasers against
any loss incurred by them as a result of any judgment or order being given
or made and expressed and paid in a currency (the "Judgment Currency")
-----------------
other than U.S. dollars and as a result of any variation as between (i) the
rate of exchange at which the U.S. dollar amount is converted into the
Judgment Currency for the purpose of such judgment or order and (ii) the
spot rate of exchange in New York, New York at which such Initial
Purchasers on the date of payment of such judgment or order are able to
purchase U.S. dollars with the amount of the Judgment Currency actually
received by such Initial Purchasers. If the U.S. dollars so purchased are
greater than the amount originally due to such Initial Purchasers
hereunder, such Initial Purchasers agree to pay the Company an amount equal
to the excess of the U.S. dollars so purchased over the amount originally
due to such Initial Purchasers hereunder. The foregoing shall constitute
43
<PAGE>
a separate and independent obligation of the Company and the Initial
Purchasers, as the case may be, and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot
rate of exchange" shall include any premiums and costs of exchange payable
in connection with the purchase of, or conversion into, U.S. dollars.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
44
<PAGE>
If the foregoing correctly sets forth the agreement among the Company
and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
Cybernet Internet Services International, Inc.
By: /s/ Authorized Signatory
---------------------------------
45
<PAGE>
Accepted:
Lehman Brothers International (Europe)
By: /s/ Authorized Signatory
------------------------------------
<PAGE>
Accepted:
Morgan Stanley & Co. International Limited
By: /s/ Authorized Signatory
------------------------------------
<PAGE>
SCHEDULE I
Initial Purchasers Number of Units
------------------ ----------------
Lehman Brothers International (Europe)................ 91500
Morgan Stanley & Co. International Limited............ 58500
------
Total................................................. 150000
======
<PAGE>
EXHIBIT 1.3
CONFORMED COPY
(Euro)25,000,000
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Pay-In-Kind Notes
due 2009
PURCHASE AGREEMENT
------------------
August 19, 1999
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
Ladies and Gentlemen:
Cybernet Internet Services International, Inc., a Delaware corporation,
(the "Company") proposes to issue and sell to the initial purchaser listed on
-------
Schedule I hereto (the "Initial Purchaser") (Euro)25,000,000 aggregate principal
-----------------
amount of 13.0% Convertible Senior Subordinated Pay-In-Kind Notes due 2009.
The Notes are to be issued under an Indenture, dated as of August 26, 1999 (the
"Indenture"), between the Company and The Bank of New York, as Trustee (in such
---------
capacity, the "Trustee"). The shares of Common Stock issuable upon exercise of
-------
the right to convert the Notes pursuant to the provisions of Article X of the
Indenture (the "Conversion Right"), are herein referred to as the "Conversion
---------------- ----------
Shares." The Notes and the Conversion Shares are collectively referred to
- ------
herein as the "Securities."
----------
The Notes will be offered and sold to the Initial Purchaser without being
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions therefrom. The Company has
- ---------------
prepared a preliminary offering memorandum, dated (Euro)August 13, 1999, and a
supplement to the preliminary offering memorandum, dated August 13, 1999
(collectively, the "Preliminary Offering Memorandum"), and an offering
-------------------------------
memorandum dated the date hereof and a supplement (the "Supplement") to the
----------
offering memorandum, dated the date hereof (collectively, the "Offering
--------
Memorandum"), setting forth information concerning the Company, its subsidiaries
- ----------
and the Securities. Copies of the Preliminary Offering Memorandum and the
Offering Memorandum will be delivered by the Company to the Initial Purchaser
pursuant to the terms of this Agreement. Any references herein to the
Preliminary Offering Memorandum and to the Offering Memorandum shall be deemed
to include all amendments and supplements thereto (including, in the case of the
Offering Memorandum, whether specifically referenced in any particular paragraph
herein or not, the Supplement) unless otherwise noted. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Notes by the Initial Purchaser in accordance with Section 2.
Holders of the Notes and Conversion Shares, as the case may be (including
the Initial Purchaser and its direct and indirect transferees), will be entitled
to the benefits of a Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
-----------------------------
which the Company will agree to file with the U.S. Securities
<PAGE>
2
and Exchange Commission (the "Commission") a resale shelf registration statement
----------
pursuant to Rule 415 under the Securities Act (the "Resale Shelf Registration
-------------------------
Statement") with respect to resales of the Notes and the notes issuable in
- ---------
payment of interest pursuant to the Indenture (the "Secondary Notes") (which
Resale Shelf Registration Statement shall also register the sale of the
underlying Common Stock issuable upon conversion thereof). The Company will
further agree pursuant to the Registration Rights Agreement that it will file
with the Commission a shelf registration statement (the "Conversion Shelf
----------------
Registration Statement") registering the issuance or resale of Conversion Shares
- ----------------------
on or prior to the one-year anniversary of the Closing Date.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to herein collectively as the "Operative Documents."
-------------------
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum, as of their respective dates, did not, and the Offering
Memorandum, as of the Closing Date (as defined in Section 2 hereof),
will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that the Company does not make any representation or warranty as to
information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum in reliance upon and in
conformity with the written information furnished to the Company by
the Initial Purchaser specifically for inclusion therein and described
in Section 7(e).
(b) Assuming the accuracy of the representations and warranties
of the Initial Purchaser contained in Section 3 and its compliance
with the agreements set forth therein, it is not necessary, in
connection with the issuance and sale of the Notes to the Initial
Purchaser and the offer, resale and delivery of the Notes by the
Initial Purchaser in the manner contemplated by this Agreement and the
Offering Memorandum, to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
-------------------
(c) The Company has been duly incorporated, is validly existing
and in good standing under Delaware law; the Company is solvent, is
not in bankruptcy, liquidation or receivership and is duly qualified
to do business in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification,
except where the failure to so qualify would not reasonably be
expected to have, singularly or in the aggregate, a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries;
and the Company has all power and authority necessary to own or hold
its respective property and to conduct the business in which it is
engaged.
(d) Each of the subsidiaries (as defined in Section 13 hereof)
of the
<PAGE>
3
Company has been duly organized, is validly existing and in good standing
under the laws of its jurisdiction of organization or incorporation, is
solvent, is not in bankruptcy, liquidation or receivership and is duly
qualified to do business in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not reasonably
be expected to have, singularly or in the aggregate, a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries; and
each has all power and authority necessary to own or hold its respective
property and to conduct the business in which it is engaged.
(e) The Company has an authorized and issued share capital and
capitalization as set forth in the Supplement under the heading
"Capitalization," except for the one-for-one conversion of shares of Series
A Preferred Stock, par value $0.001 per share (the "Series A Preferred
------------------
Stock"), occurring after June 30, 1999 for Common Stock; all outstanding
-----
shares of capital stock of the Company have been duly authorized and are
validly issued and fully paid and nonassessable; the Conversion Shares have
been duly authorized and, when the Conversion Shares are issued in
accordance with the terms and conditions contained in the Indenture upon
exercise of the Conversion Right, such Conversion Shares will be validly
issued and fully paid and nonassessable and holders of the Conversion
Shares will have no liability for any debt or other obligation of the
Company towards third parties in their capacity as holders of the
Conversion Shares; and the stockholders of the Company have no preemptive
rights with respect to the Conversion Shares which have not been validly
excluded prior to the date hereof, and there is no other conflicting right,
contingent or otherwise, of any person to purchase or be offered for
purchase any of the Conversion Shares and no depositary receipts have been
issued with respect to the Conversion Shares offered by the Company; the
Conversion Shares have been duly reserved for issuance in accordance with
the terms of the Notes and the Indenture.
(f) The Company has no Indebtedness (as defined in the Offering
Memorandum) other than (i) as set forth on the June 30, 1999 Consolidated
Balance Sheet of the Company set forth in the Supplement and (ii) the
Company's 14% Senior Notes due 2009 (the "Senior Notes").
------------
(g) The execution, delivery and performance of the Operative
Documents by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement,
shareholders agreement or other material 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 or to which any of the properties or
assets of the Company or any of its subsidiaries are subject, nor will such
actions result in any violation of the provisions of the Certificate of
Incorporation or By-laws or equivalent constitutive documents of the
Company or any of its subsidiaries or any statute, license, legislation,
<PAGE>
4
authorization, or any order, rule or regulation of any court or
governmental agency or body (including, without limitation, any statutes,
rules, orders or regulations promulgated by the Federal Communications
Commission or the Commission of the European Community) having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets subject, other than with respect to violations of the provisions of
the Certificate of Incorporation or By-laws or equivalent constitutive
documents of the Company or any of its subsidiaries, to such exceptions as,
individually or in the aggregate, could not reasonably be expected to have
a material adverse effect on the financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries. No consent, approval, authorization or order of, or filing
or registration with, any such court or governmental agency or body
(including, without limitation, any statutes, rules, orders or regulations
promulgated by the Federal Communications Commission or the Commission of
the European Community) is required for the execution, delivery and
performance of the Operative Documents by the Company and the consummation
of the transactions contemplated hereby and thereby except (A) as have been
obtained or made, (B) with respect to the transactions contemplated by the
Registration Rights Agreement, as may be required under the Securities Act,
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and (C) as required by state or foreign securities or "Blue Sky"
laws.
(h) The Company has full power and authority to enter into this
Agreement; this Agreement has been duly authorized, executed and delivered
by the Company and, when duly authorized, executed and delivered by the
Initial Purchaser, will constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing, and except,
with respect to the rights of indemnification and contribution thereunder,
where enforcement thereof may be limited by public policy.
(i) The Company has full power and authority to enter into the
Indenture; the Indenture has been duly authorized by the Company and upon
effectiveness of a Shelf Registration Statement will be qualified under the
Trust Indenture Act; and, on the Closing Date (as defined below), the
Indenture will have been duly executed and delivered by the Company and
will conform, in all material respects, to the description thereof
contained in the Offering Memorandum and, assuming due authorization,
execution and delivery of the Indenture by the Trustee, the Indenture will
constitute a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except that the enforcement
thereof may be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good
<PAGE>
5
faith and fair dealing.
(j) The Company has full power and authority to offer and sell the
Notes; the Notes have been duly authorized by the Company; and, when the
Notes are delivered to and paid for by the Initial Purchaser pursuant to
this Agreement on the Closing Date, such Notes will have been duly
executed, authenticated, issued and delivered (assuming due authentication
of the Notes by the Trustee) and will conform, in all material respects, to
the description thereof contained in the Offering Memorandum and, assuming
due authentication of the Notes by the Trustee, such Notes will constitute
valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable in accordance with their terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(k) The Company has full power and authority to enter into the
Registration Rights Agreement; the Registration Rights Agreement has been
duly authorized by the Company and will conform, in all material respects,
to the description thereof contained in the Offering Memorandum; and when
executed and delivered by the Company (assuming due authorization,
execution and delivery by the Initial Purchaser) will have been duly
executed and delivered and will be a valid and legally binding obligation
of the Company, enforceable against the Company in accordance with its
terms, except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing, and except,
with respect to the rights of indemnification and contribution thereunder,
where enforcement thereof may be limited by public policy.
(l) No stamp or other issuance taxes or duties are payable by or on
behalf of the Initial Purchaser as a consequence of the issue of the
Securities, the sale of the Notes to the Initial Purchaser and/or the
initial resale of the Securities to investors.
(m) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Offering Memorandum, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree; and, since such date, there has not been any change in the share
capital (except for the one-for-one conversion of shares of Series A
Preferred Stock occurring after August 2, 1999) or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity, results of operations or prospects of the
<PAGE>
6
Company and its subsidiaries, otherwise than as set forth in the Offering
Memorandum.
(n) The consolidated financial statements of the Company (and the
related notes) set forth in the Offering Memorandum (including the
consolidated financial statements of the Company (and the related notes)
set forth in the Supplement) comply in all material respects with the
requirements that would be applicable to a registration statement on Form
S-1 under the Securities Act and were prepared in accordance with generally
accepted accounting principles in the United States ("U.S. GAAP") fairly
the financial condition and results of operations of the entities purported
to be shown thereby, at the dates and for the periods indicated (subject in
the case of interim statements to normal year-end audit adjustments). The
financial information contained in the Offering Memorandum (including that
contained within the Supplement) under the headings "Summary -- Summary
Consolidated Financial and Operating Data", "Capitalization", "Selected
Consolidated Financial and Operating Information", "Unaudited Pro Forma
Consolidated Financial Statements" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" are derived from
the accounting records of the Company and its subsidiaries and fairly
present the information purported to be shown thereby. The summary
financial and other data and selected financial and other data included in
the Offering Memorandum have been accurately extracted from the financial
statements of the Company. The pro forma financial information contained in
the Offering Memorandum has been prepared on a basis consistent with the
historical financial statements contained in the Offering Memorandum
(except for the pro forma adjustments specified in the Offering
Memorandum), includes all material adjustments to the historical financial
information required by Rule 11-02 of Regulation S-X under the Securities
Act and the Securities Exchange Act of 1934 (the "Exchange Act") to reflect
------------
the transactions described in the Offering Memorandum, gives effect to
assumptions made on a reasonable basis and fairly presents the historical
and proposed transactions contemplated by the Offering Memorandum and by
the Operative Documents. The other historical financial and statistical
information and data included in the Offering Memorandum (including that
contained within the Supplement) are, in all material respects, fairly
presented.
(o) Schitag Ernst & Young, AG and Grant Thornton S.p.A., who have
audited the consolidated financial statements of the Company and Flashnet,
respectively, whose reports appear in the Offering Memorandum and who will
deliver the initial letters referred to in Section 4(p) hereof are each
independent public accountants with respect to the Company and Flashnet,
respectively, within the meaning of the Securities Act and the rules and
regulations promulgated thereunder.
(p) The Company and each of its subsidiaries has good and marketable
title to all personal property owned by them, subject to such exceptions
that, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the financial position, results of
operations, business
<PAGE>
7
or prospects of the Company and its subsidiaries, in each case free and
clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries. Neither the Company nor any of its
subsidiaries owns any title to real property or buildings, and all real
property and buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.
(q) The Company and each of its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as the Company has
reasonably concluded is sufficient based upon experience and industry
practice and is adequate for the conduct of their respective businesses and
the value of their respective properties.
(r) The Company and each of its subsidiaries own or possess adequate
rights to use all material intellectual property, including without
limitation, patents, inventions, processes, technology and know-how, trade
mark registrations, service mark registrations, copyrights and works of
authorship in any media, including computer hardware, software, systems,
databases, documentation, files and Internet site content, trademarks,
service marks, trade names, domain names, URLs, e-mail addresses, logos,
slogans and trade dress, trade secrets and all confidential or proprietary
information and materials, and all related registrations, applications,
recordings and licenses ("Intellectual Property") necessary for the conduct
---------------------
of their respective businesses except for such Intellectual Property the
lack of possession of which could not reasonably be expected to have a
material adverse effect on the financial position, results of operations,
business or prospects of the Company and its subsidiaries. The Company has
no reason to believe that its Intellectual Property infringes,
misappropriates or impairs ("Infringes"), or is being so Infringed by, the
---------
Intellectual Property of any third party, and has not received any notice
alleging such Infringement by any third party. No legal or government
proceeding is pending, and no law, ordinance, rule, regulation, order,
judgment or decree is pending that limits or challenges the ownership, use,
validity or enforceability of any Intellectual Property owned or used by
the Company or any of its subsidiaries, and the Company has no knowledge of
a valid basis for any of the foregoing. The Company and each of its
subsidiaries take all reasonable steps to protect and maintain their
Intellectual Property (including any confidential Intellectual Property),
and have taken all necessary actions, made all necessary filings and paid
all necessary fees in connection with the foregoing. Any licenses,
sublicenses, royalty or other agreements concerning Intellectual Property
to which the Company or any of its subsidiaries is a party are valid and in
full force and effect, no party thereto is, or is alleged to be in default
thereunder, and no event exists that, with notice or lapse of time or both,
would constitute an event of default thereunder or result in a right to
accelerate, or loss of rights thereunder, except for licences, sublicense,
royalty or other agreements the lack of validity
<PAGE>
8
or enforceability of which or the default under which could not reasonably
be expected to have a material adverse effect on the financial position,
results of operations, business or prospects of the Company and its
subsidiaries.
(s) There are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
or asset of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, might
reasonably be expected to have a material adverse effect on the financial
position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(t) Except as otherwise disclosed in the Offering Memorandum, there
are no business relationships or other related-party transactions of the
nature described in Item 404 of Regulation S-K of the Commission ("Item
----
404") involving the Company or any other party referred to in Item 404,
---
except for transactions that would be considered immaterial under Item 404.
(u) No transaction or relationship exists which would have been
required to be described in the Offering Memorandum by the Securities Act
and the rules and regulations thereunder if such Offering Memorandum were a
prospectus included in a registration statement on Form S-1 under the
Securities Act, which is not so described.
(v) Except as disclosed in the Offering Memorandum, the Company and
its subsidiaries have duly filed with the appropriate taxing authorities
all tax returns, reports and other information required to be filed through
the date hereof and have paid all taxes due thereon, except where (i) (A)
extensions have been properly obtained or are being contested in good faith
and for which adequate reserves have been provided for in accordance with
U.S. GAAP and (B) such extensions referred to in clause (i)(A) are
disclosed in the Offering Memorandum and (ii) the failure to so file or pay
could not reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations, business
or prospects of the Company and its subsidiaries; each such tax return,
report or other information was, when filed, accurate and complete in all
material respects; the Company has no knowledge of any tax deficiency
which, if determined adversely to the Company or any of its subsidiaries,
might reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations, business
or prospects of the Company and its subsidiaries.
(w) All interest payments payable on the Notes may be paid by the
Company in U.S. dollars and all dividends and other distributions declared
and payable on the Conversion Shares may be paid by the Company in U.S.
dollars and all such payments will not be subject to income, withholding or
other taxes under the laws and regulations of the United States or Germany
or any political
<PAGE>
9
subdivision or taxing authority thereof or therein and will otherwise be
free and clear of any other tax, duty, withholding or deduction in the
United States or Germany or any political subdivision or taxing authority
thereof or therein and without the necessity of obtaining any governmental
authorization in the United States or Germany or any political subdivision
or taxing authority thereof or therein.
(x) Since the date as of which information is given in the Offering
Memorandum through the Closing Date (except for the one-for-one conversion
of shares of Series A Preferred Stock occurring after August 2, 1999 for
Common Stock), and except as may otherwise be disclosed in the Offering
Memorandum, the Company has not (i) issued or granted any securities,
including, without limitation, any options or warrants, (ii) incurred any
liability or obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business, (iii)
entered into any transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its issued share capital.
(y) There are no contracts or agreements between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities to be registered
pursuant to the Registration Rights Agreement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act, other than the Registration Rights
Agreement among the Company, Lehman Brothers International (Europe)
("Lehman") and the Initial Purchaser dated July 8, 1999 with respect to the
--------
Company's Senior Notes.
(z) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective Certificate of Incorporation or By-laws or
equivalent constitutive documents, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject,
other than such defaults which could not reasonably be expected to have a
material adverse effect on the financial condition, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries or (iii) in violation in any respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its properties
or assets may be subject or has failed to obtain any license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its properties or assets or to the conduct of
its business, other than such violations or failures which could not
reasonably be expected to have a material adverse effect on the financial
condition, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.
<PAGE>
10
(aa) The Company (i) makes and keeps books and records which are
accurate and complete in all material respects and (ii) maintains internal
accounting controls which provide reasonable assurance that transactions
are executed in accordance with management's authorization, transactions
are recorded as necessary to permit preparation of its financial statements
and to maintain accountability for its assets, access to its assets is
permitted only in accordance with management's authorization and the
reported accountability for its assets is compared with existing assets at
reasonable intervals.
(bb) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or, to the Company's knowledge, other
person associated with or acting on behalf of the Company or any of its
subsidiaries, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate
funds, (iii) violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any
bribe, rebate (other than legal price concessions to customers in the
ordinary course of business), payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
(cc) The Company is not in violation in any respect of any applicable
environmental law, ordinance, rule, regulation, order, judgment, decree or
permit in any jurisdiction with respect to the properties of the Company or
any of its subsidiaries, other than such violations which could not
reasonably be expected, singularly or in the aggregate, to have a material
adverse effect on the financial condition, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(dd) Except as described in the Offering Memorandum, there are no
material acquisitions of businesses or assets by the Company or any of its
subsidiaries pending or currently being negotiated.
(ee) No labor disturbance by employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent which
might reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations, business
or prospects of the Company or its subsidiaries.
(ff) All computer hardware, software, databases, automated systems and
other computer and telecommunications equipment owned or licensed by the
Company or any of its subsidiaries can be used prior to, during and after
the calendar year 2000 and will operate during each such time period and at
least as effectively during each such time period without material error
relating to the processing, calculating, comparing, sequencing or other use
of date-related data function (the foregoing ability, "Year 2000
---------
Compliant"). The Company reasonably believes, after due inquiry, that
---------
suppliers, vendors, customers or other material third parties used or
served by the Company and its subsidiaries are or
<PAGE>
11
will be Year 2000 Compliant in a timely manner, except as would not have a
material adverse effect on the financial position, stockholders' equity,
results of operations, business prospects or operations of the Company and
its subsidiaries. The Company has no reason to believe, and does not
believe, that there are any issues related to the Company's ability to be
Year 2000 Compliant that are of a character required to be described or
referred to in the Offering Memorandum.
(gg) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940, as amended (the "Investment Company Act"), nor is it a closed-
----------------------
end investment company required to be registered, but not registered,
thereunder; and the Company is not and, after giving effect to the offering
and sale of the Notes and the application of the proceeds thereof as
described in the Offering Memorandum, will not be an "investment company"
as defined in the Investment Company Act and the rules and regulations of
the Commission thereunder.
(hh) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act including, without limitation, the
requirement that Notes have an "effective conversion premium" (as such term
is defined in Rule 144A) of ten percent or greater.
(ii) Neither the Company nor any subsidiary has incurred any liability
for a fee, commission, or other compensation on account of the employment
of a broker or finder in connection with the transactions contemplated by
this Agreement.
(jj) Neither the Company nor any subsidiary has taken, directly or
indirectly, any action which is designed to or which has constituted or
which might reasonably have been expected to cause or result in
stabilization or manipulation of the price of any security of the Company
or which would otherwise be prohibited by Regulation M under the Exchange
Act in connection with the offering of the Securities.
(kk) Neither the Company nor any of its affiliates, nor any agent
acting on its or their behalf has offered or sold or will offer or sell any
of the Securities (A) in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act, or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act or (B) with respect to any
such Securities sold in reliance on Rule 903 of Regulation S under the
Securities Act, by means of any directed selling efforts within the meaning
of Rule 902(b) of Regulation S. The Company, its affiliates and any agent
acting on its behalf will comply with any offering restrictions and other
requirements of Regulation S applicable to the transactions contemplated
hereby including those applicable to any exercise of the Conversion Right.
The Company has not entered, and will not enter, into any contractual
arrangement with respect to the distribution of the Securities except for
this Agreement and the agreements contemplated hereby.
<PAGE>
12
(ll) Neither the Company nor any of its Affiliates (as defined in Rule
501(b) of Regulation D promulgated under the Securities Act) has directly,
or through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the
Securities Act) which is or will be integrated with the sale of Securities
in a manner that would require the registration under the Securities Act of
the Securities.
(mm) The Company owns no capital stock of, or other equity interests
in, any Person (as defined in the Indenture), other than all of the issued
and outstanding share capital of Cybernet Internet-Dienstleistungen AG
("Cybernet AG"), Flashnet S.p.A. ("Flashnet"), Vianet Telekommunikations
------------- --------
AG ("Vianet"), Cybernet E-Commerce GmbH ("Cybernet E-Commerce") and Carolin
------ -------------------
Verwaltungsgesellschaft mBH ("Carolin") and 51% of the issued and
-------
outstanding share capital of Sunweb AG; none of Cybernet AG, Flashnet,
Vianet, Cybernet E-Commerce, Carolin and Sunweb AG owns any capital stock
of, or other equity interests in, any Person, except that (i) Cybernet AG
owns all the issued and outstanding share capital of Open:Net Internet
Solutions GmbH ("Open:Net") and of Cybernet Internet Beteiligungs GmbH
--------
("Cybernet GmbH") and 66% of the issued and outstanding share capital of
-------------
Eclipse s.r.l. ("Eclipse") and (ii) Sunweb AG owns all the issued and
-------
outstanding share capital of Sunweb Internet Services GmbH ("Sunweb GmbH").
-----------
Open:Net, Cybernet GmbH, Eclipse and Sunweb GmbH do not own any capital
stock of, or other equity interests in, any Person.
(nn) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
-----
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
-----
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(oo) The Company and its subsidiaries possess all material licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or foreign
regulatory agencies or bodies which are necessary or desirable for the
ownership of their respective properties or the conduct of their respective
businesses as described in the Offering Memorandum, except where the
failure to possess or make the same would not, singularly or in the
aggregate, have a material adverse effect on the financial position,
stockholders' equity, results of operations, business prospects
<PAGE>
13
or operations of the Company and its subsidiaries, and neither the Company
nor any subsidiary has received notification of any revocation or
modification of any such license, certificate, authorization or permit or
has any reason to believe that any such license, certificate, authorization
or permit will not be renewed in the ordinary course.
(pp) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by any foreign or U.S. federal or state court of
competent jurisdiction has been issued with respect to the Company which
would prevent or suspend the issuance or sale of the Securities or the use
of the Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Company, threatened against or affecting the Company
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, which could reasonably be expected to
interfere with or adversely affect the issuance of the Securities or in any
manner draw into question the validity or enforceability of any of the
Operative Documents or any action taken or to be taken pursuant thereto;
and the Company has complied with any and all requests by any securities
authority in any jurisdiction for additional information to be included in
the Preliminary Offering Memorandum or the Offering Memorandum.
(qq) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum (including
forward looking statements in the Supplement) has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.
(rr) The Company has filed on a timely basis with the Commission, to
the extent required, (i) all annual and quarterly financial statements and
other information required to be contained in a filing with the Commission
on Forms 10-K and 10-Q and (ii) all current reports required to be filed
with the Commission on Form 8-K.
2. Purchase, Sale and Delivery of Securities. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Initial
Purchaser, and the Initial Purchaser agrees to purchase from the Company, the
number of Notes set forth opposite the Initial Purchaser's name on Schedule I
hereto at a purchase price of (Euro)0.95 per Note, plus accrued interest, if
any, from August 26, 2004, to the Closing Date.
The Company will deliver, against payment of the purchase price, Notes
in the form of one or more certificates in global or definitive form. If the
Notes are offered in global form, beneficial interests in the Notes will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by The Depository Trust Company ("DTC") and its
---
participants, including, as applicable, Morgan Guaranty Trust Company of New
<PAGE>
14
York, Brussels office, as operator of the Euroclear System, and Cedelbank,
societe anonyme. Payment for the Notes shall be made by or on behalf of the
Initial Purchaser in same day funds by wire transfer to an account previously
designated to the Initial Purchaser by the Company at a bank reasonably
acceptable to the Initial Purchaser at 4:00 p.m. (London time), on August 26,
1999, or at such other time not later than seven full business days thereafter
as the Initial Purchaser and the Company determine, such time being herein
referred to as the "Closing Date", against delivery at the office of Simpson
------------
Thacher & Bartlett (London) at least 24 hours prior to the Closing Date to the
Trustee.
3. Representations by Initial Purchaser; Resale by Initial Purchaser.
(a) The Initial Purchaser represents and warrants to the Company that
it is an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) The Initial Purchaser acknowledges that the Securities have not
been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Rule 144A or Regulation S or pursuant to
another exemption from the registration requirements of the Securities Act.
The Initial Purchaser represents and agrees that it has offered and sold
the Securities and will offer and sell the Securities (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the later
of the date of commencement of the Offering and the Closing Date, only in
accordance with Rule 903 or Rule 144A under the Securities Act ("Rule
----
144A"). Accordingly, neither the Initial Purchaser nor its affiliates, nor
----
any persons acting on its behalf, have engaged or will engage in any
directed selling efforts with respect to the Securities, and the Initial
Purchaser, its affiliates and all persons acting on its behalf have
complied and will comply with the offering restrictions requirement of
Regulation S. The Initial Purchaser agrees that, at or prior to
confirmation of sale of the Notes other than a sale pursuant to Rule 144A,
the Initial Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
the Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the date of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meanings given to them
by Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
<PAGE>
15
(c) The Initial Purchaser agrees that it and each of its affiliates
have not entered and will not enter into any contractual arrangement with
respect to the distribution of the Securities except with the prior written
consent of the Company.
(d) The Initial Purchaser and each of its affiliates has not
solicited offers for nor offered or sold and each agrees that it will not
solicit offers for nor offer or sell the Securities in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act, including, but not limited
to, (i) any advertising, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio or (ii) any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. The Initial Purchaser
agrees, with respect to initial resales made in reliance on Rule 144A of
any of the Securities, to deliver either with the confirmation of such
initial resale or otherwise prior to settlement of such initial resale a
notice (which may be included in the Offering Memorandum) to the effect
that the initial resale of such Securities has been made in reliance upon
the exemption from the registration requirements of the Securities Act
provided by Rule 144A.
(e) The Initial Purchaser represents and agrees that it (i) has not
solicited, and will not solicit, offers to purchase any of the Securities
from, (ii) has not sold, and will not sell, any of the Securities to, and
(iii) has not distributed, and will not distribute, the Offering Memorandum
to any person or entity in any jurisdiction outside of the United States
except, to the best of the Initial Purchaser's knowledge and belief, in
compliance in all material respects with all applicable laws. For the
purpose of this Agreement, "United States" means the United States of
-------------
America, its territories, its possessions and other areas subject to its
jurisdiction.
4. Further Agreements of the Company. The Company agrees as follows:
(a) The Company will advise the Initial Purchaser promptly of any
proposal to amend or supplement the Offering Memorandum and will not effect
such amendment or supplement to which the Initial Purchaser shall
reasonably object after being given notice thereof and reasonable time for
review. If, at any time prior to completion of the resale of the Notes by
the Initial Purchaser, any event shall occur or condition exist as a result
of which it is necessary, in the opinion of counsel for the Initial
Purchaser or counsel for the Company, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not misleading, or if
it is necessary to amend or supplement the Offering Memorandum to comply
with applicable law, to promptly prepare such amendment or supplement as
may be necessary to correct such untrue statement or omission or so that
the Offering Memorandum, as so amended or supplemented, will comply with
applicable law. Neither the Initial Purchaser's
<PAGE>
16
consent to, nor its delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6.
(b) The Company will furnish to the Initial Purchaser copies of the
Offering Memorandum (and all amendments and supplements thereto) as soon as
available and in such quantities as the Initial Purchaser shall reasonably
request for internal use and for distribution to prospective purchasers,
and the Company will furnish to the Initial Purchaser as soon as
practicable four copies of the Offering Memorandum (including four copies
of the Supplement) , each signed by a duly authorized officer of the
Company, one of which will include the independent accountants' reports
therein manually signed by such independent accountants. For so long as
any of the Securities are outstanding, if the Company is ever not subject
to Section 13 or 15(d) of the Exchange Act and is not exempt from reporting
pursuant to Rule 12g3-2(b) under the Exchange Act, the Company will
promptly furnish or cause to be furnished to the Initial Purchaser and the
holders of the Securities, and, upon request of prospective purchasers of
the Securities, to such purchasers, copies of the information required to
be delivered to holders and prospective purchasers of the Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Securities. The Company
will pay the expenses of printing and distributing to the Initial Purchaser
all such documents.
(c) The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not
the Company has a class of securities registered under the Exchange Act,
(i) all annual and quarterly financial statements and other financial
information required to be contained in a filing with the Commission on
Forms 10-K and 10-Q (which financial statements shall be prepared in
accordance with U.S. GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual financial information, a report thereon by the
Company's certified independent accountants and (ii) all current reports
required to be filed with the Commission on Form 8-K. Such quarterly
financial information shall be filed with the Commission within 45 days
following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end
of each fiscal year of the Company. Such annual financial information shall
include the geographic segment financial information required to be
disclosed by the Company under Item 101(d) of Regulation S-K under the
Securities Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder, without cost to such holder, copies of
such reports and documents within 15 days after the date on which the
Company files such reports and documents with the Commission or the date on
which the Company would be required to file such reports and documents if
the Company were so required, and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited
under the Exchange Act, to supply at the Company's cost copies of such
reports and
<PAGE>
17
documents to any prospective holder promptly upon request.
(d) The Company will promptly from time to time exercise best efforts
to take such action as the Initial Purchaser may reasonably request to
qualify the Securities for offering and sale under the securities laws of
such jurisdictions as the Initial Purchaser may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the resale
of the Notes; provided, however, that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general consent to service of process in
any jurisdiction (other than pursuant to an Operative Document) in which it
is not now so subject or otherwise subject itself to taxation in any
jurisdiction in which it is not otherwise so qualified or subject.
(e) Until the second anniversary of the Closing Date, the Company
will, upon request, furnish to the Initial Purchaser and any holder of
Securities, a copy of the restrictions on transfer which the Company
believes are applicable to the Securities; provided, however, that nothing
contained herein shall obligate the Company to track or trace particular
Securities held by anyone other than the Company or any of its affiliates
(as defined in Rule 144 under the Securities Act).
(f) In connection with the offering, until the Initial Purchaser
shall have notified the Company of the completion of the resale of the
Notes, neither the Company nor any of its affiliates have bid for or
purchased or will bid for or purchase, either alone or with one or more
other persons, for any account in which they or any of their affiliates
have a beneficial interest any Notes nor have they attempted or will they
attempt to induce any person to purchase any Notes; and neither they nor
any of their affiliates will make bids or purchases for the purpose of
creating actual, or apparent, active trading in, or of raising the price
of, the Notes.
(g) For a period of 90 days after the date hereof, neither the
Company nor any of its direct or indirect subsidiaries will (i) offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any debt securities issued or guaranteed by the Company or any
such subsidiary and having a maturity of more than one year from the date
of issue other than pursuant to obligations under registration rights
agreements or (ii) directly or indirectly, offer for sale, sell or
otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition or purchase
by any person at any time in the future of) any shares of Common Stock
(other than shares issued through private placements in connection with the
acquisition of the capital stock or assets of another company, shares
issued pursuant to employee benefit plans, qualified stock option plans or
other employee compensation plans existing on the date hereof or pursuant
to currently outstanding options, warrants or rights), or sell or grant
options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to option plans existing on the
date hereof), in each case, without the prior written consent of the
<PAGE>
18
Initial Purchaser. Neither the Company nor any of its direct or indirect
subsidiaries will at any time offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act or the
safe harbor of Regulation S thereunder to cease to be applicable to the
offer and sale of the Securities.
(h) The Company will indemnify and hold harmless the Initial
Purchaser against any documentary, stamp or similar issuance tax, including
any interest and penalties, on the creation, issuance and sale of the
Securities and on the initial resale thereof by the Initial Purchaser and
on the execution and delivery of this Agreement. All payments to be made
by the Company hereunder shall be made without withholding or deduction for
or on account of any present or future taxes, duties or governmental
charges whatsoever unless the Company is compelled by law to deduct or
withhold such taxes, duties or charges. In that event, the Company shall
pay such additional amounts as may be necessary in order that the net
amounts received after such withholding or deduction shall equal the
amounts that would have been received if no withholding or deduction had
been made.
(i) The Company will apply the net proceeds from the sale of the
Notes as set forth in the Offering Memorandum under the caption "Use of
Proceeds."
(j) Between the date hereof and the Closing Date (both dates
inclusive), the Company will notify and consult with the Initial Purchaser,
and cause its subsidiaries and all other parties acting on its or their
behalf to notify and consult with the Initial Purchaser, prior to issuing
any announcement which could be material in the context of the distribution
of the Securities.
(k) The Company will promptly inform the Initial Purchaser of any
communications received by it from any governmental or regulatory agency or
authority, including, without limitation, any German or Italian regulatory
authority, any relevant stock exchange or trading market (including the
Freiverkehr of the Frankfurt Stock Exchange), or the Commission, relating
to the offering of the Securities and to furnish the Initial Purchaser with
copies thereof.
(l) The Company will take such steps as shall be necessary to ensure
that neither the Company nor any subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company Act
and the rules and regulations of the Commission thereunder.
(m) The Company will not take, directly or indirectly, any action
which is designed to stabilize or manipulate, or which constitutes or which
might reasonably be expected to cause or result in stabilization or
manipulation, of the price of any security of the Company in connection
with the offering of the Securities.
(n) If not effected prior to the Closing Date and the Initial
Purchaser has
<PAGE>
19
waived the conditions set forth in Section 6(r) hereof, upon request by the
Initial Purchaser, the Company will promptly apply to list the Notes or
have them admitted for trading on an internationally recognized stock
exchange or over-the-counter trading market and will use its best efforts
to ensure that such application is accepted.
(o) The Company will use its best efforts to cause the Notes to be
eligible for inclusion in the Private Offerings, Resale and Trading through
Automated Linkages Market of The Nasdaq Stock Market, Inc. (the "PORTAL
------
Market").
------
(p) The Company will cause each of Schitag Ernst & Young, AG and
Grant Thornton S.p.A. to deliver an initial comfort letter, dated the date
hereof, to the Initial Purchaser in form and substance reasonably
satisfactory to the Initial Purchaser at or prior to the time copies of the
Offering Memorandum (including the Supplement) are furnished to the Initial
Purchaser.
(q) The Company will prepare the Offering Memorandum (including the
Supplement) on or prior to the Closing Date in form and substance
reasonably satisfactory to the Initial Purchaser. The Supplement shall
contain Consolidated Statements of Loss and Comprehensive Loss and
Consolidated Statements of Cash Flows, each as of and for the six months
ended June 30, 1998 and 1999, Consolidated Balance Sheets as of the year
ended December 31, 1998 and the six months ended June 30, 1999, a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" comparing the six months ended June 30, 1999 with the six
months ended June 30, 1998 and pro forma consolidated financial information
for the Company as of and for the six months ended June 30, 1999
reflecting, among other transactions, the acquisition of Flashnet.
(r) At any time prior to (i) the listing of the Notes or an admission
for their trading on an internationally recognized stock exchange or the
Freiverkehr of the Frankfurt Stock Exchange (provided, however, that such
listing or admission occurs within four weeks of the Closing Date) or (ii)
completion of the resale of the Notes by the Initial Purchaser, the Company
will provide, and cause its Subsidiaries, affiliates and advisors to
provide, to the Initial Purchaser promptly upon its request, all
information deemed necessary by the Initial Purchaser and its legal counsel
and access to officers, directors, employees and advisors of the Company
and its Subsidiaries in order to complete and continue its "due diligence"
review of the Company and its Subsidiaries.
5. Expenses. The Company agrees, to pay: (a) the costs incident to the
authorization, issuance, registration (as set forth in the Registration Rights
Agreement), sale and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distributing
of the Preliminary Offering Memorandum and the Offering Memorandum and any
amendment or supplement thereto, all as provided in this Agreement; (c) any fees
charged by investment rating agencies for the rating of the Securities; (d) the
fees and expenses of qualifying the Securities under the securities laws of the
several jurisdictions as provided in Section 4(d) and of preparing, printing and
distributing a Blue Sky Memorandum
<PAGE>
20
(including reasonable related fees and expenses of counsel to the Initial
Purchaser); (e) the costs of preparing certificates evidencing the Securities;
(f) all expenses and fees in connection with the application for inclusion of
the Securities in the PORTAL Market, and the obtaining of any approval from any
relevant authority in Germany or any other country in which the securities are
listed or admitted for trading on a stock exchange or over-the-counter trading
market; (g) the fees and expenses (including fees and disbursements of counsel)
of the Trustee; (h) the fees and expenses of any Authorized Agent (as defined in
Section 15 hereof); (i) the cost and charges of any transfer agent or registrar;
(j) all stamp or other issuance or transfer taxes or governmental duties, if
any, payable by the Initial Purchaser in connection with the offer and sale of
the Notes to the Initial Purchaser; and (k) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement not otherwise specifically provided for in this Section, including,
without limitation, the fees and expenses of Schitag Ernst & Young, AG, the
Company's independent accountants, and Grant Thornton S.p.A., Flashnet's
independent accountants, and the fees and expenses of Powell, Goldstein, Frazer
& Murphy LLP, U.S. counsel to the Company, Besner Kreifels Weber, German counsel
to the Company, Avv. Fausto D'Ambrosio, Italian counsel to the Company, and Dr.
Thomas Herndl, Austrian counsel to the Company, provided that, except as
provided in this Section 5 and in Section 9, the Initial Purchaser shall pay its
own costs and expenses and any transfer taxes on the Securities which it may
sell.
6. Conditions of the Initial Purchaser's Obligations. The several
obligations of the Initial Purchaser hereunder are subject to the accuracy, when
made and on the Closing Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchaser shall not have discovered and disclosed to
the Company on or prior to the Closing Date that the Offering Memorandum or
any amendment or supplement thereto (including the Supplement) contains any
untrue statement of a fact which, in the opinion of counsel to the Initial
Purchaser, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(b) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Indenture, the
Registration Rights Agreement, the Offering Memorandum or any amendment or
supplement thereto (including the Supplement), and all other legal matters
relating to this Agreement, the Indenture, the Registration Rights
Agreement and the transactions contemplated hereby and thereby shall be
reasonably satisfactory in all material respects to counsel to the Initial
Purchaser, and the Company, shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters.
(c) Powell, Goldstein, Frazer & Murphy LLP shall have furnished to
the Initial Purchaser its written opinion, as U.S. counsel to the Company,
addressed to the Initial Purchaser and dated the Closing Date, in form and
substance satisfactory to the Initial Purchaser, to the effect that:
<PAGE>
21
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is duly qualified to do business and is in good standing
as a foreign corporation in each U.S. jurisdiction in which its
ownership or lease of property or the conduct of its businesses
requires such qualification, and has all power and authority necessary
to own or hold its properties and conduct the businesses in which it
is engaged;
(ii) The Company has an authorized capitalization as set forth
in the Supplement and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and nonassessable and conform to the description thereof
contained in the Offering Memorandum;
(iii) To the best of such counsel's knowledge there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might have a
material adverse effect on the financial position, stockholders'
equity, results of operations, business or prospects of the Company
and its subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) The Company has full right, power and authority to execute
and deliver each of the Operative Documents and to perform its
obligations thereunder; and all corporate action required to be taken
for the due and proper authorization, execution and delivery of each
of the Operative Documents and the consummation of the transactions
contemplated thereby has been duly and validly taken;
(v) Each of the Operative Documents is in proper legal form for
the enforcement thereof against the Company without further action on
the part of the Initial Purchaser, the holders of the Securities, or
the Trustee;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery by the Initial Purchaser, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, and except, with
respect to the rights of indemnification and
<PAGE>
22
contribution thereunder, where enforcement thereof may be limited by
public policy;
(vii) The Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery of the Indenture by the Trustee, constitutes a valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied covenant of good faith
and fair dealing;
(viii) The Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
of the Commission applicable to an indenture eligible to be qualified
thereunder;
(ix) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Registration Rights
Agreement by the Initial Purchaser, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) or an implied
covenant of good faith and fair dealing, and except, with respect to
the rights of indemnification and contribution thereunder, where
enforcement thereof may be limited by public policy;
(x) The certificates used to evidence the Notes are in due and
proper form and comply with all applicable statutory requirements of
U.S. federal, Delaware and New York law; the certificates used to
evidence the Secondary Notes will be, when issued, in due and proper
form and will comply with all applicable statutory requirements of
U.S. federal, Delaware and New York law;
(xi) The Notes have been duly authorized, executed and
delivered by the Company and, assuming due authentication thereof by
the Trustee, upon payment and delivery in accordance with this
Agreement and the Indenture, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency,
<PAGE>
23
fraudulent, conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing;
(xii) The Secondary Notes have been duly authorized, and when
executed and issued by the Company in satisfaction of its interest
obligations under the Indenture and duly authenticated by the Trustee
in accordance with the Indenture, will constitute valid and legally
binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether in a proceeding in
equity or at law) or an implied covenant of good faith and fair
dealing.
(xiii) The Conversion Shares have been duly authorized and, when
issued in accordance with the terms and conditions contained in the
Indenture upon conversion of the Notes or the Secondary Notes into
Common Stock, will be validly issued in accordance with the laws of
the State of Delaware and the provisions of the Certificate of
Incorporation and By-laws of the Company and will be fully paid and
nonassessable and holders of such Conversion Shares will have no other
liability for any debt or other obligation of the Company towards
third parties in their capacity as holders of such Conversion Shares;
such Conversion Shares, when issued, will not be subject to any
preemptive or similar rights and will be free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability;
(xiv) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any shares of the Common Stock or pursuant to the Company's
Certificate of Incorporation or By-Laws or any agreement or other
instrument known to such counsel;
(xv) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities to be registered pursuant to the
Registration Rights Agreement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act other than the Registration Rights Agreement
among the Company, Lehman and the Initial Purchaser dated July 8, 1999
with respect to the Company's Senior Notes;
<PAGE>
24
(xvi) The execution, delivery and performance of the Operative
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, do not and will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which the Company or any of
its subsidiaries is subject, nor will such actions result in any
violation of (A) the provisions of the Certificate of Incorporation or
By-laws or equivalent constitutive documents of the Company or any of
its subsidiaries, (B) any existing applicable law, rule or regulation
of any court or governmental agency or body of the United States or
the State of New York or any Delaware governmental agency or body
acting pursuant to the Delaware General Corporation Law (other than
state securities or Blue Sky laws as to which we have not been
requested to express any opinion) or (C) any order, known to such
counsel, of any government, governmental instrumentality or court of
the United States or the State of New York having jurisdiction over
the Company or any of its properties or assets or any Delaware
governmental agency or body acting pursuant to the Delaware General
Corporation Law;
(xvii) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
of the United States or the State of New York or any Delaware
governmental agency or body acting pursuant to the Delaware General
Corporation Law is required for the consummation of the transactions
contemplated by the Operative Documents in connection with the
issuance or sale of the Notes by the Company (assuming compliance with
the terms of the Operative Documents by the parties thereto), except,
with respect to the transactions contemplated by the Registration
Rights Agreement, as may be required under the Securities Act, the
Trust Indenture Act and the rules and regulations of the Commission
thereunder, and otherwise except as may be required by state or
foreign securities or Blue Sky laws (as to which such counsel
expresses no opinion);
(xviii) The descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents
are accurate in all material respects to the extent the foregoing
concern the federal laws of the United States, the laws of the State
of New York and the Delaware General Corporation Law; the statements
set forth in the Offering Memorandum under the caption "Description of
the Notes," insofar as such statements purport to constitute a summary
of the terms of the Indenture and the Registration Rights Agreement,
fairly summarize such terms, agreements and other documents in all
material respects; and the statements set forth in the Offering
Memorandum under the caption "Certain United States Federal Income Tax
Consequences to Non-U.S.
<PAGE>
25
Holders" insofar as they purport to constitute summaries of matters of
U.S. federal income tax law and legal conclusions with respect thereto
constitute accurate summaries of the matters described therein all
material respects;
(xix) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company
Act, nor is it a closed-end investment company required to be
registered, but not registered, thereunder; and the Company is not
and, after giving effect to the offering and sale of the Notes and the
application of the proceeds thereof as described in the Offering
Memorandum, will not be an "investment company" as defined in the
Investment Company Act and the rules and regulations of the Commission
thereunder;
(xx) No New York State or any New York City stamp or
documentary taxes payable by or on behalf of the Initial Purchaser or
the Company are required to be paid with respect to the execution of
the Indenture and the authorization, issuance, sale and delivery of
the Securities to the Initial Purchaser in the manner contemplated by
this Agreement;
(xxi) The Company can sue and be sued in its own name;
(xxii) The Company has, pursuant to Section 15 of this
Agreement, legally, validly and irrevocably submitted to the personal
jurisdiction of any state or federal court located in the Borough of
Manhattan, The City of New York, New York in any action arising out of
or relating to this Agreement or the transactions contemplated
thereby, and has legally, validly and effectively appointed the
Authorized Agent as its authorized agent for the purposes described in
Section 15 of this Agreement;
(xxiii) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act;
(xxiv) Neither the Company nor any of its Affiliates (as defined
in Rule 501(b) of Regulation D promulgated under the Securities Act)
has directly, or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any "security"
(as defined in the Securities Act) which is or will be integrated with
the sale of Securities in a manner that would require the registration
under the Securities Act of the Securities; and
(xxv) No registration of the Securities under the Securities
Act, and no qualification of an indenture under the Trust Indenture
Act, is required in connection with the offer and sale of the Notes by
the Company to the Initial Purchaser or in connection with the initial
resale
<PAGE>
26
of the Notes by the Initial Purchaser in the manner contemplated in
this Agreement and the Offering Memorandum.
Such counsel shall also have furnished to the Initial Purchaser a
written statement, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the
effect that (i) the Offering Memorandum (including the Supplement) conforms
in all material respects to the requirements of, and contains all
information that would be required to be presented by, the Securities Act
and the rules and regulations promulgated thereunder that would have been
applicable thereto if such Offering Memorandum were a prospectus included
in a registration statement on Form S-1 under the Securities Act, however,
had the Company submitted the Offering Memorandum to the staff of the
Commission, there may have been comments from the staff requiring
amendments before the offer document was declared effective, and (ii) (x)
such counsel has acted as counsel to the Company in connection with the
preparation of the Offering Memorandum (including the Supplement) and (y)
based on the foregoing, no facts have come to the attention of such counsel
which gave it reason to believe that the Offering Memorandum (including the
Supplement) (other than the financial statements, statistical and other
financial data contained therein or omitted therefrom, as to which such
counsel has not been requested to comment), as of its date or the Closing
Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in light of circumstances under which they were made, not
misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum except for the statements made in the
Offering Memorandum under the captions "Description of the Notes" and
"Certain United States Federal Income Tax Consequences to Non-U.S. Holders"
insofar as such statements relate to the provisions of the Securities, this
Agreement, the Indenture, and the Registration Rights Agreement or concern
legal matters.
In rendering such opinion, such counsel may (i) state that its opinion
is limited to matters governed by the federal laws of the United States of
America, the laws of the State of New York and the General Corporation Law
of the State of Delaware (and may contain such assumptions and
qualifications as are satisfactory in form and substance to the Initial
Purchaser) and (ii) rely (to the extent such counsel deems proper and
specifies in its opinion) as to matters involving the application of the
laws of Germany, Italy and Austria upon the opinions of Besner Kreifels
Weber, Avv. Fausto D'Ambrosio and Dr. Thomas Herndl, respectively, referred
to in Sections 6(d)(1), (2) and (3) below.
(d) (1) Besner Kreifels Weber shall have furnished to the Initial
Purchaser its written opinion, as German counsel to the Company, addressed
to the Initial Purchaser and dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser, to the effect that:
<PAGE>
27
(i) Each of Cybernet AG, Cybernet GmbH, Cybernet E-Commerce,
Carolin and Open:Net (the "German Subsidiaries") has been duly
-------------------
incorporated and is validly existing as a corporation (and, in the
case of Cybernet E-Commerce, is a limited partnership validly existing
as a limited partnership) in good standing under the laws of Germany,
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification
and has all power and authority necessary to own or hold its
properties and conduct the businesses in which it is engaged;
(ii) All of the issued shares of capital stock of the German
Subsidiaries have been duly and validly authorized and issued and are
fully paid, nonassessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(iii) To the best of such counsel's knowledge and other than as
set forth in the Offering Memorandum there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries might have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iv) The execution, delivery and performance of the Operative
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, do not and will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which the Company or any of
its subsidiaries is subject, nor will such actions result in any
violation of (A) the provisions of the Articles of Association or
bylaws or equivalent constitutive documents of any of the German
Subsidiaries, (B) any existing applicable law, rule or regulation of
any court or governmental agency or body of Germany or (C) any order,
known to such counsel, of any government, governmental instrumentality
or court of Germany having jurisdiction over the Company or any of its
properties or assets;
(v) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
Germany or any political subdivision thereof is required for the
<PAGE>
28
consummation of the transactions contemplated by the Operative
Documents in connection with the issuance or sale of the Notes by the
Company (assuming compliance with the terms of the Operative Documents
by the parties thereto), except, with respect to the transactions
contemplated by the Registration Rights Agreement;
(vi) Under German law, the Company would be deemed to have had
sufficient contacts with the United States and would be recognized as
a validly existing Delaware corporation and as the holding company and
owner of all the issued shares of capital stock of Cybernet AG and the
other German Subsidiaries.
(vii) The descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents
are accurate in all material respects to the extent the foregoing
concern the laws of Germany; the statements set forth in the Offering
Memorandum under the captions "Risk Factors -- There May be Questions
about our Status Under German Law," "Risk Factors -- We Are Subject to
Regulation" and "Business -- Regulation," to the extent that they
constitute summaries of matters of German law or regulation or legal
conclusions, fairly summarize the matters described therein in all
material respects;
(viii) Any judgment obtained in a United States federal or state
court of competent jurisdiction sitting in New York City arising out
of or in relation to the obligations of the Company under the
Operative Documents would be enforced against the Company in the
courts of Germany without substantive reexamination or relitigation on
the merits of the subject matter thereof;
(ix) The Initial Purchaser would be permitted to commence
proceedings against the Company in German courts based on this
Agreement, and the holders of Notes and Conversion Shares (or the
Trustee acting on their behalf) (the "Holders") would be permitted to
-------
commence proceedings against the Company in German courts based on the
Operative Documents (to the extent that such Initial Purchaser and
Holders have direct contractual rights against the Company under such
Operative Documents, Notes, or Conversion Shares, as appropriate,
which arise as a result of valid and binding obligations of the
Company under such documents in accordance with the laws of the State
of New York), and such German courts would recognize the choice of law
provisions of the Operative Documents;
(x) Under German law, the agreement of the Company that
Operative Documents shall be governed by the laws of the State of New
York will, if it constitutes a binding agreement under the laws of the
State of New York, be recognized by the courts of Germany;
<PAGE>
29
(xi) The indemnification and contribution provisions set forth
in Section 7 herein do not contravene the public policy or laws of
Germany;
(xii) Under German law, the submission by the Company to the
jurisdiction of the United States federal or New York state courts
sitting in New York City set forth in each of the Operative Documents,
is enforceable against the Company, and service of process effected in
the manner set forth in the Operative Documents, assuming validity
under the laws of the State of New York, will be effective, insofar as
German law is concerned;
(xiii) All real property and buildings held under lease by the
Company and the German Subsidiaries are held by them under valid
subsisting and enforceable leases; and
(xiv) No stamp, registration or other similar taxes or duties
are payable in Germany by or on behalf of the Initial Purchaser upon
or in connection with the sale and delivery to or by the Initial
Purchaser of the Notes as contemplated by the Offering Memorandum, and
it is not necessary, prior to the Initial Purchaser seeking
enforcement of any of the Operative Documents in Germany, that any
stamp or similar tax be paid.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by German law (and may contain such assumptions
and qualifications as are satisfactory in form and substance to the Initial
Purchaser) and shall state that each of Powell, Goldstein, Frazer & Murphy
LLP and Simpson Thacher & Bartlett may rely upon its opinion with respect
to matters of German law.
(2) Avv. Fausto D'Ambrosio, Italian counsel to the Company, shall have
furnished to the Initial Purchaser its written opinion, addressed to the
Initial Purchaser and dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser, to the effect that:
(i) Flashnet and Eclipse (the "Italian Subsidiaries") have
--------------------
been duly incorporated and are validly existing as corporations in
good standing under the laws of Italy, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their ownership or lease of property or the
conduct of their businesses requires such qualification and have all
power and authority necessary to own or hold their properties and
conduct the businesses in which they are engaged; and
(ii) All of the issued shares of capital stock of the Italian
Subsidiaries have been duly and validly authorized and issued and are
fully paid and nonassessable; and all of the issued shares of capital
stock of Flashnet and 66% of the issued shares of capital stock of
Eclipse are
<PAGE>
30
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Italian law (and may contain such
assumptions and qualifications as are satisfactory in form and substance to
the Initial Purchaser) and shall state that each of Powell, Goldstein,
Frazer & Murphy LLP and Simpson Thacher & Bartlett may rely upon its
opinion with respect to matters of Italian law.
(3) Dr. Thomas Herndl, Austrian counsel to the Company, shall have
furnished to the Initial Purchaser its written opinion addressed to the
Initial Purchaser and dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser, to the effect that:
(i) Vianet has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Austria, is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification
and has all power and authority necessary to own or hold its
properties and conduct the businesses in which it is engaged; and
(ii) All of the issued shares of capital stock of Vianet have
been duly and validly authorized and issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by Austrian law (and may contain such
assumptions and qualifications as are satisfactory in form and substance to
the Initial Purchaser) and shall state that each of Powell, Goldstein,
Frazer & Murphy LLP and Simpson Thacher & Bartlett may rely upon its
opinion with respect to matters of Austrian law.
(e) The Trustee shall have furnished to the Initial Purchaser an
officer's certificate, dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser to the effect that (i) the Indenture
has been duly authorized, executed and delivered by the Trustee, (ii) each
person who, on behalf of the Trustee, executed and delivered the Indenture
was at the date thereof and is now duly elected, appointed or authorized,
qualified and acting as an officer or authorized signatory of the Trustee
and duly authorized to perform such acts at the respective times of such
acts and the signatures of such persons appearing on such document are
their genuine signatures and (iii) such other matters reasonably requested
by the Initial Purchaser to be included in such officer's certificate.
Attached to such officer's certificate shall be an extract of the bylaws of
the Trustee, duly adopted by its Board of Directors, respecting the signing
authority of the persons mentioned in clause (ii) above and a letter from
an
<PAGE>
31
officer of the Trustee authorizing, pursuant to such bylaws, such signing
authority, which bylaws and letter at the Closing Date are in full force
and effect.
(f) With respect to the letter of Schitag Ernst & Young, AG delivered
to the Initial Purchaser and dated the date hereof referred to in Section
4(p) (as used in this paragraph, the "initial letter"), the Company shall
--------------
have furnished to the Initial Purchaser a letter (as used in this
paragraph, the "bring-down letter") of such accountants, addressed to the
-----------------
Initial Purchaser and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of such bring-down letter (or,
with respect to matters involving changes or developments since the date as
of which specified financial information is given in the Offering
Memorandum, as of a date not more than five days prior to the date of each
such bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its
initial letter and (iii) confirming in all material respects the
conclusions and findings set forth in its initial letter.
(g) The Company shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of Andreas Eder, Chairman, President
and Chief Executive Officer, and Robert Eckert, Chief Financial Officer and
Treasurer, stating, on behalf of the Company, that:
(1) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the Closing Date; and
the Company has complied with all its agreements contained herein; and
(2) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Memorandum (A) any loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth in
the Offering Memorandum or (B) any change in the share capital (except
for the one-for-one conversion of shares of Series A Preferred Stock
occurring after August 2, 1999 for Common Stock) or long-term debt of
the Company or any of its subsidiaries or any change in or generally
affecting the affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the Offering Memorandum; and
(3) They have carefully examined the Offering Memorandum
(including the Supplement) and, in their opinion (A) the Offering
Memorandum (including the Supplement), as of its date, did not include
any untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) since such date no event
has
<PAGE>
32
occurred which should have been set forth in an amendment to the
Offering Memorandum so that the Offering Memorandum, as so amended or
supplemented, would not include any untrue statement of a material
fact and would not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading.
(h) (1) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Offering
Memorandum and (2) since such date there shall not have been any change in
the share capital (except for the one-for-one conversion of shares of
Series A Preferred Stock occurring after August 2, 1999 for Common Stock)
or long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than
as set forth in the Offering Memorandum, the effect of which, in any such
case described in clause (1) or (2), is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering of the Securities on the terms and
in the manner contemplated in the Offering Memorandum.
(i) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (1) trading in securities
generally on the New York Stock Exchange, Inc. or the Nasdaq National
Market System, or trading in any securities of the Company on any exchange,
shall have been suspended or minimum prices shall have been established on
any such exchange or such market by the Commission, by such exchange or by
any other regulatory body or governmental authority having jurisdiction,
(2) a banking moratorium shall have been declared by New York State or U.S.
federal authorities or by authorities in Germany or European Union
authorities, (3) the United States or Germany shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or Germany or there shall have been a declaration of a
national emergency or war by the United States or Germany or (iv) there
shall have occurred such a material adverse change in general, United
States, or German economic, political or financial conditions or in
currency exchange rates, taxation, exchange controls or foreign investment
regulations (or the effect of international conditions on the financial
markets in the United States or Germany shall be such) as to make it, in
the judgment of the Initial Purchaser, impracticable or inadvisable to
proceed with completion of the offering or sale of and payment for the
Securities.
(j) The Initial Purchaser shall have received on the Closing Date a
counterpart of the Registration Rights Agreement which shall have been
executed and delivered by the duly authorized officers of the Company.
<PAGE>
33
(k) The Indenture (in form and substance satisfactory to the Initial
Purchaser) shall have been duly executed and delivered by the Company and
the Trustee on the Closing Date and shall be in full force and effect on
such date and the Notes shall have been duly executed and delivered by the
Company and duly authenticated by the Trustees on the Closing Date.
(l) The NASD shall have accepted the Securities for trading in the
PORTAL Market.
(m) The Notes shall have been duly authorized, executed and delivered
by the Company.
(n) There shall not have occurred any invalidation of Rule 144A under
the Securities Act by any court or any withdrawal or proposed withdrawal of
any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the judgment of the Initial Purchaser would materially impair the
ability of the Initial Purchaser to purchase, hold or effect resales of the
Securities as contemplated hereby.
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body which would, as of the Closing Date, prevent the issuance or
sale of the Notes; and no injunction, restraining order or order of any
other nature by any court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance or sale of the
Notes.
(p) The Company shall have furnished to the Initial Purchaser such
further information, certificates and documents as the Initial Purchaser
may reasonably request.
(q) The Initial Purchaser shall have received and be reasonably
satisfied with the content of the Offering Memorandum (including the
Supplement) on or prior to the Closing Date. The Supplement shall contain
Consolidated Statements of Loss and Comprehensive Loss and Consolidated
Statements of Cash Flows, each as of and for the six months ended June 30,
1998 and 1999, Consolidated Balance Sheets as of the year ended December
31, 1998 and the six months ended June 30, 1999, a "Management's Discussion
and Analysis of Financial Condition and the Results of Operations"
comparing the six months ended June 30, 1999 with the six months ended June
30, 1998 and pro forma consolidated financial information for the Company
as of and for the six months ended June 30, 1999 reflecting, among other
transactions, the acquisition of Flashnet.
(r) The Company shall have effected a listing of the Notes or an
admission for their trading on an internationally recognized stock exchange
or the Freiverkehr of the Frankfurt Stock Exchange.
<PAGE>
34
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchaser.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each of the
Initial Purchaser, its officers and employees and each person, if any,
who controls each of the Initial Purchaser within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which each of the Initial
Purchaser, its officers, employees or controlling persons may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum, the Offering
Memorandum, or in any amendment or supplement thereto (including the
Supplement), (ii) the omission or alleged omission to state in the
Preliminary Offering Memorandum, the Offering Memorandum or in any
amendment or supplement thereto (including the Supplement) any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by the Initial Purchaser in connection
with, or relating in any manner to, the Securities or the offering
contemplated hereby, and which is included as part of or referred to
in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable in the case of any matter covered by
this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such act or
failure to act undertaken or omitted to be taken by the Initial
Purchaser through its gross negligence or wilful misconduct), and
shall reimburse each of the Initial Purchaser and such officer,
employee and controlling person promptly upon demand for any legal or
other expenses reasonably incurred by the Initial Purchaser, officer,
employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Offering Memorandum, or in
any such amendment or supplement, in reliance upon and in conformity
with the written information furnished to the Company by the Initial
Purchaser specifically for inclusion therein and described in Section
7(e). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to the Initial
Purchaser or to any officer, employee or controlling person of the
Initial Purchaser.
<PAGE>
35
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, its officers and employees, each of its directors and each
person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the
Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum, the Offering
Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state in the Offering Memorandum or in
any amendment or supplement thereto any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with the written information furnished
to the Company by or on behalf of the Initial Purchaser specifically
for inclusion therein and described in Section 7(e), and shall
reimburse the Company and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the
Company, as the case may be, or any such director, officer or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which the Initial Purchaser
may otherwise have to the Company or any such director, officer or
controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 7, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 7 except to the extent it has been materially prejudiced
by such failure and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, any indemnified party shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the
<PAGE>
36
employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have
been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for such indemnified party to
employ separate counsel or (iii) the indemnifying party has failed to
assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys (in addition to one separate firm of attorneys as local
counsel, if appropriate under the circumstances) at any time for all
such indemnified parties, which firm shall be designated in writing by
the Initial Purchaser, if the indemnified parties under this Section 7
consist of the Initial Purchaser or any of its officers, employees or
controlling persons, or by the Company, if the indemnified parties
under this Section consist of the Company or any of its directors,
officers, employees or controlling persons. Each indemnified party, as
a condition of the indemnity agreements contained in Sections 7(a) and
7(b), shall use its reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld)
settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent (a) includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on
behalf of the indemnified party, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss of liability by reason
of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, in such proportion
as shall be
<PAGE>
37
appropriate to reflect the relative benefits received by the Company
on the one hand and the Initial Purchaser on the other from the
offering of the Securities or if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one
hand and the Initial Purchaser on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchaser on the other with
respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Securities
purchased under this Agreement (before deducting expenses but after
deducting discounts and commissions) received by the Company on the
one hand, and the total discounts and commissions received by the
Initial Purchaser with respect to the Securities purchased under this
Agreement, on the other hand, bear to the total gross proceeds from
the offering of the Securities under this Agreement, in each case as
set forth in the table on the cover page of the Offering Memorandum.
The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by the Company on the one hand, or the Initial Purchaser on
the other hand, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Initial Purchaser
agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 7(d) shall be deemed to include, for
purposes of this Section 7(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7(d), the Initial Purchaser shall not be required to
contribute any amount in excess of the amount by which the total price
at which the Securities purchased by it were resold exceeds the amount
of any damages which the Initial Purchaser has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The Initial Purchaser confirms that the statements with
respect to the offering of the Notes set forth in the first and ninth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum are correct and constitute the only information furnished
in writing to the Company by or on behalf of the Initial Purchaser
specifically for inclusion in the Offering Memorandum.
<PAGE>
38
8. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 6(h) or 6(i) shall have
occurred or if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
9. Reimbursement of Initial Purchaser's Expenses. If this Agreement
shall be terminated by the Initial Purchaser because of any failure or refusal
on the part of the Company to comply with the terms or to fulfil any of the
conditions of Section 6 (other than Subsections 6(h), (i), (o) and (r)) of this
Agreement, the Company shall reimburse the Initial Purchaser for fees and
expenses of its counsel and for such other out-of-pocket expenses as shall have
been reasonably incurred by it in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Company shall pay the
full amount thereof to the Initial Purchaser.
10. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to: Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, NY 10036, Attention: Syndicate
Department (Fax: +1-212-761-0192);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate, 21/st/
Floor, London, EC2M 3YH, Attention: William R. Dougherty, Esq. (Fax:
+44-171-422-4022);
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to Cybernet Internet Services International
Inc., Stefan-George-Ring 19-23, 81929 Munich, Germany, Attention:
Robert Eckert, Chief Financial Officer and Treasurer (Fax: +49-89-993-
15199);
With a copy to Powell, Goldstein, Frazer & Murphy LLP, 1001
Pennsylvania Avenue, N.W., Washington D.C. 20004, Attention: Joseph M.
Berl, Esq. (Fax: +1-202-624-7222).
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of the Initial Purchaser and the person or persons, if any, who
control the Initial Purchaser within the meaning of Section 15 of the Securities
Act and the indemnity agreement of the Initial Purchaser contained in Section
7(b) of this Agreement shall be deemed to be for the benefit of directors,
officers and employees of the Company and any person controlling the Company
within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
<PAGE>
39
12. Survival. The respective indemnities, representations, warranties
and agreements of the Company and the Initial Purchaser contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect regardless of any investigation made by or
on behalf of any of them or any person controlling any of them.
13. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, the term "business day" means any day on which the
------------
Nasdaq National Market System is open for trading and the term "subsidiary" has
----------
the meaning set forth in Rule 405 under the Securities Act.
14. Governing Law. This Agreement and the rights and duties of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
15. Submission to Jurisdiction; Appointment of Agent for Service;
Waiver; Currency Indemnity. To the fullest extent permitted by applicable law,
the Company irrevocably submits to the non-exclusive jurisdiction of any federal
or state court in the Borough of Manhattan in the City of New York, County and
State of New York, United States of America, in any suit or proceeding based on
or arising under this Agreement, and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in any such court. The
Company, to the fullest extent permitted by applicable law, irrevocably and
fully waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding and hereby irrevocably designates and appoints CSC, at New
York, New York (the "Authorized Agent"), for a period of ten years from the date
----------------
hereof or until such time as no Notes are outstanding, as its authorized agent
upon whom process may be served in any such suit or proceeding. The Company
represents that it has notified the Authorized Agent of such designation and
appointment and that the Authorized Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs its Authorized Agent to accept
such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of said service to the Company mailed by
first class mail or delivered to its Authorized Agent shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any person to serve process
in any other manner permitted by law. The Company agrees that a final action in
any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Agreement or the transactions contemplated hereby may also be
instituted by the Initial Purchaser, its respective officers and employees or
any person who controls the Initial Purchaser within the meaning of the
Securities Act in any competent court in Germany and the Company expressly
accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
<PAGE>
40
The provisions of this Section 15(a) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchaser and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(a) The Company shall indemnify the Initial Purchaser against
any loss incurred by it as a result of any judgment or order being
given or made and expressed and paid in a currency (the "Judgment
--------
Currency") other than U.S. dollars and as a result of any variation as
--------
between (i) the rate of exchange at which the U.S. dollar amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in New York, New York at
which the Initial Purchaser on the date of payment of such judgment or
order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by the Initial Purchaser. If the U.S.
dollars so purchased are greater than the amount originally due to the
Initial Purchaser hereunder, the Initial Purchaser agrees to pay the
Company an amount equal to the excess of the U.S. dollars so purchased
over the amount originally due to the Initial Purchaser hereunder. The
foregoing shall constitute a separate and independent obligation of
the Company and the Initial Purchaser, as the case may be, and shall
continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase
of, or conversion into, U.S. dollars.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement among the Company
and the Initial Purchaser, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
Cybernet Internet Services International, Inc.
By: /s/ Andreas Eder
------------------------------------
Name: Andreas Eder
Title: President and Chief Executive
Officer
<PAGE>
Accepted:
Morgan Stanley & Co. International Limited
By: /s/ Jorg Mohaupt
-------------------------
Authorized Representative
<PAGE>
SCHEDULE I
Aggregate
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
Morgan Stanley & Co. International Limited.. (Euro)25,000,000
----------------
Total....................................... (Euro)25,000,000
================
<PAGE>
EXHIBIT 1.4
CONFORMED COPY
$35,000,000
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Discount Notes
due 2009
PURCHASE AGREEMENT
------------------
August 19, 1999
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
Ladies and Gentlemen:
Cybernet Internet Services International, Inc., a Delaware corporation,
(the "Company") proposes to issue and sell to the initial purchaser listed on
-------
Schedule I hereto (the "Initial Purchaser") $35,000,000 aggregate initial
-----------------
accreted value of 13.0% Convertible Senior Subordinated Discount Notes due 2009.
The Notes are to be issued under an Indenture, dated as of August 26, 1999 (the
"Indenture"), between the Company and The Bank of New York, as Trustee (in such
---------
capacity, the "Trustee"). The shares of Common Stock issuable upon exercise of
-------
the right to convert the Notes pursuant to the provisions of Article X of the
Indenture (the "Conversion Right") are herein referred to as the "Conversion
---------------- ----------
Shares." The Notes and the Conversion Shares are collectively referred to
- ------
herein as the "Securities."
----------
The Notes will be offered and sold to the Initial Purchaser without being
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions therefrom. The Company has
--------------
prepared a preliminary offering memorandum, dated August 13, 1999, and a
supplement to the preliminary offering memorandum, dated August 13, 1999
(collectively, the "Preliminary Offering Memorandum"), and an offering
-------------------------------
memorandum dated the date hereof and a supplement (the "Supplement") to the
----------
offering memorandum, dated the date hereof (collectively, the "Offering
--------
Memorandum"), setting forth information concerning the Company, its subsidiaries
- ----------
and the Securities. Copies of the Preliminary Offering Memorandum and the
Offering Memorandum will be delivered by the Company to the Initial Purchaser
pursuant to the terms of this Agreement. Any references herein to the
Preliminary Offering Memorandum and to the Offering Memorandum shall be deemed
to include all amendments and supplements thereto (including, in the case of the
Offering Memorandum, whether specifically referenced in any particular paragraph
herein or not, the Supplement) unless otherwise noted. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Notes by the Initial Purchaser in accordance with Section 2.
Holders of the Notes and Conversion Shares, as the case may be (including
the Initial Purchaser and its direct and indirect transferees), will be entitled
to the benefits of a Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
-----------------------------
which the Company will agree to file with the U.S. Securities
<PAGE>
2
and Exchange Commission (the "Commission") a resale shelf registration statement
----------
pursuant to Rule 415 under the Securities Act (the "Resale Shelf Registration
-------------------------
Statement") with respect to resales of the Notes (which Resale Shelf
- ---------
Registration Statement shall also register the sale of the underlying Common
Stock issuable upon conversion thereof). The Company will further agree pursuant
to the Registration Rights Agreement that it will file with the Commission a
shelf registration statement (the "Conversion Shelf Registration Statement")
---------------------------------------
registering the issuance or resale of Conversion Shares on or prior to the one-
year anniversary of the Closing Date.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to herein collectively as the "Operative Documents."
-------------------
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum, as of their respective dates, did not, and the Offering
Memorandum, as of the Closing Date (as defined in Section 2 hereof),
will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that the Company does not make any representation or warranty as to
information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum in reliance upon and in
conformity with the written information furnished to the Company by
the Initial Purchaser specifically for inclusion therein and described
in Section 7(e).
(b) Assuming the accuracy of the representations and
warranties of the Initial Purchaser contained in Section 3 and its
compliance with the agreements set forth therein, it is not necessary,
in connection with the issuance and sale of the Notes to the Initial
Purchaser and the offer, resale and delivery of the Notes by the
Initial Purchaser in the manner contemplated by this Agreement and the
Offering Memorandum, to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
-------------------
(c) The Company has been duly incorporated, is validly
existing and in good standing under Delaware law; the Company is
solvent, is not in bankruptcy, liquidation or receivership and is duly
qualified to do business in each jurisdiction in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not
reasonably be expected to have, singularly or in the aggregate, a
material adverse effect on the financial position, stockholders'
equity, results of operations, business or prospects of the Company
and its subsidiaries; and the Company has all power and authority
necessary to own or hold its respective property and to conduct the
business in which it is engaged.
(d) Each of the subsidiaries (as defined in Section 13
hereof) of the Company has been duly organized, is validly existing
and in good standing under
<PAGE>
3
the laws of its jurisdiction of organization or incorporation, is
solvent, is not in bankruptcy, liquidation or receivership and is duly
qualified to do business in each jurisdiction in which its ownership
or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not
reasonably be expected to have, singularly or in the aggregate, a
material adverse effect on the financial position, stockholders'
equity, results of operations, business or prospects of the Company
and its subsidiaries; and each has all power and authority necessary
to own or hold its respective property and to conduct the business in
which it is engaged.
(e) The Company has an authorized and issued share capital
and capitalization as set forth in the Supplement under the heading
"Capitalization," except for the one-for-one conversion of shares of
Series A Preferred Stock, par value $0.001 per share (the "Series A
--------
Preferred Stock"), occurring after June 30, 1999 for Common Stock; all
---------------
outstanding shares of capital stock of the Company have been duly
authorized and are validly issued and fully paid and nonassessable;
the Conversion Shares have been duly authorized and, when the
Conversion Shares are issued in accordance with the terms and
conditions contained in the Indenture upon exercise of the Conversion
Right, such Conversion Shares will be validly issued and fully paid
and nonassessable and holders of the Conversion Shares will have no
liability for any debt or other obligation of the Company towards
third parties in their capacity as holders of the Conversion Shares;
and the stockholders of the Company have no preemptive rights with
respect to the Conversion Shares which have not been validly excluded
prior to the date hereof, and there is no other conflicting right,
contingent or otherwise, of any person to purchase or be offered for
purchase any of the Conversion Shares and no depositary receipts have
been issued with respect to the Conversion Shares offered by the
Company; the Conversion Shares have been duly reserved for issuance in
accordance with the terms of the Notes and the Indenture.
(f) The Company has no Indebtedness (as defined in the
Offering Memorandum) other than (i) as set forth on the June 30, 1999
Consolidated Balance Sheet of the Company set forth in the Supplement
and (ii) the Company's 14% Senior Notes due 2009 (the "Senior Notes").
------------
(g) The execution, delivery and performance of the
Operative Documents by the Company and the consummation of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement, shareholders agreement or other material 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 or to
which any of the properties or assets of the Company or any of its
subsidiaries are subject, nor will such actions result in any
violation of the provisions of the Certificate of Incorporation or By-
laws or equivalent constitutive documents of the Company or any of its
subsidiaries or any statute, license, legislation, authorization, or
any order, rule or regulation of any court or governmental
<PAGE>
4
agency or body (including, without limitation, any statutes, rules,
orders or regulations promulgated by the Federal Communications
Commission or the Commission of the European Community) having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets subject, other than with respect to
violations of the provisions of the Certificate of Incorporation or
By-laws or equivalent constitutive documents of the Company or any of
its subsidiaries, to such exceptions as, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
No consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body
(including, without limitation, any statutes, rules, orders or
regulations promulgated by the Federal Communications Commission or
the Commission of the European Community) is required for the
execution, delivery and performance of the Operative Documents by the
Company and the consummation of the transactions contemplated hereby
and thereby except (A) as have been obtained or made, (B) with respect
to the transactions contemplated by the Registration Rights Agreement,
as may be required under the Securities Act, the Trust Indenture Act
and the rules and regulations of the Commission thereunder and (C) as
required by state or foreign securities or "Blue Sky" laws.
(h) The Company has full power and authority to enter into
this Agreement; this Agreement has been duly authorized, executed and
delivered by the Company and, when duly authorized, executed and
delivered by the Initial Purchaser, will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, and except, with
respect to the rights of indemnification and contribution thereunder,
where enforcement thereof may be limited by public policy.
(i) The Company has full power and authority to enter into
the Indenture; the Indenture has been duly authorized by the Company
and upon effectiveness of a Shelf Registration Statement will be
qualified under the Trust Indenture Act; and, on the Closing Date (as
defined below), the Indenture will have been duly executed and
delivered by the Company and will conform, in all material respects,
to the description thereof contained in the Offering Memorandum and,
assuming due authorization, execution and delivery of the Indenture by
the Trustee, the Indenture will constitute a valid and legally binding
obligation of the Company, enforceable in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
<PAGE>
5
(j) The Company has full power and authority to offer and
sell the Notes; the Notes have been duly authorized by the Company;
and, when the Notes are delivered to and paid for by the Initial
Purchaser pursuant to this Agreement on the Closing Date, such Notes
will have been duly executed, authenticated, issued and delivered
(assuming due authentication of the Notes by the Trustee) and will
conform, in all material respects, to the description thereof
contained in the Offering Memorandum and, assuming due authentication
of the Notes by the Trustee, such Notes will constitute valid and
legally binding obligations of the Company, entitled to the benefits
of the Indenture and enforceable in accordance with their terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
(k) The Company has full power and authority to enter into
the Registration Rights Agreement; the Registration Rights Agreement
has been duly authorized by the Company and will conform, in all
material respects, to the description thereof contained in the
Offering Memorandum; and when executed and delivered by the Company
(assuming due authorization, execution and delivery by the Initial
Purchaser) will have been duly executed and delivered and will be a
valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing, and
except, with respect to the rights of indemnification and contribution
thereunder, where enforcement thereof may be limited by public policy.
(l) No stamp or other issuance taxes or duties are payable
by or on behalf of the Initial Purchaser as a consequence of the issue
of the Securities, the sale of the Notes to the Initial Purchaser
and/or the initial resale of the Securities to investors.
(m) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Offering Memorandum, any material loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and, since such date,
there has not been any change in the share capital (except for the
one-for-one conversion of shares of Series A Preferred Stock occurring
after August 2, 1999) or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity,
results of operations or prospects of the
<PAGE>
6
Company and its subsidiaries, otherwise than as set forth in the
Offering Memorandum.
(n) The consolidated financial statements of the Company
(and the related notes) set forth in the Offering Memorandum
(including the consolidated financial statements of the Company (and
the related notes) set forth in the Supplement) comply in all material
respects with the requirements that would be applicable to a
registration statement on Form S-1 under the Securities Act and were
prepared in accordance with generally accepted accounting principles
in the United States ("U.S. GAAP") consistently applied throughout the
---------
periods involved and present fairly the financial condition and
results of operations of the entities purported to be shown thereby,
at the dates and for the periods indicated (subject in the case of
interim statements to normal year-end audit adjustments). The
financial information contained in the Offering Memorandum (including
that contained within the Supplement) under the headings "Summary --
Summary Consolidated Financial and Operating Data", "Capitalization",
"Selected Consolidated Financial and Operating Information",
"Unaudited Pro Forma Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" are derived from the accounting records of the
Company and its subsidiaries and fairly present the information
purported to be shown thereby. The summary financial and other data
and selected financial and other data included in the Offering
Memorandum have been accurately extracted from the financial
statements of the Company. The pro forma financial information
contained in the Offering Memorandum has been prepared on a basis
consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjustments specified in
the Offering Memorandum), includes all material adjustments to the
historical financial information required by Rule 11-02 of Regulation
S-X under the Securities Act and the Securities Exchange Act of 1934
(the "Exchange Act") to reflect the transactions described in the
------------
Offering Memorandum, gives effect to assumptions made on a reasonable
basis and fairly presents the historical and proposed transactions
contemplated by the Offering Memorandum and by the Operative
Documents. The other historical financial and statistical information
and data included in the Offering Memorandum (including that contained
within the Supplement) are, in all material respects, fairly
presented.
(o) Schitag Ernst & Young, AG and Grant Thornton S.p.A.,
who have audited the consolidated financial statements of the Company
and Flashnet, respectively, whose reports appear in the Offering
Memorandum and who will deliver the initial letters referred to in
Section 4(p) hereof are each independent public accountants with
respect to the Company and Flashnet, respectively, within the meaning
of the Securities Act and the rules and regulations promulgated
thereunder.
(p) The Company and each of its subsidiaries has good and
marketable title to all personal property owned by them, subject to
such exceptions that, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the
financial position, results of operations, business
<PAGE>
7
or prospects of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries. Neither the Company nor any of
its subsidiaries owns any title to real property or buildings, and all
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.
(q) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the
Company has reasonably concluded is sufficient based upon experience
and industry practice and is adequate for the conduct of their
respective businesses and the value of their respective properties.
(r) The Company and each of its subsidiaries own or possess
adequate rights to use all material intellectual property, including
without limitation, patents, inventions, processes, technology and
know-how, trade mark registrations, service mark registrations,
copyrights and works of authorship in any media, including computer
hardware, software, systems, databases, documentation, files and
Internet site content, trademarks, service marks, trade names, domain
names, URLs, e-mail addresses, logos, slogans and trade dress, trade
secrets and all confidential or proprietary information and materials,
and all related registrations, applications, recordings and licenses
("Intellectual Property") necessary for the conduct of their
---------------------
respective businesses except for such Intellectual Property the lack
of possession of which could not reasonably be expected to have a
material adverse effect on the financial position, results of
operations, business or prospects of the Company and its subsidiaries.
The Company has no reason to believe that its Intellectual Property
infringes, misappropriates or impairs ("Infringes"), or is being so
---------
Infringed by, the Intellectual Property of any third party, and has
not received any notice alleging such Infringement by any third party.
No legal or government proceeding is pending, and no law, ordinance,
rule, regulation, order, judgment or decree is pending that limits or
challenges the ownership, use, validity or enforceability of any
Intellectual Property owned or used by the Company or any of its
subsidiaries, and the Company has no knowledge of a valid basis for
any of the foregoing. The Company and each of its subsidiaries take
all reasonable steps to protect and maintain their Intellectual
Property (including any confidential Intellectual Property), and have
taken all necessary actions, made all necessary filings and paid all
necessary fees in connection with the foregoing. Any licenses,
sublicenses, royalty or other agreements concerning Intellectual
Property to which the Company or any of its subsidiaries is a party
are valid and in full force and effect, no party thereto is, or is
alleged to be in default thereunder, and no event exists that, with
notice or lapse of time or both, would constitute an event of default
thereunder or result in a right to accelerate, or loss of rights
thereunder, except for licences, sublicense, royalty or other
agreements the lack of validity
<PAGE>
8
or enforceability of which or the default under which could not
reasonably be expected to have a material adverse effect on the
financial position, results of operations, business or prospects of
the Company and its subsidiaries.
(s) There are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which
any property or asset of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, might reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries;
and to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(t) Except as otherwise disclosed in the Offering
Memorandum, there are no business relationships or other related-party
transactions of the nature described in Item 404 of Regulation S-K of
the Commission ("Item 404") involving the Company or any other party
--------
referred to in Item 404, except for transactions that would be
considered immaterial under Item 404.
(u) No transaction or relationship exists which would have
been required to be described in the Offering Memorandum by the
Securities Act and the rules and regulations thereunder if such
Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act, which is not so
described.
(v) Except as disclosed in the Offering Memorandum, the
Company and its subsidiaries have duly filed with the appropriate
taxing authorities all tax returns, reports and other information
required to be filed through the date hereof and have paid all taxes
due thereon, except where (i) (A) extensions have been properly
obtained or are being contested in good faith and for which adequate
reserves have been provided for in accordance with U.S. GAAP and (B)
such extensions referred to in clause (i)(A) are disclosed in the
Offering Memorandum and (ii) the failure to so file or pay could not
reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; each such
tax return, report or other information was, when filed, accurate and
complete in all material respects; the Company has no knowledge of any
tax deficiency which, if determined adversely to the Company or any of
its subsidiaries, might reasonably be expected to have a material
adverse effect on the financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries.
(w) All interest payments payable on the Notes may be paid
by the Company in U.S. dollars and all dividends and other
distributions declared and payable on the Conversion Shares may be
paid by the Company in U.S. dollars and all such payments will not be
subject to income, withholding or other taxes under the laws and
regulations of the United States or Germany or any political
<PAGE>
9
subdivision or taxing authority thereof or therein and will otherwise
be free and clear of any other tax, duty, withholding or deduction in
the United States or Germany or any political subdivision or taxing
authority thereof or therein and without the necessity of obtaining
any governmental authorization in the United States or Germany or any
political subdivision or taxing authority thereof or therein.
(x) Since the date as of which information is given in the
Offering Memorandum through the Closing Date (except for the one-for-
one conversion of shares of Series A Preferred Stock occurring after
August 2, 1999 for Common Stock), and except as may otherwise be
disclosed in the Offering Memorandum, the Company has not (i) issued
or granted any securities, including, without limitation, any options
or warrants, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred
in the ordinary course of business, (iii) entered into any transaction
not in the ordinary course of business or (iv) declared or paid any
dividend on its issued share capital.
(y) There are no contracts or agreements between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities to be registered pursuant to the Registration Rights
Agreement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act,
other than the Registration Rights Agreement among the Company, Lehman
Brothers International (Europe) ("Lehman") and the Initial Purchaser
------
dated July 8, 1999 with respect to the Company's Senior Notes.
(z) Neither the Company nor any of its subsidiaries is (i)
in violation of its respective Certificate of Incorporation or By-laws
or equivalent constitutive documents, (ii) in default, and no event
has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
or assets is subject, other than such defaults which could not
reasonably be expected to have a material adverse effect on the
financial condition, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries or (iii) in
violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its properties or assets may
be subject or has failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to
the ownership of its properties or assets or to the conduct of its
business, other than such violations or failures which could not
reasonably be expected to have a material adverse effect on the
financial condition, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.
<PAGE>
10
(aa) The Company (i) makes and keeps books and records which
are accurate and complete in all material respects and (ii) maintains
internal accounting controls which provide reasonable assurance that
transactions are executed in accordance with management's
authorization, transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, access to its assets is permitted only in accordance
with management's authorization and the reported accountability for
its assets is compared with existing assets at reasonable intervals.
(bb) Neither the Company nor any of its subsidiaries, nor
any director, officer, agent, employee or, to the Company's knowledge,
other person associated with or acting on behalf of the Company or any
of its subsidiaries, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee
from corporate funds, (iii) violated or is in violation of any
provision of the United States Foreign Corrupt Practices Act of 1977,
as amended, or (iv) made any bribe, rebate (other than legal price
concessions to customers in the ordinary course of business), payoff,
influence payment, kickback or other unlawful payment to any foreign
or domestic government official or employee.
(cc) The Company is not in violation in any respect of any
applicable environmental law, ordinance, rule, regulation, order,
judgment, decree or permit in any jurisdiction with respect to the
properties of the Company or any of its subsidiaries, other than such
violations which could not reasonably be expected, singularly or in
the aggregate, to have a material adverse effect on the financial
condition, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.
(dd) Except as described in the Offering Memorandum, there
are no material acquisitions of businesses or assets by the Company or
any of its subsidiaries pending or currently being negotiated.
(ee) No labor disturbance by employees of the Company or any
of its subsidiaries exists or, to the knowledge of the Company, is
imminent which might reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company or its subsidiaries.
(ff) All computer hardware, software, databases, automated
systems and other computer and telecommunications equipment owned or
licensed by the Company or any of its subsidiaries can be used prior
to, during and after the calendar year 2000 and will operate during
each such time period and at least as effectively during each such
time period without material error relating to the processing,
calculating, comparing, sequencing or other use of date-related data
function (the foregoing ability, "Year 2000 Compliant"). The Company
-------------------
reasonably believes, after due inquiry, that suppliers, vendors,
customers or other material third parties used or served by the
Company and its subsidiaries are or
<PAGE>
11
will be Year 2000 Compliant in a timely manner, except as would not
have a material adverse effect on the financial position,
stockholders' equity, results of operations, business prospects or
operations of the Company and its subsidiaries. The Company has no
reason to believe, and does not believe, that there are any issues
related to the Company's ability to be Year 2000 Compliant that are of
a character required to be described or referred to in the Offering
Memorandum.
(gg) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States
Investment Company Act of 1940, as amended (the "Investment Company
------------------
Act"), nor is it a closed-end investment company required to be
---
registered, but not registered, thereunder; and the Company is not
and, after giving effect to the offering and sale of the Notes and the
application of the proceeds thereof as described in the Offering
Memorandum, will not be an "investment company" as defined in the
Investment Company Act and the rules and regulations of the Commission
thereunder.
(hh) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act including, without
limitation, the requirement that Notes have an "effective conversion
premium" (as such term is defined in Rule 144A) of ten percent or
greater.
(ii) Neither the Company nor any subsidiary has incurred any
liability for a fee, commission, or other compensation on account of
the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(jj) Neither the Company nor any subsidiary has taken,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably have been expected to cause or
result in stabilization or manipulation of the price of any security
of the Company or which would otherwise be prohibited by Regulation M
under the Exchange Act in connection with the offering of the
Securities.
(kk) Neither the Company nor any of its affiliates, nor any
agent acting on its or their behalf has offered or sold or will offer
or sell any of the Securities (A) in the United States by means of any
form of general solicitation or general advertising within the meaning
of Rule 502(c) under the Securities Act, or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act or (B) with respect to any such Securities sold in reliance on
Rule 903 of Regulation S under the Securities Act, by means of any
directed selling efforts within the meaning of Rule 902(b) of
Regulation S. The Company, its affiliates and any agent acting on its
behalf will comply with any offering restrictions and other
requirements of Regulation S applicable to the transactions
contemplated hereby including those applicable to any exercise of the
Conversion Right. The Company has not entered, and will not enter,
into any contractual arrangement with respect to the distribution of
the Securities except for this Agreement and the agreements
contemplated hereby.
<PAGE>
12
(ll) Neither the Company nor any of its Affiliates (as
defined in Rule 501(b) of Regulation D promulgated under the
Securities Act) has directly, or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Securities Act) which is or will be
integrated with the sale of Securities in a manner that would require
the registration under the Securities Act of the Securities.
(mm) The Company owns no capital stock of, or other equity
interests in, any Person (as defined in the Indenture), other than all
of the issued and outstanding share capital of Cybernet Internet-
Dienstleistungen AG ("Cybernet AG"), Flashnet S.p.A. ("Flashnet"),
----------- --------
Vianet Telekommunikations AG ("Vianet"), Cybernet E-Commerce GmbH
------
("Cybernet E-Commerce") and Carolin Verwaltungsgesellschaft mBH
-------------------
("Carolin") and 51% of the issued and outstanding share capital of
-------
Sunweb AG; none of Cybernet AG, Flashnet, Vianet, Cybernet E-Commerce,
Carolin and Sunweb AG owns any capital stock of, or other equity
interests in, any Person, except that (i) Cybernet AG owns all the
issued and outstanding share capital of Open:Net Internet Solutions
GmbH ("Open:Net") and of Cybernet Internet Beteiligungs GmbH
--------
("Cybernet GmbH") and 66% of the issued and outstanding share capital
-------------
of Eclipse s.r.l. ("Eclipse") and (ii) Sunweb AG owns all the issued
-------
and outstanding share capital of Sunweb Internet Services GmbH
("Sunweb GmbH"). Open:Net, Cybernet GmbH, Eclipse and Sunweb GmbH do
-----------
not own any capital stock of, or other equity interests in, any
Person.
(nn) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
-----
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
-----
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(oo) The Company and its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have
made all declarations and filings with, the appropriate federal, state
or foreign regulatory agencies or bodies which are necessary or
desirable for the ownership of their respective properties or the
conduct of their respective businesses as described in the Offering
Memorandum, except where the failure to possess or make the same would
not, singularly or in the aggregate, have a material adverse effect on
the financial position, stockholders' equity, results of operations,
business prospects
<PAGE>
13
or operations of the Company and its subsidiaries, and neither the
Company nor any subsidiary has received notification of any revocation
or modification of any such license, certificate, authorization or
permit or has any reason to believe that any such license,
certificate, authorization or permit will not be renewed in the
ordinary course.
(pp) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the issuance of the
Securities or suspends the sale of the Securities in any jurisdiction;
no injunction, restraining order or order of any nature by any foreign
or U.S. federal or state court of competent jurisdiction has been
issued with respect to the Company which would prevent or suspend the
issuance or sale of the Securities or the use of the Preliminary
Offering Memorandum or the Offering Memorandum in any jurisdiction; no
action, suit or proceeding is pending against or, to the best
knowledge of the Company, threatened against or affecting the Company
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, which could reasonably be expected to
interfere with or adversely affect the issuance of the Securities or
in any manner draw into question the validity or enforceability of any
of the Operative Documents or any action taken or to be taken pursuant
thereto; and the Company has complied with any and all requests by any
securities authority in any jurisdiction for additional information to
be included in the Preliminary Offering Memorandum or the Offering
Memorandum.
(qq) No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Preliminary Offering Memorandum or the Offering
Memorandum (including forward looking statements in the Supplement)
has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(rr) The Company has filed on a timely basis with the
Commission, to the extent required, (i) all annual and quarterly
financial statements and other information required to be contained in
a filing with the Commission on Forms 10-K and 10-Q and (ii) all
current reports required to be filed with the Commission on Form 8-K.
2. Purchase, Sale and Delivery of Securities. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Initial
Purchaser, and the Initial Purchaser agrees to purchase from the Company, the
number of Notes set forth opposite the Initial Purchaser's name on Schedule I
hereto at a purchase price of $534.78 per Note, plus accrued interest, if any,
from August 26, 2004, to the Closing Date.
The Company will deliver, against payment of the purchase price, Notes
in the form of one or more certificates in global or definitive form. If the
Notes are offered in global form, beneficial interests in the Notes will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by The Depository Trust Company ("DTC") and its
---
participants, including, as applicable, Morgan Guaranty Trust Company of New
<PAGE>
14
York, Brussels office, as operator of the Euroclear System, and Cedelbank,
societe anonyme. Payment for the Notes shall be made by or on behalf of the
Initial Purchaser in same day funds by wire transfer to an account previously
designated to the Initial Purchaser by the Company at a bank reasonably
acceptable to the Initial Purchaser at 4:00 p.m. (London time), on August 26,
1999, or at such other time not later than seven full business days thereafter
as the Initial Purchaser and the Company determine, such time being herein
referred to as the "Closing Date", against delivery at the office of Simpson
------------
Thacher & Bartlett (London) at least 24 hours prior to the Closing Date to the
Trustee.
3. Representations by Initial Purchaser; Resale by Initial
Purchaser.
(a) The Initial Purchaser represents and warrants to the Company
that it is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
(b) The Initial Purchaser acknowledges that the Securities have
not been registered under the Securities Act and may not be offered or
sold within the United States or to, or for the account or benefit of,
U.S. persons except in accordance with Rule 144A or Regulation S or
pursuant to another exemption from the registration requirements of
the Securities Act. The Initial Purchaser represents and agrees that
it has offered and sold the Securities and will offer and sell the
Securities (i) as part of its distribution at any time and (ii)
otherwise until 40 days after the later of the date of commencement of
the Offering and the Closing Date, only in accordance with Rule 903 or
Rule 144A under the Securities Act ("Rule 144A"). Accordingly,
---------
neither the Initial Purchaser nor its affiliates, nor any persons
acting on its behalf, have engaged or will engage in any directed
selling efforts with respect to the Securities, and the Initial
Purchaser, its affiliates and all persons acting on its behalf have
complied and will comply with the offering restrictions requirement of
Regulation S. The Initial Purchaser agrees that, at or prior to
confirmation of sale of the Notes other than a sale pursuant to Rule
144A, the Initial Purchaser will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration
that purchases the Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after
the date of the commencement of the offering and the closing
date, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used
above have the meanings given to them by Regulation S."
Terms used in this subsection (b) have the meanings given to them
by Regulation S.
<PAGE>
15
(c) The Initial Purchaser agrees that it and each of its
affiliates have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Securities except
with the prior written consent of the Company.
(d) The Initial Purchaser and each of its affiliates has not
solicited offers for nor offered or sold and each agrees that it will
not solicit offers for nor offer or sell the Securities in the United
States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities
Act, including, but not limited to, (i) any advertising, article,
notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or (ii) any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. The Initial Purchaser agrees,
with respect to initial resales made in reliance on Rule 144A of any
of the Securities, to deliver either with the confirmation of such
initial resale or otherwise prior to settlement of such initial resale
a notice (which may be included in the Offering Memorandum) to the
effect that the initial resale of such Securities has been made in
reliance upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.
(e) The Initial Purchaser represents and agrees that it (i) has
not solicited, and will not solicit, offers to purchase any of the
Securities from, (ii) has not sold, and will not sell, any of the
Securities to, and (iii) has not distributed, and will not distribute,
the Offering Memorandum to any person or entity in any jurisdiction
outside of the United States except, to the best of the Initial
Purchaser's knowledge and belief, in compliance in all material
respects with all applicable laws. For the purpose of this Agreement,
"United States" means the United States of America, its territories,
-------------
its possessions and other areas subject to its jurisdiction.
4. Further Agreements of the Company. The Company agrees as follows:
(a) The Company will advise the Initial Purchaser promptly of
any proposal to amend or supplement the Offering Memorandum and will
not effect such amendment or supplement to which the Initial Purchaser
shall reasonably object after being given notice thereof and
reasonable time for review. If, at any time prior to completion of the
resale of the Notes by the Initial Purchaser, any event shall occur or
condition exist as a result of which it is necessary, in the opinion
of counsel for the Initial Purchaser or counsel for the Company, to
amend or supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time it is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Offering Memorandum to comply
with applicable law, to promptly prepare such amendment or supplement
as may be necessary to correct such untrue statement or omission or so
that the Offering Memorandum, as so amended or supplemented, will
comply with applicable law. Neither the Initial Purchaser's
<PAGE>
16
consent to, nor its delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(b) The Company will furnish to the Initial Purchaser copies of
the Offering Memorandum (and all amendments and supplements thereto)
as soon as available and in such quantities as the Initial Purchaser
shall reasonably request for internal use and for distribution to
prospective purchasers, and the Company will furnish to the Initial
Purchaser as soon as practicable four copies of the Offering
Memorandum (including four copies of the Supplement) , each signed by
a duly authorized officer of the Company, one of which will include
the independent accountants' reports therein manually signed by such
independent accountants. For so long as any of the Securities are
outstanding, if the Company is ever not subject to Section 13 or 15(d)
of the Exchange Act and is not exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, the Company will promptly furnish or
cause to be furnished to the Initial Purchaser and the holders of the
Securities, and, upon request of prospective purchasers of the
Securities, to such purchasers, copies of the information required to
be delivered to holders and prospective purchasers of the Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in
connection with resales by such holders of the Securities. The Company
will pay the expenses of printing and distributing to the Initial
Purchaser all such documents.
(c) The Company will file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission and whether
or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and
other financial information required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (which financial statements
shall be prepared in accordance with U.S. GAAP), including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual financial
information, a report thereon by the Company's certified independent
accountants and (ii) all current reports required to be filed with the
Commission on Form 8-K. Such quarterly financial information shall be
filed with the Commission within 45 days following the end of each
fiscal quarter of the Company, and such annual financial information
shall be furnished within 90 days following the end of each fiscal
year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed
by the Company under Item 101(d) of Regulation S-K under the
Securities Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder, without cost to such holder,
copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission
or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if
filing such reports and documents with the Commission is not accepted
by the Commission or is prohibited under the
<PAGE>
17
Exchange Act, to supply at the Company's cost copies of such reports
and documents to any prospective holder promptly upon request.
(d) The Company will promptly from time to time exercise best
efforts to take such action as the Initial Purchaser may reasonably
request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Initial Purchaser may
request and to comply with such laws so as to permit the continuance
of sales and dealings therein in such jurisdictions for as long as may
be necessary to complete the resale of the Notes; provided, however,
that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to take any action that would
subject it to general consent to service of process in any
jurisdiction (other than pursuant to an Operative Document) in which
it is not now so subject or otherwise subject itself to taxation in
any jurisdiction in which it is not otherwise so qualified or subject.
(e) Until the second anniversary of the Closing Date, the
Company will, upon request, furnish to the Initial Purchaser and any
holder of Securities, a copy of the restrictions on transfer which the
Company believes are applicable to the Securities; provided, however,
that nothing contained herein shall obligate the Company to track or
trace particular Securities held by anyone other than the Company or
any of its affiliates (as defined in Rule 144 under the Securities
Act).
(f) In connection with the offering, until the Initial Purchaser
shall have notified the Company of the completion of the resale of the
Notes, neither the Company nor any of its affiliates have bid for or
purchased or will bid for or purchase, either alone or with one or
more other persons, for any account in which they or any of their
affiliates have a beneficial interest any Notes nor have they
attempted or will they attempt to induce any person to purchase any
Notes; and neither they nor any of their affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Notes.
(g) For a period of 90 days after the date hereof, neither the
Company nor any of its direct or indirect subsidiaries will (i) offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any debt securities issued or guaranteed by the Company or
any such subsidiary and having a maturity of more than one year from
the date of issue other than pursuant to obligations under
registration rights agreements or (ii) directly or indirectly, offer
for sale, sell or otherwise dispose of (or enter into any transaction
or device which is designed to, or could be expected to, result in the
disposition or purchase by any person at any time in the future of)
any shares of Common Stock (other than shares issued through private
placements in connection with the acquisition of the capital stock or
assets of another company, shares issued pursuant to employee benefit
plans, qualified stock option plans or other employee compensation
plans existing on the date hereof or pursuant to currently outstanding
options, warrants or rights), or sell or grant options, rights or
warrants with respect to any shares of Common Stock (other than the
grant of options pursuant to option plans
<PAGE>
18
existing on the date hereof), in each case, without the prior written
consent of the Initial Purchaser. Neither the Company nor any of its
direct or indirect subsidiaries will at any time offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, pledge,
contract or disposition would cause the exemption afforded by Section
4(2) of the Securities Act or the safe harbor of Regulation S
thereunder to cease to be applicable to the offer and sale of the
Securities.
(h) The Company will indemnify and hold harmless the Initial
Purchaser against any documentary, stamp or similar issuance tax,
including any interest and penalties, on the creation, issuance and
sale of the Securities and on the initial resale thereof by the
Initial Purchaser and on the execution and delivery of this Agreement.
All payments to be made by the Company hereunder shall be made without
withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless the Company is
compelled by law to deduct or withhold such taxes, duties or charges.
In that event, the Company shall pay such additional amounts as may be
necessary in order that the net amounts received after such
withholding or deduction shall equal the amounts that would have been
received if no withholding or deduction had been made.
(i) The Company will apply the net proceeds from the sale of the
Notes as set forth in the Offering Memorandum under the caption "Use
of Proceeds."
(j) Between the date hereof and the Closing Date (both dates
inclusive), the Company will notify and consult with the Initial
Purchaser, and cause its subsidiaries and all other parties acting on
its or their behalf to notify and consult with the Initial Purchaser,
prior to issuing any announcement which could be material in the
context of the distribution of the Securities.
(k) The Company will promptly inform the Initial Purchaser of
any communications received by it from any governmental or regulatory
agency or authority, including, without limitation, any German or
Italian regulatory authority, any relevant stock exchange or trading
market (including the Freiverkehr of the Frankfurt Stock Exchange), or
the Commission, relating to the offering of the Securities and to
furnish the Initial Purchaser with copies thereof.
(l) The Company will take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall become an
"investment company" within the meaning of such term under the
Investment Company Act and the rules and regulations of the Commission
thereunder.
(m) The Company will not take, directly or indirectly, any
action which is designed to stabilize or manipulate, or which
constitutes or which might reasonably be expected to cause or result
in stabilization or manipulation, of the price of any security of the
Company in connection with the offering of the Securities.
<PAGE>
19
(n) Upon request by the Initial Purchaser, the Company will
apply to list the Notes or have them admitted for trading on an
internationally recognized stock exchange or over-the-counter trading
market and will use its best efforts to ensure that such application
is accepted.
(o) The Company will use its best efforts to cause the Notes to
be eligible for inclusion in the Private Offerings, Resale and Trading
through Automated Linkages Market of The Nasdaq Stock Market, Inc.
(the "PORTAL Market").
-------------
(p) The Company will cause each of Schitag Ernst & Young, AG and
Grant Thornton S.p.A. to deliver an initial comfort letter, dated the
date hereof, to the Initial Purchaser in form and substance reasonably
satisfactory to the Initial Purchaser at or prior to the time copies
of the Offering Memorandum (including the Supplement) are furnished to
the Initial Purchaser.
(q) The Company will prepare the Offering Memorandum (including
the Supplement) on or prior to the Closing Date in form and substance
reasonably satisfactory to the Initial Purchaser. The Supplement shall
contain Consolidated Statements of Loss and Comprehensive Loss and
Consolidated Statements of Cash Flows, each as of and for the six
months ended June 30, 1998 and 1999, Consolidated Balance Sheets as of
the year ended December 31, 1998 and the six months ended June 30,
1999, a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" comparing the six months ended June 30,
1999 with the six months ended June 30, 1998 and pro forma
consolidated financial information for the Company as of and for the
six months ended June 30, 1999 reflecting, among other transactions,
the acquisition of Flashnet.
5. Expenses. The Company agrees, to pay: (a) the costs incident to
the authorization, issuance, registration (as set forth in the Registration
Rights Agreement), sale and delivery of the Securities and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and
distributing of the Preliminary Offering Memorandum and the Offering Memorandum
and any amendment or supplement thereto, all as provided in this Agreement; (c)
any fees charged by investment rating agencies for the rating of the Securities;
(d) the fees and expenses of qualifying the Securities under the securities laws
of the several jurisdictions as provided in Section 4(d) and of preparing,
printing and distributing a Blue Sky Memorandum (including reasonable related
fees and expenses of counsel to the Initial Purchaser); (e) the costs of
preparing certificates evidencing the Securities; (f) all expenses and fees in
connection with the application for inclusion of the Securities in the PORTAL
Market, and the obtaining of any approval from any relevant authority in Germany
or any other country in which the securities are listed or admitted for trading
on a stock exchange or over-the-counter trading market; (g) the fees and
expenses (including fees and disbursements of counsel) of the Trustee; (h) the
fees and expenses of any Authorized Agent (as defined in Section 15 hereof); (i)
the cost and charges of any transfer agent or registrar; (j) all stamp or other
issuance or transfer taxes or governmental duties, if any, payable by the
Initial Purchaser in connection with the offer and sale of the Notes to the
Initial Purchaser; and (k) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement not otherwise
specifically provided for in this Section, including, without limitation, the
fees and expenses of Schitag Ernst & Young, AG, the
<PAGE>
20
Company's independent accountants, and Grant Thornton S.p.A., Flashnet's
independent accountants, and the fees and expenses of Powell, Goldstein, Frazer
& Murphy LLP, U.S. counsel to the Company, Besner Kreifels Weber, German counsel
to the Company, Avv. Fausto D'Ambrosio, Italian counsel to the Company, and Dr.
Thomas Herndl, Austrian counsel to the Company, provided that, except as
provided in this Section 5 and in Section 9, the Initial Purchaser shall pay its
own costs and expenses and any transfer taxes on the Securities which it may
sell.
6. Conditions of the Initial Purchaser's Obligations. The several
obligations of the Initial Purchaser hereunder are subject to the accuracy, when
made and on the Closing Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto (including
the Supplement) contains any untrue statement of a fact which, in the
opinion of counsel to the Initial Purchaser, is material or omits to
state any fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.
(b) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Indenture, the Registration Rights Agreement, the Offering Memorandum
or any amendment or supplement thereto (including the Supplement), and
all other legal matters relating to this Agreement, the Indenture, the
Registration Rights Agreement and the transactions contemplated hereby
and thereby shall be reasonably satisfactory in all material respects
to counsel to the Initial Purchaser, and the Company, shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) Powell, Goldstein, Frazer & Murphy LLP shall have furnished
to the Initial Purchaser its written opinion, as U.S. counsel to the
Company, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, is duly qualified to do business and is in
good standing as a foreign corporation in each U.S. jurisdiction
in which its ownership or lease of property or the conduct of its
businesses requires such qualification, and has all power and
authority necessary to own or hold its properties and conduct the
businesses in which it is engaged;
(ii) The Company has an authorized capitalization as set
forth in the Supplement and all of the issued shares of capital
stock of the Company have been duly and validly authorized and
issued, are fully
<PAGE>
21
paid and nonassessable and conform to the description thereof
contained in the Offering Memorandum;
(iii) To the best of such counsel's knowledge there are no
legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property or
assets of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, might have a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; and,
to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(iv) The Company has full right, power and authority to
execute and deliver each of the Operative Documents and to
perform its obligations thereunder; and all corporate action
required to be taken for the due and proper authorization,
execution and delivery of each of the Operative Documents and the
consummation of the transactions contemplated thereby has been
duly and validly taken;
(v) Each of the Operative Documents is in proper legal
form for the enforcement thereof against the Company without
further action on the part of the Initial Purchaser, the holders
of the Securities, or the Trustee;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization,
execution and delivery by the Initial Purchaser, constitutes a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing, and except, with respect to the rights of
indemnification and contribution thereunder, where enforcement
thereof may be limited by public policy;
(vii) The Indenture has been duly authorized, executed
and delivered by the Company and, assuming due authorization,
execution and delivery of the Indenture by the Trustee,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally, general
equitable principles (whether considered in a
<PAGE>
22
proceeding in equity or at law) or an implied covenant of good
faith and fair dealing;
(viii) The Indenture conforms in all material respects
with the requirements of the Trust Indenture Act and the rules
and regulations of the Commission applicable to an indenture
eligible to be qualified thereunder;
(ix) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming
due authorization, execution and delivery of the Registration
Rights Agreement by the Initial Purchaser, constitutes a valid
and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) or an implied covenant of good faith and fair
dealing, and except, with respect to the rights of
indemnification and contribution thereunder, where enforcement
thereof may be limited by public policy;
(x) The certificates used to evidence the Notes are in
due and proper form and comply with all applicable statutory
requirements of U.S. federal, Delaware and New York law;
(xi) The Notes have been duly authorized, executed and
delivered by the Company and, assuming due authentication thereof
by the Trustee, upon payment and delivery in accordance with this
Agreement and the Indenture, will be duly and validly issued and
outstanding and will constitute valid and legally binding
obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with
their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent, conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether in a proceeding in equity or at law) or an implied
covenant of good faith and fair dealing;
(xii) The Conversion Shares have been duly authorized
and, when issued in accordance with the terms and conditions
contained in the Indenture upon conversion of the Notes into
Common Stock, will be validly issued in accordance with the laws
of the State of Delaware and the provisions of the Certificate of
Incorporation and By-laws of the Company and will be fully paid
and nonassessable and holders of such Conversion Shares will have
no other liability for any debt or other obligation of the
Company towards third parties in their capacity as holders of
such Conversion Shares; such Conversion Shares, when
<PAGE>
23
issued, will not be subject to any preemptive or similar rights
and will be free and clear of all liens, encumbrances, equities
and claims or restrictions on transferability;
(xiii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting
or transfer of, any shares of the Common Stock or pursuant to the
Company's Certificate of Incorporation or By-Laws or any
agreement or other instrument known to such counsel;
(xiv) There are no contracts, agreements or
understandings between the Company and any person granting such
person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities
of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities to be
registered pursuant to the Registration Rights Agreement or in
any securities being registered pursuant to any other
registration statement filed by the Company under the Securities
Act other than the Registration Rights Agreement among the
Company, Lehman and the Initial Purchaser dated July 8, 1999 with
respect to the Company's Senior Notes.
(xv) The execution, delivery and performance of the
Operative Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, do
not and will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, any material indenture,
mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any of its
subsidiaries is subject, nor will such actions result in any
violation of (A) the provisions of the Certificate of
Incorporation or By-laws or equivalent constitutive documents of
the Company or any of its subsidiaries, (B) any existing
applicable law, rule or regulation of any court or governmental
agency or body of the United States or the State of New York or
any Delaware governmental agency or body acting pursuant to the
Delaware General Corporation Law (other than state securities or
Blue Sky laws as to which we have not been requested to express
any opinion) or (C) any order, known to such counsel, of any
government, governmental instrumentality or court of the United
States or the State of New York having jurisdiction over the
Company or any of its properties or assets or any Delaware
governmental agency or body acting pursuant to the Delaware
General Corporation Law;
(xvi) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of the United States or the State of
New York or any Delaware governmental
<PAGE>
24
agency or body acting pursuant to the Delaware General
Corporation Law is required for the consummation of the
transactions contemplated by the Operative Documents in
connection with the issuance or sale of the Notes by the Company
(assuming compliance with the terms of the Operative Documents by
the parties thereto), except, with respect to the transactions
contemplated by the Registration Rights Agreement, as may be
required under the Securities Act, the Trust Indenture Act and
the rules and regulations of the Commission thereunder, and
otherwise except as may be required by state or foreign
securities or Blue Sky laws (as to which such counsel expresses
no opinion);
(xvii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings and contracts and
other documents are accurate in all material respects to the
extent the foregoing concern the federal laws of the United
States, the laws of the State of New York and the Delaware
General Corporation Law; the statements set forth in the Offering
Memorandum under the caption "Description of the Notes," insofar
as such statements purport to constitute a summary of the terms
of the Indenture and the Registration Rights Agreement, fairly
summarize such terms, agreements and other documents in all
material respects; and the statements set forth in the Offering
Memorandum under the caption "Certain United States Federal
Income Tax Consequences" insofar as they purport to constitute
summaries of matters of U.S. federal income tax law and legal
conclusions with respect thereto constitute accurate summaries of
the matters described therein all material respects;
(xviii) The Company is not an open-end investment company,
unit investment trust or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment
Company Act, nor is it a closed-end investment company required
to be registered, but not registered, thereunder; and the Company
is not and, after giving effect to the offering and sale of the
Notes and the application of the proceeds thereof as described in
the Offering Memorandum, will not be an "investment company" as
defined in the Investment Company Act and the rules and
regulations of the Commission thereunder;
(xix) No New York State or any New York City stamp or
documentary taxes payable by or on behalf of the Initial
Purchaser or the Company are required to be paid with respect to
the execution of the Indenture and the authorization, issuance,
sale and delivery of the Securities to the Initial Purchaser in
the manner contemplated by this Agreement;
(xx) The Company can sue and be sued in its own name;
(xxi) The Company has, pursuant to Section 15 of this
Agreement, legally, validly and irrevocably submitted to the
personal jurisdiction of any state or federal court located in
the Borough of
<PAGE>
25
Manhattan, The City of New York, New York in any action arising
out of or relating to this Agreement or the transactions
contemplated thereby, and has legally, validly and effectively
appointed the Authorized Agent as its authorized agent for the
purposes described in Section 15 of this Agreement;
(xxii) The Securities satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act;
(xxiii) Neither the Company nor any of its Affiliates (as
defined in Rule 501(b) of Regulation D promulgated under the
Securities Act) has directly, or through any agent, sold, offered
for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act)
which is or will be integrated with the sale of Securities in a
manner that would require the registration under the Securities
Act of the Securities; and
(xxiv) No registration of the Securities under the
Securities Act, and no qualification of an indenture under the
Trust Indenture Act, is required in connection with the offer and
sale of the Notes by the Company to the Initial Purchaser or in
connection with the initial resale of the Notes by the Initial
Purchaser in the manner contemplated in this Agreement and the
Offering Memorandum.
Such counsel shall also have furnished to the Initial Purchaser a
written statement, addressed to the Initial Purchaser and dated the
Closing Date, in form and substance satisfactory to the Initial
Purchaser, to the effect that (i) the Offering Memorandum (including
the Supplement) conforms in all material respects to the requirements
of, and contains all information that would be required to be
presented by, the Securities Act and the rules and regulations
promulgated thereunder that would have been applicable thereto if such
Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act, however, had the
Company submitted the Offering Memorandum to the staff of the
Commission, there may have been comments from the staff requiring
amendments before the offer document was declared effective, and (ii)
(x) such counsel has acted as counsel to the Company in connection
with the preparation of the Offering Memorandum (including the
Supplement) and (y) based on the foregoing, no facts have come to the
attention of such counsel which gave it reason to believe that the
Offering Memorandum (including the Supplement) (other than the
financial statements, statistical and other financial data contained
therein or omitted therefrom, as to which such counsel has not been
requested to comment), as of its date or the Closing Date, contained
or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in
light of circumstances under which they were made, not misleading.
The foregoing opinion and statement may be qualified by a statement to
the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Offering Memorandum except for the
<PAGE>
26
statements made in the Offering Memorandum under the captions
"Description of the Notes" and "Certain United States Federal Income
Tax Consequences" insofar as such statements relate to the provisions
of the Securities, this Agreement, the Indenture, and the Registration
Rights Agreement or concern legal matters.
In rendering such opinion, such counsel may (i) state that its
opinion is limited to matters governed by the federal laws of the
United States of America, the laws of the State of New York and the
General Corporation Law of the State of Delaware (and may contain such
assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchaser) and (ii) rely (to the extent such
counsel deems proper and specifies in its opinion) as to matters
involving the application of the laws of Germany, Italy and Austria
upon the opinions of Besner Kreifels Weber, Avv. Fausto D'Ambrosio and
Dr. Thomas Herndl, respectively, referred to in Sections 6(d)(1), (2)
and (3) below.
(d) (1) Besner Kreifels Weber shall have furnished to the
Initial Purchaser its written opinion, as German counsel to the
Company, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to
the effect that:
(i) Each of Cybernet AG, Cybernet GmbH, Cybernet E-
Commerce, Carolin and Open:Net (the "German Subsidiaries") has
-------------------
been duly incorporated and is validly existing as a corporation
(and, in the case of Cybernet E-Commerce, is a limited
partnership validly existing as a limited partnership) in good
standing under the laws of Germany, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or lease of property or the
conduct of its business requires such qualification and has all
power and authority necessary to own or hold its properties and
conduct the businesses in which it is engaged;
(ii) All of the issued shares of capital stock of the
German Subsidiaries have been duly and validly authorized and
issued and are fully paid, nonassessable and are owned directly
or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iii) To the best of such counsel's knowledge and other than
as set forth in the Offering Memorandum there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or asset of
the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries
might have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; and,
to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
<PAGE>
27
(iv) The execution, delivery and performance of the
Operative Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, do
not and will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
or any of its subsidiaries pursuant to, any material indenture,
mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any of its
subsidiaries is subject, nor will such actions result in any
violation of (A) the provisions of the Articles of Association or
bylaws or equivalent constitutive documents of any of the German
Subsidiaries, (B) any existing applicable law, rule or regulation
of any court or governmental agency or body of Germany or (C) any
order, known to such counsel, of any government, governmental
instrumentality or court of Germany having jurisdiction over the
Company or any of its properties or assets;
(v) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of Germany or any political
subdivision thereof is required for the consummation of the
transactions contemplated by the Operative Documents in
connection with the issuance or sale of the Notes by the Company
(assuming compliance with the terms of the Operative Documents by
the parties thereto), except, with respect to the transactions
contemplated by the Registration Rights Agreement;
(vi) Under German law, the Company would be deemed to have
had sufficient contacts with the United States and would be
recognized as a validly existing Delaware corporation and as the
holding company and owner of all the issued shares of capital
stock of Cybernet AG and the other German Subsidiaries.
(vii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings and contracts and
other documents are accurate in all material respects to the
extent the foregoing concern the laws of Germany; the statements
set forth in the Offering Memorandum under the captions "Risk
Factors --There May be Questions about our Status Under German
Law," "Risk Factors -- We Are Subject to Regulation" and
"Business -- Regulation," to the extent that they constitute
summaries of matters of German law or regulation or legal
conclusions, fairly summarize the matters described therein in
all material respects;
(viii) Any judgment obtained in a United States federal or
state court of competent jurisdiction sitting in New York City
arising out of or in relation to the obligations of the Company
under the Operative Documents would be enforced against the
Company in the courts of
<PAGE>
28
Germany without substantive reexamination or relitigation on the
merits of the subject matter thereof;
(ix) The Initial Purchaser would be permitted to commence
proceedings against the Company in German courts based on this
Agreement, and the holders of Notes and Conversion Shares (or the
Trustee acting on their behalf) (the "Holders") would be
-------
permitted to commence proceedings against the Company in German
courts based on the Operative Documents (to the extent that such
Initial Purchaser and Holders have direct contractual rights
against the Company under such Operative Documents, Notes, or
Conversion Shares, as appropriate, which arise as a result of
valid and binding obligations of the Company under such documents
in accordance with the laws of the State of New York), and such
German courts would recognize the choice of law provisions of the
Operative Documents;
(x) Under German law, the agreement of the Company that
Operative Documents shall be governed by the laws of the State of
New York will, if it constitutes a binding agreement under the
laws of the State of New York, be recognized by the courts of
Germany;
(xi) The indemnification and contribution provisions set
forth in Section 7 herein do not contravene the public policy or
laws of Germany;
(xii) Under German law, the submission by the Company to
the jurisdiction of the United States federal or New York state
courts sitting in New York City set forth in each of the
Operative Documents, is enforceable against the Company, and
service of process effected in the manner set forth in the
Operative Documents, assuming validity under the laws of the
State of New York, will be effective, insofar as German law is
concerned;
(xiii) All real property and buildings held under lease by
the Company and the German Subsidiaries are held by them under
valid subsisting and enforceable leases; and
(xiv) No stamp, registration or other similar taxes or
duties are payable in Germany by or on behalf of the Initial
Purchaser upon or in connection with the sale and delivery to or
by the Initial Purchaser of the Notes as contemplated by the
Offering Memorandum, and it is not necessary, prior to the
Initial Purchaser seeking enforcement of any of the Operative
Documents in Germany, that any stamp or similar tax be paid.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by German law (and may contain
such assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchaser) and shall state that each of
Powell, Goldstein, Frazer & Murphy LLP
<PAGE>
29
and Simpson Thacher & Bartlett may rely upon its opinion with respect
to matters of German law.
(2) Avv. Fausto D'Ambrosio, Italian counsel to the Company,
shall have furnished to the Initial Purchaser its written opinion,
addressed to the Initial Purchaser and dated the Closing Date, in form
and substance satisfactory to the Initial Purchaser, to the effect
that:
(i) Flashnet and Eclipse (the "Italian Subsidiaries") have
--------------------
been duly incorporated and are validly existing as corporations
in good standing under the laws of Italy, are duly qualified to
do business and are in good standing as foreign corporations in
each jurisdiction in which their ownership or lease of property
or the conduct of their businesses requires such qualification
and have all power and authority necessary to own or hold their
properties and conduct the businesses in which they are engaged;
and
(ii) All of the issued shares of capital stock of the
Italian Subsidiaries have been duly and validly authorized and
issued and are fully paid and nonassessable; and all of the
issued shares of capital stock of Flashnet and 66% of the issued
shares of capital stock of Eclipse are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Italian law (and may
contain such assumptions and qualifications as are satisfactory in
form and substance to the Initial Purchaser) and shall state that each
of Powell, Goldstein, Frazer & Murphy LLP and Simpson Thacher &
Bartlett may rely upon its opinion with respect to matters of Italian
law.
(3) Dr. Thomas Herndl, Austrian counsel to the Company, shall
have furnished to the Initial Purchaser its written opinion addressed
to the Initial Purchaser and dated the Closing Date, in form and
substance satisfactory to the Initial Purchaser, to the effect that:
(i) Vianet has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Austria, is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its businesses
requires such qualification and has all power and authority
necessary to own or hold its properties and conduct the
businesses in which it is engaged; and
(ii) All of the issued shares of capital stock of Vianet
have been duly and validly authorized and issued and are fully
paid and nonassessable and are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities
or claims.
<PAGE>
30
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Austrian law (and may
contain such assumptions and qualifications as are satisfactory in
form and substance to the Initial Purchaser) and shall state that each
of Powell, Goldstein, Frazer & Murphy LLP and Simpson Thacher &
Bartlett may rely upon its opinion with respect to matters of Austrian
law.
(e) The Trustee shall have furnished to the Initial Purchaser an
officer's certificate, dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser to the effect that (i) the
Indenture has been duly authorized, executed and delivered by the
Trustee, (ii) each person who, on behalf of the Trustee, executed and
delivered the Indenture was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer
or authorized signatory of the Trustee and duly authorized to perform
such acts at the respective times of such acts and the signatures of
such persons appearing on such document are their genuine signatures
and (iii) such other matters reasonably requested by the Initial
Purchaser to be included in such officer's certificate. Attached to
such officer's certificate shall be an extract of the bylaws of the
Trustee, duly adopted by its Board of Directors, respecting the
signing authority of the persons mentioned in clause (ii) above and a
letter from an officer of the Trustee authorizing, pursuant to such
bylaws, such signing authority, which bylaws and letter at the Closing
Date are in full force and effect.
(f) With respect to the letter of Schitag Ernst & Young, AG
delivered to the Initial Purchaser and dated the date hereof referred
to in Section 4(p) (as used in this paragraph, the "initial letter"),
--------------
the Company shall have furnished to the Initial Purchaser a letter (as
used in this paragraph, the "bring-down letter") of such accountants,
-----------------
addressed to the Initial Purchaser and dated the Closing Date (i)
confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as
of the date of such bring-down letter (or, with respect to matters
involving changes or developments since the date as of which specified
financial information is given in the Offering Memorandum, as of a
date not more than five days prior to the date of each such bring-down
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by its initial letter
and (iii) confirming in all material respects the conclusions and
findings set forth in its initial letter.
(g) The Company shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of Andreas Eder, Chairman,
President and Chief Executive Officer, and Robert Eckert, Chief
Financial Officer and Treasurer, stating, on behalf of the Company,
that:
(1) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the Closing Date;
and the Company has complied with all its agreements contained
herein; and
<PAGE>
31
(2) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial
statements included in the Offering Memorandum (A) any loss or
interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree,
otherwise than as set forth in the Offering Memorandum or (B) any
change in the share capital (except for the one-for-one
conversion of shares of Series A Preferred Stock occurring after
August 2, 1999 for Common Stock) or long-term debt of the Company
or any of its subsidiaries or any change in or generally
affecting the affairs, management, financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth in the Offering
Memorandum; and
(3) They have carefully examined the Offering Memorandum
(including the Supplement) and, in their opinion (A) the Offering
Memorandum (including the Supplement), as of its date, did not
include any untrue statement of a material fact and did not omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B)
since such date no event has occurred which should have been set
forth in an amendment to the Offering Memorandum so that the
Offering Memorandum, as so amended or supplemented, would not
include any untrue statement of a material fact and would not
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances in which they were made, not misleading.
(h) (1) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Offering Memorandum any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth in the Offering Memorandum and (2) since such date
there shall not have been any change in the share capital (except for
the one-for-one conversion of shares of Series A Preferred Stock
occurring after August 2, 1999 for Common Stock) or long-term debt of
the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the Offering Memorandum, the effect of
which, in any such case described in clause (1) or (2), is, in the
judgment of the Initial Purchaser, so material and adverse as to make
it impracticable or inadvisable to proceed with the offering of the
Securities on the terms and in the manner contemplated in the Offering
Memorandum.
(i) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (1) trading in
securities generally on the New York Stock Exchange, Inc. or the
Nasdaq National Market System,
<PAGE>
32
or trading in any securities of the Company on any exchange, shall
have been suspended or minimum prices shall have been established on
any such exchange or such market by the Commission, by such exchange
or by any other regulatory body or governmental authority having
jurisdiction, (2) a banking moratorium shall have been declared by New
York State or U.S. federal authorities or by authorities in Germany or
European Union authorities, (3) the United States or Germany shall
have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or Germany or
there shall have been a declaration of a national emergency or war by
the United States or Germany or (iv) there shall have occurred such a
material adverse change in general, United States, or German economic,
political or financial conditions or in currency exchange rates,
taxation, exchange controls or foreign investment regulations (or the
effect of international conditions on the financial markets in the
United States or Germany shall be such) as to make it, in the judgment
of the Initial Purchaser, impracticable or inadvisable to proceed with
completion of the offering or sale of and payment for the Securities.
(j) The Initial Purchaser shall have received on the Closing
Date a counterpart of the Registration Rights Agreement which shall
have been executed and delivered by the duly authorized officers of
the Company.
(k) The Indenture (in form and substance satisfactory to the
Initial Purchaser) shall have been duly executed and delivered by the
Company and the Trustee on the Closing Date and shall be in full force
and effect on such date and the Notes shall have been duly executed
and delivered by the Company and duly authenticated by the Trustees on
the Closing Date.
(l) The NASD shall have accepted the Securities for trading in
the PORTAL Market.
(m) The Notes shall have been duly authorized, executed and
delivered by the Company.
(n) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial
Purchaser would materially impair the ability of the Initial Purchaser
to purchase, hold or effect resales of the Securities as contemplated
hereby.
(o) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Notes; and no injunction,
restraining order or order of any other nature by any court of
competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance or sale of the Notes.
<PAGE>
33
(p) The Company shall have furnished to the Initial Purchaser
such further information, certificates and documents as the Initial
Purchaser may reasonably request.
(q) The Initial Purchaser shall have received and be reasonably
satisfied with the content of the Offering Memorandum (including the
Supplement) on or prior to the Closing Date. The Supplement shall
contain Consolidated Statements of Loss and Comprehensive Loss and
Consolidated Statements of Cash Flows, each as of and for the six
months ended June 30, 1998 and 1999, Consolidated Balance Sheets as of
the year ended December 31, 1998 and the six months ended June 30,
1999, a "Management's Discussion and Analysis of Financial Condition
and the Results of Operations" comparing the six months ended June 30,
1999 with the six months ended June 30, 1998 and pro forma
consolidated financial information for the Company as of and for the
six months ended June 30, 1999 reflecting, among other transactions,
the acquisition of Flashnet.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchaser.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each of the
Initial Purchaser, its officers and employees and each person, if any,
who controls each of the Initial Purchaser within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which each of the Initial
Purchaser, its officers, employees or controlling persons may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum, the Offering
Memorandum, or in any amendment or supplement thereto (including the
Supplement), (ii) the omission or alleged omission to state in the
Preliminary Offering Memorandum, the Offering Memorandum or in any
amendment or supplement thereto (including the Supplement) any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by the Initial Purchaser in connection
with, or relating in any manner to, the Securities or the offering
contemplated hereby, and which is included as part of or referred to
in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable in the case of any matter covered by
this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such act or
failure to act undertaken or omitted to be taken by the Initial
<PAGE>
34
Purchaser through its gross negligence or wilful misconduct), and
shall reimburse each of the Initial Purchaser and such officer,
employee and controlling person promptly upon demand for any legal or
other expenses reasonably incurred by the Initial Purchaser, officer,
employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Offering Memorandum, or in
any such amendment or supplement, in reliance upon and in conformity
with the written information furnished to the Company by the Initial
Purchaser specifically for inclusion therein and described in Section
7(e). The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to the Initial
Purchaser or to any officer, employee or controlling person of the
Initial Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, its officers and employees, each of its directors and each
person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the
Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum, the Offering
Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state in the Offering Memorandum or in
any amendment or supplement thereto any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with the written information furnished
to the Company by or on behalf of the Initial Purchaser specifically
for inclusion therein and described in Section 7(e), and shall
reimburse the Company and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the
Company, as the case may be, or any such director, officer or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity
agreement is in addition to any liability which the Initial Purchaser
may otherwise have to the Company or any such director, officer or
controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 7, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have
<PAGE>
35
under this Section 7 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this
Section 7. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof,
the indemnifying party shall be entitled to participate therein and,
to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, any indemnified party shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it
is advisable for such indemnified party to employ separate counsel or
(iii) the indemnifying party has failed to assume the defense of such
action and employ counsel reasonably satisfactory to the indemnified
party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action on
behalf of such indemnified party, it being understood, however, that
the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys (in addition to one separate firm
of attorneys as local counsel, if appropriate under the circumstances)
at any time for all such indemnified parties, which firm shall be
designated in writing by the Initial Purchaser, if the indemnified
parties under this Section 7 consist of the Initial Purchaser or any
of its officers, employees or controlling persons, or by the Company,
if the indemnified parties under this Section consist of the Company
or any of its directors, officers, employees or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Sections 7(a) and 7(b), shall use its reasonable efforts
to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld) settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such
settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all
<PAGE>
36
liability arising out of such claim, action, suit or proceeding and
(b) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified
party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if
there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss of liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, in such proportion
as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and the Initial Purchaser on the other
from the offering of the Securities or if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Initial Purchaser on the other with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Initial Purchaser on
the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses
but after deducting discounts and commissions) received by the Company
on the one hand, and the total discounts and commissions received by
the Initial Purchaser with respect to the Securities purchased under
this Agreement, on the other hand, bear to the total gross proceeds
from the offering of the Securities under this Agreement, in each case
as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or the Initial
Purchaser on the other hand, the intent of the parties and their
relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Initial
Purchaser agree that it would not be just and equitable if
contributions pursuant to this Section 7(d) were to be determined by
pro rata allocation or by any other method of allocation which does
not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 7(d) shall be deemed to include, for
purposes of this Section 7(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7(d), the Initial
<PAGE>
37
Purchaser shall not be required to contribute any amount in excess of
the amount by which the total price at which the Securities purchased
by it were resold exceeds the amount of any damages which the Initial
Purchaser has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Initial Purchaser confirms that the statements with
respect to the offering of the Notes set forth in the first and ninth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum are correct and constitute the only information furnished
in writing to the Company by or on behalf of the Initial Purchaser
specifically for inclusion in the Offering Memorandum.
8. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 6(h) or 6(i) shall have
occurred or if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
9. Reimbursement of Initial Purchaser's Expenses. If this Agreement
shall be terminated by the Initial Purchaser because of any failure or refusal
on the part of the Company to comply with the terms or to fulfil any of the
conditions of Section 6 (other than Subsections 6(h), (i) and (o)) of this
Agreement, the Company shall reimburse the Initial Purchaser for fees and
expenses of its counsel and for such other out-of-pocket expenses as shall have
been reasonably incurred by it in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Company shall pay the
full amount thereof to the Initial Purchaser.
10. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to: Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, NY 10036, Attention: Syndicate
Department (Fax: +1-212-761-0192);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate, 21/st/
Floor, London, EC2M 3YH, Attention: William R. Dougherty, Esq. (Fax:
+44-171-422-4022);
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to Cybernet Internet Services International
Inc., Stefan-George-Ring 19-23, 81929 Munich, Germany, Attention:
Robert Eckert, Chief Financial Officer and Treasurer (Fax: +49-89-993-
15199);
<PAGE>
38
With a copy to Powell, Goldstein, Frazer & Murphy LLP, 1001
Pennsylvania Avenue, N.W., Washington D.C. 20004, Attention: Joseph
M. Berl, Esq. (Fax: +1-202-624-7222).
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of the Initial Purchaser and the person or persons, if any, who
control the Initial Purchaser within the meaning of Section 15 of the Securities
Act and the indemnity agreement of the Initial Purchaser contained in Section
7(b) of this Agreement shall be deemed to be for the benefit of directors,
officers and employees of the Company and any person controlling the Company
within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Survival. The respective indemnities, representations, warranties
and agreements of the Company and the Initial Purchaser contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect regardless of any investigation made by or
on behalf of any of them or any person controlling any of them.
13. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, the term "business day" means any day on which the
------------
Nasdaq National Market System is open for trading and the term "subsidiary" has
----------
the meaning set forth in Rule 405 under the Securities Act.
14. Governing Law. This Agreement and the rights and duties of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
15. Submission to Jurisdiction; Appointment of Agent for Service;
Waiver; Currency Indemnity. To the fullest extent permitted by applicable law,
the Company irrevocably submits to the non-exclusive jurisdiction of any federal
or state court in the Borough of Manhattan in the City of New York, County and
State of New York, United States of America, in any suit or proceeding based on
or arising under this Agreement, and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in any such court. The
Company, to the fullest extent permitted by applicable law, irrevocably and
fully waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding and hereby irrevocably designates and appoints CSC, at New
York, New York (the "Authorized Agent"), for a period of ten years from the date
----------------
hereof or until such time as no Notes are outstanding, as its authorized agent
upon whom process may be served in any such suit or proceeding. The Company
represents that it has notified the Authorized Agent of such designation and
appointment and that the Authorized Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs its Authorized Agent to accept
such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of
<PAGE>
39
said service to the Company mailed by first class mail or delivered to its
Authorized Agent shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
right of any person to serve process in any other manner permitted by law. The
Company agrees that a final action in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other lawful manner. Notwithstanding the foregoing, any action against
the Company arising out of or based on this Agreement or the transactions
contemplated hereby may also be instituted by the Initial Purchaser, its
respective officers and employees or any person who controls the Initial
Purchaser within the meaning of the Securities Act in any competent court in
Germany and the Company expressly accepts the jurisdiction of any such court in
any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 15(a) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchaser and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(a) The Company shall indemnify the Initial Purchaser against
any loss incurred by it as a result of any judgment or order being
given or made and expressed and paid in a currency (the "Judgment
--------
Currency") other than U.S. dollars and as a result of any variation as
--------
between (i) the rate of exchange at which the U.S. dollar amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in New York, New York at
which the Initial Purchaser on the date of payment of such judgment or
order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by the Initial Purchaser. If the U.S.
dollars so purchased are greater than the amount originally due to the
Initial Purchaser hereunder, the Initial Purchaser agrees to pay the
Company an amount equal to the excess of the U.S. dollars so purchased
over the amount originally due to the Initial Purchaser hereunder. The
foregoing shall constitute a separate and independent obligation of
the Company and the Initial Purchaser, as the case may be, and shall
continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase
of, or conversion into, U.S. dollars.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
<PAGE>
40
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement among the Company
and the Initial Purchaser, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
Cybernet Internet Services International, Inc.
By: /s/ Andreas Eder
---------------------------------
Name: Andreas Eder
Title: President and Chief Executive Officer
<PAGE>
Accepted:
Morgan Stanley & Co. International Limited
By: /s/ Jorg Mohaupt
---------------------------------
Authorized Representative
<PAGE>
SCHEDULE I
Aggregate
Initial
Accreted Value
Initial Purchaser of Notes
- ----------------- ---------------
Morgan Stanley & Co. International Limited.. $ 35,000,000
------------
Total....................................... $ 35,000,000
============
<PAGE>
EXHIBIT 1.5
CONFORMED COPY
$15,002,183
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Discount Notes
due 2009
PURCHASE AGREEMENT
------------------
August 23, 1999
Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
Ladies and Gentlemen:
Cybernet Internet Services International, Inc., a Delaware corporation,
(the "Company") proposes to issue and sell to the initial purchaser listed on
-------
Schedule I hereto (the "Initial Purchaser") $15,002,183 aggregate initial
-----------------
accreted value of 13.0% Convertible Senior Subordinated Discount Notes due 2009.
The Notes are to be issued under an Indenture, dated as of August 26, 1999 (the
"Indenture"), between the Company and The Bank of New York, as Trustee (in such
---------
capacity, the "Trustee"). The shares of Common Stock issuable upon exercise of
-------
the right to convert the Notes pursuant to the provisions of Article X of the
Indenture (the "Conversion Right") are herein referred to as the "Conversion
---------------- ----------
Shares." The Notes and the Conversion Shares are collectively referred to
- ------
herein as the "Securities."
----------
The Notes will be offered and sold to the Initial Purchaser without being
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions therefrom. The Company has
--------------
prepared an offering memorandum dated the date hereof and a supplement (the
"Supplement") to the offering memorandum, dated the date hereof (collectively,
----------
the "Offering Memorandum"), setting forth information concerning the Company,
-------------------
its subsidiaries and the Securities. Copies of the Offering Memorandum will be
delivered by the Company to the Initial Purchaser pursuant to the terms of this
Agreement. Any references herein to the Offering Memorandum shall be deemed to
include all amendments and supplements thereto (including whether specifically
referenced in any particular paragraph herein or not, the Supplement) unless
otherwise noted. The Company hereby confirms that it has authorized the use of
the Offering Memorandum in connection with the offering and resale of the Notes
by the Initial Purchaser in accordance with Section 2.
Holders of the Notes and Conversion Shares, as the case may be (including
the Initial Purchaser and its direct and indirect transferees), will be entitled
to the benefits of a Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
-----------------------------
which the Company will agree to file with the U.S. Securities and Exchange
Commission (the "Commission") a resale shelf registration statement pursuant to
----------
Rule 415 under the Securities Act (the "Resale Shelf Registration Statement")
-----------------------------------
with respect to resales of the Notes (which Resale Shelf Registration Statement
shall also register the sale of the underlying Common Stock issuable upon
conversion thereof). The Company will further
<PAGE>
2
agree pursuant to the Registration Rights Agreement that it will file with the
Commission a shelf registration statement (the "Conversion Shelf Registration
-----------------------------
Statement") registering the issuance or resale of Conversion Shares on or prior
- ---------
to the one-year anniversary of the Closing Date.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to herein collectively as the "Operative Documents."
-------------------
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) The Offering Memorandum, as of its date, did not, and the
Offering Memorandum, as of the Closing Date (as defined in Section 2
hereof), will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that the Company does not make any representation or warranty as to
information contained in or omitted from the Offering Memorandum in
reliance upon and in conformity with the written information furnished
to the Company by the Initial Purchaser specifically for inclusion
therein and described in Section 7(e).
(b) Assuming the accuracy of the representations and warranties
of the Initial Purchaser contained in Section 3 and its compliance
with the agreements set forth therein, it is not necessary, in
connection with the issuance and sale of the Notes to the Initial
Purchaser and the offer, resale and delivery of the Notes by the
Initial Purchaser in the manner contemplated by this Agreement and the
Offering Memorandum, to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
-------------------
(c) The Company has been duly incorporated, is validly existing
and in good standing under Delaware law; the Company is solvent, is
not in bankruptcy, liquidation or receivership and is duly qualified
to do business in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification,
except where the failure to so qualify would not reasonably be
expected to have, singularly or in the aggregate, a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries;
and the Company has all power and authority necessary to own or hold
its respective property and to conduct the business in which it is
engaged.
(d) Each of the subsidiaries (as defined in Section 13 hereof)
of the Company has been duly organized, is validly existing and in
good standing under the laws of its jurisdiction of organization or
incorporation, is solvent, is not in bankruptcy, liquidation or
receivership and is duly qualified to do business in each jurisdiction
in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so
qualify would not reasonably be expected to have, singularly or in the
aggregate, a material
<PAGE>
3
adverse effect on the financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and each has all power and authority necessary to own or
hold its respective property and to conduct the business in which it
is engaged.
(e) The Company has an authorized and issued share capital and
capitalization as set forth in the Supplement under the heading
"Capitalization," except for the one-for-one conversion of shares of
Series A Preferred Stock, par value $0.001 per share (the "Series A
--------
Preferred Stock"), occurring after June 30, 1999 for Common Stock; all
---------------
outstanding shares of capital stock of the Company have been duly
authorized and are validly issued and fully paid and nonassessable;
the Conversion Shares have been duly authorized and, when the
Conversion Shares are issued in accordance with the terms and
conditions contained in the Indenture upon exercise of the Conversion
Right, such Conversion Shares will be validly issued and fully paid
and nonassessable and holders of the Conversion Shares will have no
liability for any debt or other obligation of the Company towards
third parties in their capacity as holders of the Conversion Shares;
and the stockholders of the Company have no preemptive rights with
respect to the Conversion Shares which have not been validly excluded
prior to the date hereof, and there is no other conflicting right,
contingent or otherwise, of any person to purchase or be offered for
purchase any of the Conversion Shares and no depositary receipts have
been issued with respect to the Conversion Shares offered by the
Company; the Conversion Shares have been duly reserved for issuance in
accordance with the terms of the Notes and the Indenture.
(f) The Company has no Indebtedness (as defined in the Offering
Memorandum) other than (i) as set forth on the June 30, 1999
Consolidated Balance Sheet of the Company set forth in the Supplement
and (ii) the Company's 14% Senior Notes due 2009 (the "Senior Notes").
------------
(g) The execution, delivery and performance of the Operative
Documents by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement, shareholders agreement or other material 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 or to
which any of the properties or assets of the Company or any of its
subsidiaries are subject, nor will such actions result in any
violation of the provisions of the Certificate of Incorporation or By-
laws or equivalent constitutive documents of the Company or any of its
subsidiaries or any statute, license, legislation, authorization, or
any order, rule or regulation of any court or governmental agency or
body (including, without limitation, any statutes, rules, orders or
regulations promulgated by the Federal Communications Commission or
the Commission of the European Community) having jurisdiction over the
Company or any of its subsidiaries or any of their properties or
assets subject, other than with respect to violations of the
provisions of the Certificate of Incorporation or
<PAGE>
4
By-laws or equivalent constitutive documents of the Company or any of
its subsidiaries, to such exceptions as, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
No consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body
(including, without limitation, any statutes, rules, orders or
regulations promulgated by the Federal Communications Commission or
the Commission of the European Community) is required for the
execution, delivery and performance of the Operative Documents by the
Company and the consummation of the transactions contemplated hereby
and thereby except (A) as have been obtained or made, (B) with respect
to the transactions contemplated by the Registration Rights Agreement,
as may be required under the Securities Act, the Trust Indenture Act
and the rules and regulations of the Commission thereunder and (C) as
required by state or foreign securities or "Blue Sky" laws.
(h) The Company has full power and authority to enter into this
Agreement; this Agreement has been duly authorized, executed and
delivered by the Company and, when duly authorized, executed and
delivered by the Initial Purchaser, will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, and except, with
respect to the rights of indemnification and contribution thereunder,
where enforcement thereof may be limited by public policy.
(i) The Company has full power and authority to enter into the
Indenture; the Indenture has been duly authorized by the Company and
upon effectiveness of a Shelf Registration Statement will be qualified
under the Trust Indenture Act; and, on the Closing Date (as defined
below), the Indenture will have been duly executed and delivered by
the Company and will conform, in all material respects, to the
description thereof contained in the Offering Memorandum and, assuming
due authorization, execution and delivery of the Indenture by the
Trustee, the Indenture will constitute a valid and legally binding
obligation of the Company, enforceable in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
(j) The Company has full power and authority to offer and sell
the Notes; the Notes have been duly authorized by the Company; and,
when the Notes are delivered to and paid for by the Initial Purchaser
pursuant to this Agreement on the Closing Date, such Notes will have
been duly executed, authenticated, issued
<PAGE>
5
and delivered (assuming due authentication of the Notes by the
Trustee) and will conform, in all material respects, to the
description thereof contained in the Offering Memorandum and, assuming
due authentication of the Notes by the Trustee, such Notes will
constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except that the enforcement thereof may
be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(k) The Company has full power and authority to enter into the
Registration Rights Agreement; the Registration Rights Agreement has
been duly authorized by the Company and will conform, in all material
respects, to the description thereof contained in the Offering
Memorandum; and when executed and delivered by the Company (assuming
due authorization, execution and delivery by the Initial Purchaser)
will have been duly executed and delivered and will be a valid and
legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that the enforcement
thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing, and except,
with respect to the rights of indemnification and contribution
thereunder, where enforcement thereof may be limited by public policy.
(l) No stamp or other issuance taxes or duties are payable by or
on behalf of the Initial Purchaser as a consequence of the issue of
the Securities, the sale of the Notes to the Initial Purchaser and/or
the initial resale of the Securities to investors.
(m) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Offering Memorandum, any material loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and, since such date,
there has not been any change in the share capital (except for the
one-for-one conversion of shares of Series A Preferred Stock occurring
after August 2, 1999) or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity,
results of operations or prospects of the Company and its
subsidiaries, otherwise than as set forth in the Offering Memorandum.
(n) The consolidated financial statements of the Company (and
the related notes) set forth in the Offering Memorandum (including the
consolidated financial statements of the Company (and the related
notes) set forth in the
<PAGE>
6
Supplement) comply in all material respects with the requirements that
would be applicable to a registration statement on Form S-1 under the
Securities Act and were prepared in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") consistently
---------
applied throughout the periods involved and present fairly the
financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated (subject in the case of interim statements to normal year-
end audit adjustments). The financial information contained in the
Offering Memorandum (including that contained within the Supplement)
under the headings "Summary -- Summary Consolidated Financial and
Operating Data", "Capitalization", "Selected Consolidated Financial
and Operating Information", "Unaudited Pro Forma Consolidated
Financial Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are derived from the
accounting records of the Company and its subsidiaries and fairly
present the information purported to be shown thereby. The summary
financial and other data and selected financial and other data
included in the Offering Memorandum have been accurately extracted
from the financial statements of the Company. The pro forma financial
information contained in the Offering Memorandum has been prepared on
a basis consistent with the historical financial statements contained
in the Offering Memorandum (except for the pro forma adjustments
specified in the Offering Memorandum), includes all material
adjustments to the historical financial information required by Rule
11-02 of Regulation S-X under the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act") to reflect the transactions
-------------
described in the Offering Memorandum, gives effect to assumptions made
on a reasonable basis and fairly presents the historical and proposed
transactions contemplated by the Offering Memorandum and by the
Operative Documents. The other historical financial and statistical
information and data included in the Offering Memorandum (including
that contained within the Supplement) are, in all material respects,
fairly presented.
(o) Schitag Ernst & Young, AG and Grant Thornton S.p.A., who
have audited the consolidated financial statements of the Company and
Flashnet, respectively, whose reports appear in the Offering
Memorandum and who will deliver the initial letters referred to in
Section 4(p) hereof are each independent public accountants with
respect to the Company and Flashnet, respectively, within the meaning
of the Securities Act and the rules and regulations promulgated
thereunder.
(p) The Company and each of its subsidiaries has good and
marketable title to all personal property owned by them, subject to
such exceptions that, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the
financial position, results of operations, business or prospects of
the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and its subsidiaries. Neither the Company nor any of its subsidiaries
owns any title to real property or buildings, and all real property
and buildings held under lease by the Company
<PAGE>
7
and its subsidiaries are held by them under valid, subsisting and
enforceable leases, with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
(q) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as the
Company has reasonably concluded is sufficient based upon experience
and industry practice and is adequate for the conduct of their
respective businesses and the value of their respective properties.
(r) The Company and each of its subsidiaries own or possess
adequate rights to use all material intellectual property, including
without limitation, patents, inventions, processes, technology and
know-how, trade mark registrations, service mark registrations,
copyrights and works of authorship in any media, including computer
hardware, software, systems, databases, documentation, files and
Internet site content, trademarks, service marks, trade names, domain
names, URLs, e-mail addresses, logos, slogans and trade dress, trade
secrets and all confidential or proprietary information and materials,
and all related registrations, applications, recordings and licenses
("Intellectual Property") necessary for the conduct of their
---------------------
respective businesses except for such Intellectual Property the lack
of possession of which could not reasonably be expected to have a
material adverse effect on the financial position, results of
operations, business or prospects of the Company and its subsidiaries.
The Company has no reason to believe that its Intellectual Property
infringes, misappropriates or impairs ("Infringes"), or is being so
---------
Infringed by, the Intellectual Property of any third party, and has
not received any notice alleging such Infringement by any third party.
No legal or government proceeding is pending, and no law, ordinance,
rule, regulation, order, judgment or decree is pending that limits or
challenges the ownership, use, validity or enforceability of any
Intellectual Property owned or used by the Company or any of its
subsidiaries, and the Company has no knowledge of a valid basis for
any of the foregoing. The Company and each of its subsidiaries take
all reasonable steps to protect and maintain their Intellectual
Property (including any confidential Intellectual Property), and have
taken all necessary actions, made all necessary filings and paid all
necessary fees in connection with the foregoing. Any licenses,
sublicenses, royalty or other agreements concerning Intellectual
Property to which the Company or any of its subsidiaries is a party
are valid and in full force and effect, no party thereto is, or is
alleged to be in default thereunder, and no event exists that, with
notice or lapse of time or both, would constitute an event of default
thereunder or result in a right to accelerate, or loss of rights
thereunder, except for licences, sublicense, royalty or other
agreements the lack of validity or enforceability of which or the
default under which could not reasonably be expected to have a
material adverse effect on the financial position, results of
operations, business or prospects of the Company and its subsidiaries.
(s) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which
any property or asset
<PAGE>
8
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, might
reasonably be expected to have a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; and to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(t) Except as otherwise disclosed in the Offering Memorandum,
there are no business relationships or other related-party
transactions of the nature described in Item 404 of Regulation S-K of
the Commission ("Item 404") involving the Company or any other party
--------
referred to in Item 404, except for transactions that would be
considered immaterial under Item 404.
(u) No transaction or relationship exists which would have been
required to be described in the Offering Memorandum by the Securities
Act and the rules and regulations thereunder if such Offering
Memorandum were a prospectus included in a registration statement on
Form S-1 under the Securities Act, which is not so described.
(v) Except as disclosed in the Offering Memorandum, the Company
and its subsidiaries have duly filed with the appropriate taxing
authorities all tax returns, reports and other information required to
be filed through the date hereof and have paid all taxes due thereon,
except where (i) (A) extensions have been properly obtained or are
being contested in good faith and for which adequate reserves have
been provided for in accordance with U.S. GAAP and (B) such extensions
referred to in clause (i)(A) are disclosed in the Offering Memorandum
and (ii) the failure to so file or pay could not reasonably be
expected to have a material adverse effect on the financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; each such tax return, report or
other information was, when filed, accurate and complete in all
material respects; the Company has no knowledge of any tax deficiency
which, if determined adversely to the Company or any of its
subsidiaries, might reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(w) All interest payments payable on the Notes may be paid by
the Company in U.S. dollars and all dividends and other distributions
declared and payable on the Conversion Shares may be paid by the
Company in U.S. dollars and all such payments will not be subject to
income, withholding or other taxes under the laws and regulations of
the United States or Germany or any political subdivision or taxing
authority thereof or therein and will otherwise be free and clear of
any other tax, duty, withholding or deduction in the United States or
Germany or any political subdivision or taxing authority thereof or
therein and without the necessity of obtaining any governmental
authorization in the United States or Germany or any political
subdivision or taxing authority thereof or therein.
<PAGE>
9
(x) Since the date as of which information is given in the
Offering Memorandum through the Closing Date (except for the one-for-
one conversion of shares of Series A Preferred Stock occurring after
August 2, 1999 for Common Stock), and except as may otherwise be
disclosed in the Offering Memorandum, the Company has not (i) issued
or granted any securities, including, without limitation, any options
or warrants, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred
in the ordinary course of business, (iii) entered into any transaction
not in the ordinary course of business or (iv) declared or paid any
dividend on its issued share capital.
(y) There are no contracts or agreements between the Company and
any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to
any securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the securities to
be registered pursuant to the Registration Rights Agreement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act, other than
the Registration Rights Agreement among the Company, Lehman Brothers
International (Europe) ("Lehman") and the Initial Purchaser dated July
-------
8, 1999 with respect to the Compa ny's Senior Notes.
(z) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective Certificate of Incorporation or By-laws or
equivalent constitutive documents, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is
a party or by which it is bound or to which any of its properties or
assets is subject, other than such defaults which could not reasonably
be expected to have a material adverse effect on the financial
condition, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries or (iii) in violation in
any respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its properties or assets may be subject or
has failed to obtain any license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership
of its properties or assets or to the conduct of its business, other
than such violations or failures which could not reasonably be
expected to have a material adverse effect on the financial condition,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries.
(aa) The Company (i) makes and keeps books and records which are
accurate and complete in all material respects and (ii) maintains
internal accounting controls which provide reasonable assurance that
transactions are executed in accordance with management's
authorization, transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability
for its assets, access to its assets is permitted only in
<PAGE>
10
accordance with management's authorization and the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(bb) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or, to the Company's knowledge,
other person associated with or acting on behalf of the Company or any
of its subsidiaries, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee
from corporate funds, (iii) violated or is in violation of any
provision of the United States Foreign Corrupt Practices Act of 1977,
as amended, or (iv) made any bribe, rebate (other than legal price
concessions to customers in the ordinary course of business), payoff,
influence payment, kickback or other unlawful payment to any foreign
or domestic government official or employee.
(cc) The Company is not in violation in any respect of any
applicable environmental law, ordinance, rule, regulation, order,
judgment, decree or permit in any jurisdiction with respect to the
properties of the Company or any of its subsidiaries, other than such
violations which could not reasonably be expected, singularly or in
the aggregate, to have a material adverse effect on the financial
condition, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.
(dd) Except as described in the Offering Memorandum, there are no
material acquisitions of businesses or assets by the Company or any of
its subsidiaries pending or currently being negotiated.
(ee) No labor disturbance by employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is
imminent which might reasonably be expected to have a material adverse
effect on the financial position, stockholders' equity, results of
operations, business or prospects of the Company or its subsidiaries.
(ff) All computer hardware, software, databases, automated
systems and other computer and telecommunications equipment owned or
licensed by the Company or any of its subsidiaries can be used prior
to, during and after the calendar year 2000 and will operate during
each such time period and at least as effectively during each such
time period without material error relating to the processing,
calculating, comparing, sequencing or other use of date-related data
function (the foregoing ability, "Year 2000 Compliant"). The Company
-------------------
reasonably believes, after due inquiry, that suppliers, vendors,
customers or other material third parties used or served by the
Company and its subsidiaries are or will be Year 2000 Compliant in a
timely manner, except as would not have a material adverse effect on
the financial position, stockholders' equity, results of operations,
business prospects or operations of the Company and its subsidiaries.
The Company has no reason to believe, and does not believe, that there
are any issues related to the Company's ability to be Year 2000
Compliant that are of a character required to be described or referred
to in the Offering Memorandum.
<PAGE>
11
(gg) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States
Investment Company Act of 1940, as amended (the "Investment Company
------------------
Act"), nor is it a closed-end investment company required to be
---
registered, but not registered, thereunder; and the Company is not
and, after giving effect to the offering and sale of the Notes and the
application of the proceeds thereof as described in the Offering
Memorandum, will not be an "investment company" as defined in the
Investment Company Act and the rules and regulations of the Commission
thereunder.
(hh) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act including, without limitation, the
requirement that Notes have an "effective conversion premium" (as such
term is defined in Rule 144A) of ten percent or greater.
(ii) Neither the Company nor any subsidiary has incurred any
liability for a fee, commission, or other compensation on account of
the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(jj) Neither the Company nor any subsidiary has taken, directly
or indirectly, any action which is designed to or which has
constituted or which might reasonably have been expected to cause or
result in stabilization or manipulation of the price of any security
of the Company or which would otherwise be prohibited by Regulation M
under the Exchange Act in connection with the offering of the
Securities.
(kk) Neither the Company nor any of its affiliates, nor any agent
acting on its or their behalf has offered or sold or will offer or
sell any of the Securities (A) in the United States by means of any
form of general solicitation or general advertising within the meaning
of Rule 502(c) under the Securities Act, or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act or (B) with respect to any such Securities sold in reliance on
Rule 903 of Regulation S under the Securities Act, by means of any
directed selling efforts within the meaning of Rule 902(b) of
Regulation S. The Company, its affiliates and any agent acting on its
behalf will comply with any offering restrictions and other
requirements of Regulation S applicable to the transactions
contemplated hereby including those applicable to any exercise of the
Conversion Right. The Company has not entered, and will not enter,
into any contractual arrangement with respect to the distribution of
the Securities except for this Agreement and the agreements
contemplated hereby.
(ll) Neither the Company nor any of its Affiliates (as defined in
Rule 501(b) of Regulation D promulgated under the Securities Act) has
directly, or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any "security"
(as defined in the Securities Act) which
<PAGE>
12
is or will be integrated with the sale of Securities in a manner that
would require the registration under the Securities Act of the
Securities.
(mm) The Company owns no capital stock of, or other equity
interests in, any Person (as defined in the Indenture), other than all
of the issued and outstanding share capital of Cybernet Internet-
Dienstleistungen AG ("Cybernet AG"), Flashnet S.p.A. ("Flashnet"),
----------- --------
Vianet Telekommunikations AG ("Vianet"), Cybernet E-Commerce GmbH
------
("Cybernet E-Commerce") and Carolin Verwaltungsgesellschaft mBH
-------------------
("Carolin") and 51% of the issued and outstanding share capital of
-------
Sunweb AG; none of Cybernet AG, Flashnet, Vianet, Cybernet E-Commerce,
Carolin and Sunweb AG owns any capital stock of, or other equity
interests in, any Person, except that (i) Cybernet AG owns all the
issued and outstanding share capital of Open:Net Internet Solutions
GmbH ("Open:Net") and of Cybernet Internet Beteiligungs GmbH
--------
("Cybernet GmbH") and 66% of the issued and outstanding share capital
-------------
of Eclipse s.r.l. ("Eclipse") and (ii) Sunweb AG owns all the issued
-------
and outstanding share capital of Sunweb Internet Services GmbH
("Sunweb GmbH"). Open:Net, Cybernet GmbH, Eclipse
-----------
and Sunweb GmbH do not own any capital stock of, or other equity
interests in, any Person.
(nn) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
-----
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
----
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(oo) The Company and its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have
made all declarations and filings with, the appropriate federal, state
or foreign regulatory agencies or bodies which are necessary or
desirable for the ownership of their respective properties or the
conduct of their respective businesses as described in the Offering
Memorandum, except where the failure to possess or make the same would
not, singularly or in the aggregate, have a material adverse effect on
the financial position, stockholders' equity, results of operations,
business prospects or operations of the Company and its subsidiaries,
and neither the Company nor any subsidiary has received notification
of any revocation or modification of any such license, certificate,
authorization or permit or has any reason to believe that any such
license, certificate, authorization or permit will not be renewed in
the ordinary course.
<PAGE>
13
(pp) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance of the Securities or suspends the
sale of the Securities in any jurisdiction; no injunction, restraining
order or order of any nature by any foreign or U.S. federal or state
court of competent jurisdiction has been issued with respect to the
Company which would prevent or suspend the issuance or sale of the
Securities or the use of the Offering Memorandum in any jurisdiction;
no action, suit or proceeding is pending against or, to the best
knowledge of the Company, threatened against or affecting the Company
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, which could reasonably be expected to
interfere with or adversely affect the issuance of the Securities or
in any manner draw into question the validity or enforceability of any
of the Operative Documents or any action taken or to be taken pursuant
thereto; and the Company has complied with any and all requests by any
securities authority in any jurisdiction for additional information to
be included in the Offering Memorandum.
(qq) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Offering Memorandum (including forward looking
statements in the Supplement) has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(rr) The Company has filed on a timely basis with the Commission,
to the extent required, (i) all annual and quarterly financial
statements and other information required to be contained in a filing
with the Commission on Forms 10-K and 10-Q and (ii) all current
reports required to be filed with the Commission on Form 8-K.
2. Purchase, Sale and Delivery of Securities. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Initial
Purchaser, and the Initial Purchaser agrees to purchase from the Company, the
number of Notes set forth opposite the Initial Purchaser's name on Schedule I
hereto at a purchase price of $534.78 per Note, plus accrued interest, if any,
from August 26, 2004, to the Closing Date.
The Company will deliver, against payment of the purchase price, Notes
in the form of one or more certificates in global or definitive form. If the
Notes are offered in global form, beneficial interests in the Notes will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by The Depository Trust Company ("DTC") and its
---
participants, including, as applicable, Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System, and Cedelbank,
societe anonyme. Payment for the Notes shall be made by or on behalf of the
Initial Purchaser in same day funds by wire transfer to an account previously
designated to the Initial Purchaser by the Company at a bank reasonably
acceptable to the Initial Purchaser at 4:00 p.m. (London time), on August 26,
1999, or at such other time not later than seven full business days thereafter
as the Initial Purchaser and the Company determine, such time being herein
referred to as the "Closing Date",
------------
<PAGE>
14
against delivery at the office of Simpson Thacher & Bartlett (London) at least
24 hours prior to the Closing Date to the Trustee.
3. Representations by Initial Purchaser; Resale by Initial
Purchaser.
(a) The Initial Purchaser represents and warrants to the
Company that it is an "accredited investor" within the meaning of
Regulation D under the Securities Act.
(b) The Initial Purchaser acknowledges that the Securities
have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Rule 144A or
Regulation S or pursuant to another exemption from the registration
requirements of the Securities Act. The Initial Purchaser represents
and agrees that it has offered and sold the Securities and will offer
and sell the Securities (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the date of
commencement of the Offering and the Closing Date, only in accordance
with Rule 903 or Rule 144A under the Securities Act ("Rule 144A").
---------
Accordingly, neither the Initial Purchaser nor its affiliates, nor any
persons acting on its behalf, have engaged or will engage in any
directed selling efforts with respect to the Securities, and the
Initial Purchaser, its affiliates and all persons acting on its behalf
have complied and will comply with the offering restrictions
requirement of Regulation S. The Initial Purchaser agrees that, at or
prior to confirmation of sale of the Notes other than a sale pursuant
to Rule 144A, the Initial Purchaser will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases the Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or
(ii) otherwise until 40 days after the date of the
commencement of the offering and the closing date, except in
either case in accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used above have
the meanings given to them by Regulation S."
Terms used in this subsection (b) have the meanings given to
them by Regulation S.
(c) The Initial Purchaser agrees that it and each of its
affiliates have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Securities except
with the prior written consent of the Company.
(d) The Initial Purchaser and each of its affiliates has
not solicited offers for nor offered or sold and each agrees that it
will not solicit offers for nor offer
<PAGE>
15
or sell the Securities in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, including, but not limited to, (i)
any advertising, article, notice or other communication published in
any newspaper, magazine or similar media or broadcast over television
or radio or (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. The
Initial Purchaser agrees, with respect to initial resales made in
reliance on Rule 144A of any of the Securities, to deliver either with
the confirmation of such initial resale or otherwise prior to
settlement of such initial resale a notice (which may be included in
the Offering Memorandum) to the effect that the initial resale of such
Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) The Initial Purchaser represents and agrees that it (i)
has not solicited, and will not solicit, offers to purchase any of the
Securities from, (ii) has not sold, and will not sell, any of the
Securities to, and (iii) has not distributed, and will not distribute,
the Offering Memorandum to any person or entity in any jurisdiction
outside of the United States except, to the best of the Initial
Purchaser's knowledge and belief, in compliance in all material
respects with all applicable laws. For the purpose of this Agreement,
"United States" means the United States of America, its territories,
-------------
its possessions and other areas subject to its jurisdiction.
4. Further Agreements of the Company. The Company agrees as follows:
(a) The Company will advise the Initial Purchaser promptly
of any proposal to amend or supplement the Offering Memorandum and
will not effect such amendment or supplement to which the Initial
Purchaser shall reasonably object after being given notice thereof and
reasonable time for review. If, at any time prior to completion of the
resale of the Notes by the Initial Purchaser, any event shall occur or
condition exist as a result of which it is necessary, in the opinion
of counsel for the Initial Purchaser or counsel for the Company, to
amend or supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time it is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Offering Memorandum to comply
with applicable law, to promptly prepare such amendment or supplement
as may be necessary to correct such untrue statement or omission or so
that the Offering Memorandum, as so amended or supplemented, will
comply with applicable law. Neither the Initial Purchaser's consent
to, nor its delivery to offerees or investors of, any such amendment
or supplement shall constitute a waiver of any of the conditions set
forth in Section 6.
(b) The Company will furnish to the Initial Purchaser
copies of the Offering Memorandum (and all amendments and supplements
thereto) as soon as available and in such quantities as the Initial
Purchaser shall reasonably
<PAGE>
16
request for internal use and for distribution to prospective
purchasers, and the Company will furnish to the Initial Purchaser as
soon as practicable four copies of the Offering Memorandum (including
four copies of the Supplement), each signed by a duly authorized
officer of the Company, one of which will include the independent
accountants' reports therein manually signed by such independent
accountants. For so long as any of the Securities are outstanding, if
the Company is ever not subject to Section 13 or 15(d) of the Exchange
Act and is not exempt from reporting pursuant to Rule 12g3-2(b) under
the Exchange Act, the Company will promptly furnish or cause to be
furnished to the Initial Purchaser and the holders of the Securities,
and, upon request of prospective purchasers of the Securities, to such
purchasers, copies of the information required to be delivered to
holders and prospective purchasers of the Securities pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection
with resales by such holders of the Securities. The Company will pay
the expenses of printing and distributing to the Initial Purchaser all
such documents.
(c) The Company will file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission
and whether or not the Company has a class of securities registered
under the Exchange Act, (i) all annual and quarterly financial
statements and other financial information required to be contained in
a filing with the Commission on Forms 10-K and 10-Q (which financial
statements shall be prepared in accordance with U.S. GAAP), including
a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual financial
information, a report thereon by the Company's certified independent
accountants and (ii) all current reports required to be filed with the
Commission on Form 8-K. Such quarterly financial information shall be
filed with the Commission within 45 days following the end of each
fiscal quarter of the Company, and such annual financial information
shall be furnished within 90 days following the end of each fiscal
year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed
by the Company under Item 101(d) of Regulation S-K under the
Securities Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder, without cost to such holder,
copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission
or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if
filing such reports and documents with the Commission is not accepted
by the Commission or is prohibited under the Exchange Act, to supply
at the Company's cost copies of such reports and documents to any
prospective holder promptly upon request.
(d) The Company will promptly from time to time exercise
best efforts to take such action as the Initial Purchaser may
reasonably request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Initial
Purchaser may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as
long as
<PAGE>
17
may be necessary to complete the resale of the Notes; provided,
however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to take any action
that would subject it to general consent to service of process in any
jurisdiction (other than pursuant to an Operative Document) in which
it is not now so subject or otherwise subject itself to taxation in
any jurisdiction in which it is not otherwise so qualified or subject.
(e) Until the second anniversary of the Closing Date, the
Company will, upon request, furnish to the Initial Purchaser and any
holder of Securities, a copy of the restrictions on transfer which the
Company believes are applicable to the Securities; provided, however,
that nothing contained herein shall obligate the Company to track or
trace particular Securities held by anyone other than the Company or
any of its affiliates (as defined in Rule 144 under the Securities
Act).
(f) In connection with the offering, until the Initial
Purchaser shall have notified the Company of the completion of the
resale of the Notes, neither the Company nor any of its affiliates
have bid for or purchased or will bid for or purchase, either alone or
with one or more other persons, for any account in which they or any
of their affiliates have a beneficial interest any Notes nor have they
attempted or will they attempt to induce any person to purchase any
Notes; and neither they nor any of their affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Notes.
(g) For a period of 90 days after the date hereof, neither
the Company nor any of its direct or indirect subsidiaries will (i)
offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any debt securities issued or guaranteed by
the Company or any such subsidiary and having a maturity of more than
one year from the date of issue other than pursuant to obligations
under registration rights agreements or (ii) directly or indirectly,
offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to,
result in the disposition or purchase by any person at any time in the
future of) any shares of Common Stock (other than shares issued
through private placements in connection with the acquisition of the
capital stock or assets of another company, shares issued pursuant to
employee benefit plans, qualified stock option plans or other employee
compensation plans existing on the date hereof or pursuant to
currently outstanding options, warrants or rights), or sell or grant
options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to option plans existing on
the date hereof), in each case, without the prior written consent of
the Initial Purchaser. Neither the Company nor any of its direct or
indirect subsidiaries will at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, pledge, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act or the safe harbor of Regulation S thereunder to cease
to be applicable to the offer and sale of the Securities.
<PAGE>
18
(h) The Company will indemnify and hold harmless the
Initial Purchaser against any documentary, stamp or similar issuance
tax, including any interest and penalties, on the creation, issuance
and sale of the Securities and on the initial resale thereof by the
Initial Purchaser and on the execution and delivery of this Agreement.
All payments to be made by the Company hereunder shall be made without
withholding or deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless the Company is
compelled by law to deduct or withhold such taxes, duties or charges.
In that event, the Company shall pay such additional amounts as may be
necessary in order that the net amounts received after such
withholding or deduction shall equal the amounts that would have been
received if no withholding or deduction had been made.
(i) The Company will apply the net proceeds from the sale
of the Notes as set forth in the Offering Memorandum under the caption
"Use of Proceeds."
(j) Between the date hereof and the Closing Date (both
dates inclusive), the Company will notify and consult with the Initial
Purchaser, and cause its subsidiaries and all other parties acting on
its or their behalf to notify and consult with the Initial Purchaser,
prior to issuing any announcement which could be material in the
context of the distribution of the Securities.
(k) The Company will promptly inform the Initial Purchaser
of any communications received by it from any governmental or
regulatory agency or authority, including, without limitation, any
German or Italian regulatory authority, any relevant stock exchange or
trading market (including the Freiverkehr of the Frankfurt Stock
Exchange), or the Commission, relating to the offering of the
Securities and to furnish the Initial Purchaser with copies thereof.
(l) The Company will take such steps as shall be necessary
to ensure that neither the Company nor any subsidiary shall become an
"investment company" within the meaning of such term under the
Investment Company Act and the rules and regulations of the Commission
thereunder.
(m) The Company will not take, directly or indirectly, any
action which is designed to stabilize or manipulate, or which
constitutes or which might reasonably be expected to cause or result
in stabilization or manipulation, of the price of any security of the
Company in connection with the offering of the Securities.
(n) Upon request by the Initial Purchaser, the Company will
apply to list the Notes or have them admitted for trading on an
internationally recognized stock exchange or over-the-counter trading
market and will use its best efforts to ensure that such application
is accepted.
(o) The Company will use its best efforts to cause the
Notes to be eligible for inclusion in the Private Offerings, Resale
and Trading through Automated Linkages Market of The Nasdaq Stock
Market, Inc. (the "PORTAL Market").
-------------
<PAGE>
19
(p) The Company will cause each of Schitag Ernst & Young,
AG and Grant Thornton S.p.A. to deliver an initial comfort letter,
dated the date hereof, to the Initial Purchaser in form and substance
reasonably satisfactory to the Initial Purchaser at or prior to the
time copies of the Offering Memorandum (including the Supplement) are
furnished to the Initial Purchaser.
(q) The Company will prepare the Offering Memorandum
(including the Supplement) on or prior to the Closing Date in form and
substance reasonably satisfactory to the Initial Purchaser. The
Supplement shall contain Consolidated Statements of Loss and
Comprehensive Loss and Consolidated Statements of Cash Flows, each as
of and for the six months ended June 30, 1998 and 1999, Consolidated
Balance Sheets as of the year ended December 31, 1998 and the six
months ended June 30, 1999, a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" comparing the six
months ended June 30, 1999 with the six months ended June 30, 1998 and
pro forma consolidated financial information for the Company as of and
for the six months ended June 30, 1999 reflecting, among other
transactions, the acquisition of Flashnet.
5. Expenses. The Company agrees, to pay: (a) the costs incident to
the authorization, issuance, registration (as set forth in the Registration
Rights Agreement), sale and delivery of the Securities and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and
distributing of the Offering Memorandum and any amendment or supplement thereto,
all as provided in this Agreement; (c) any fees charged by investment rating
agencies for the rating of the Securities; (d) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(d) and of preparing, printing and distributing a Blue
Sky Memorandum (including reasonable related fees and expenses of counsel to the
Initial Purchaser); (e) the costs of preparing certificates evidencing the
Securities; (f) all expenses and fees in connection with the application for
inclusion of the Securities in the PORTAL Market, and the obtaining of any
approval from any relevant authority in Germany or any other country in which
the securities are listed or admitted for trading on a stock exchange or over-
the-counter trading market; (g) the fees and expenses (including fees and
disbursements of counsel) of the Trustee; (h) the fees and expenses of any
Authorized Agent (as defined in Section 15 hereof); (i) the cost and charges of
any transfer agent or registrar; (j) all stamp or other issuance or transfer
taxes or governmental duties, if any, payable by the Initial Purchaser in
connection with the offer and sale of the Notes to the Initial Purchaser; and
(k) all other costs and expenses incident to the performance of the obligations
of the Company under this Agreement not otherwise specifically provided for in
this Section, including, without limitation, the fees and expenses of Schitag
Ernst & Young, AG, the Company's independent accountants, and Grant Thornton
S.p.A., Flashnet's independent accountants, and the fees and expenses of Powell,
Goldstein, Frazer & Murphy LLP, U.S. counsel to the Company, Besner Kreifels
Weber, German counsel to the Company, Avv. Fausto D'Ambrosio, Italian counsel to
the Company, and Dr. Thomas Herndl, Austrian counsel to the Company, provided
that, except as provided in this Section 5 and in Section 9, the Initial
Purchaser shall pay its own costs and expenses and any transfer taxes on the
Securities which it may sell.
<PAGE>
20
6. Conditions of the Initial Purchaser's Obligations. The several
obligations of the Initial Purchaser hereunder are subject to the accuracy, when
made and on the Closing Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto (including
the Supplement) contains any untrue statement of a fact which, in the
opinion of counsel to the Initial Purchaser, is material or omits to
state any fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.
(b) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement,
the Indenture, the Registration Rights Agreement, the Offering
Memorandum or any amendment or supplement thereto (including the
Supplement), and all other legal matters relating to this Agreement,
the Indenture, the Registration Rights Agreement and the transactions
contemplated hereby and thereby shall be reasonably satisfactory in
all material respects to counsel to the Initial Purchaser, and the
Company, shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
(c) Powell, Goldstein, Frazer & Murphy LLP shall have
furnished to the Initial Purchaser its written opinion, as U.S.
counsel to the Company, addressed to the Initial Purchaser and dated
the Closing Date, in form and substance satisfactory to the Initial
Purchaser, to the effect that:
(i) The Company has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the State of Delaware, is duly qualified to do
business and is in good standing as a foreign corporation in
each U.S. jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such
qualification, and has all power and authority necessary to
own or hold its properties and conduct the businesses in
which it is engaged;
(ii) The Company has an authorized capitalization
as set forth in the Supplement and all of the issued shares
of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and
conform to the description thereof contained in the Offering
Memorandum;
(iii) To the best of such counsel's knowledge
there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or
of which any property or assets of the Company or any of its
subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, might have a
<PAGE>
21
material adverse effect on the financial position,
stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(iv) The Company has full right, power and
authority to execute and deliver each of the Operative
Documents and to perform its obligations thereunder; and all
corporate action required to be taken for the due and proper
authorization, execution and delivery of each of the
Operative Documents and the consummation of the transactions
contemplated thereby has been duly and validly taken;
(v) Each of the Operative Documents is in
proper legal form for the enforcement thereof against the
Company without further action on the part of the Initial
Purchaser, the holders of the Securities, or the Trustee;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Initial
Purchaser, constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement
thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of
good faith and fair dealing, and except, with respect to the
rights of indemnification and contribution thereunder, where
enforcement thereof may be limited by public policy;
(vii) The Indenture has been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery of the Indenture by
the Trustee, constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing;
(viii) The Indenture conforms in all material
respects with the requirements of the Trust Indenture Act
and the rules and regulations of the Commission applicable
to an indenture eligible to be qualified thereunder;
<PAGE>
22
(ix) The Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and,
assuming due authorization, execution and delivery of the
Registration Rights Agreement by the Initial Purchaser,
constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with
its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) or an implied covenant of good faith and
fair dealing, and except, with respect to the rights of
indemnification and contribution thereunder, where
enforcement thereof may be limited by public policy;
(x) The certificates used to evidence the
Notes are in due and proper form and comply with all
applicable statutory requirements of U.S. federal, Delaware
and New York law;
(xi) The Notes have been duly authorized,
executed and delivered by the Company and, assuming due
authentication thereof by the Trustee, upon payment and
delivery in accordance with this Agreement and the
Indenture, will be duly and validly issued and outstanding
and will constitute valid and legally binding obligations of
the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent, conveyance,
reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general
equitable principles (whether in a proceeding in equity or
at law) or an implied covenant of good faith and fair
dealing;
(xii) The Conversion Shares have been duly
authorized and, when issued in accordance with the terms and
conditions contained in the Indenture upon conversion of the
Notes into Common Stock, will be validly issued in
accordance with the laws of the State of Delaware and the
provisions of the Certificate of Incorporation and By-laws
of the Company and will be fully paid and nonassessable and
holders of such Conversion Shares will have no other
liability for any debt or other obligation of the Company
towards third parties in their capacity as holders of such
Conversion Shares; such Conversion Shares, when issued, will
not be subject to any preemptive or similar rights and will
be free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability;
(xiii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the
voting or transfer of, any shares of the Common Stock or
pursuant to the Company's Certificate of
<PAGE>
23
Incorporation or By-Laws or any agreement or other
instrument known to such counsel;
(xiv) There are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by
such person or to require the Company to include such
securities in the securities to be registered pursuant to
the Registration Rights Agreement or in any securities being
registered pursuant to any other registration statement
filed by the Company under the Securities Act other than the
Registration Rights Agreement among the Company, Lehman and
the Initial Purchaser dated July 8, 1999 with respect to the
Company's Senior Notes.
(xv) The execution, delivery and performance of
the Operative Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries
pursuant to, any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or
instrument to which the Company or any of its subsidiaries
is subject, nor will such actions result in any violation of
(A) the provisions of the Certificate of Incorporation or
By-laws or equivalent constitutive documents of the Company
or any of its subsidiaries, (B) any existing applicable law,
rule or regulation of any court or governmental agency or
body of the United States or the State of New York or any
Delaware governmental agency or body acting pursuant to the
Delaware General Corporation Law (other than state
securities or Blue Sky laws as to which we have not been
requested to express any opinion) or (C) any order, known to
such counsel, of any government, governmental
instrumentality or court of the United States or the State
of New York having jurisdiction over the Company or any of
its properties or assets or any Delaware governmental agency
or body acting pursuant to the Delaware General Corporation
Law;
(xvi) No consent, approval, authorization,
order, registration or qualification of or with any court or
governmental agency or body of the United States or the
State of New York or any Delaware governmental agency or
body acting pursuant to the Delaware General Corporation Law
is required for the consummation of the transactions
contemplated by the Operative Documents in connection with
the issuance or sale of the Notes by the Company (assuming
compliance with the terms of the Operative Documents by the
parties thereto), except, with respect to the transactions
contemplated by the Registration Rights Agreement, as may be
required under the Securities Act, the Trust Indenture Act
and the
<PAGE>
24
rules and regulations of the Commission thereunder, and
otherwise except as may be required by state or foreign
securities or Blue Sky laws (as to which such counsel
expresses no opinion);
(xvii) The descriptions in the Offering
Memorandum of statutes, legal and governmental proceedings
and contracts and other documents are accurate in all
material respects to the extent the foregoing concern the
federal laws of the United States, the laws of the State of
New York and the Delaware General Corporation Law; the
statements set forth in the Offering Memorandum under the
caption "Description of the Notes," insofar as such
statements purport to constitute a summary of the terms of
the Indenture and the Registration Rights Agreement, fairly
summarize such terms, agreements and other documents in all
material respects; and the statements set forth in the
Offering Memorandum under the caption "Certain United States
Federal Income Tax Consequences" insofar as they purport to
constitute summaries of matters of U.S. federal income tax
law and legal conclusions with respect thereto constitute
accurate summaries of the matters described therein all
material respects;
(xviii) The Company is not an open-end investment
company, unit investment trust or face-amount certificate
company that is or is required to be registered under
Section 8 of the Investment Company Act, nor is it a closed-
end investment company required to be registered, but not
registered, thereunder; and the Company is not and, after
giving effect to the offering and sale of the Notes and the
application of the proceeds thereof as described in the
Offering Memorandum, will not be an "investment company" as
defined in the Investment Company Act and the rules and
regulations of the Commission thereunder;
(xix) No New York State or any New York City
stamp or documentary taxes payable by or on behalf of the
Initial Purchaser or the Company are required to be paid
with respect to the execution of the Indenture and the
authorization, issuance, sale and delivery of the Securities
to the Initial Purchaser in the manner contemplated by this
Agreement;
(xx) The Company can sue and be sued in its own
name;
(xxi) The Company has, pursuant to Section 15 of
this Agreement, legally, validly and irrevocably submitted
to the personal jurisdiction of any state or federal court
located in the Borough of Manhattan, The City of New York,
New York in any action arising out of or relating to this
Agreement or the transactions contemplated thereby, and has
legally, validly and effectively appointed the Authorized
Agent as its authorized agent for the purposes described in
Section 15 of this Agreement;
<PAGE>
25
(xxii) The Securities satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act;
(xxiii) Neither the Company nor any of its
Affiliates (as defined in Rule 501(b) of Regulation D
promulgated under the Securities Act) has directly, or
through any agent, sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any "security"
(as defined in the Securities Act) which is or will be
integrated with the sale of Securities in a manner that
would require the registration under the Securities Act of
the Securities; and
(xxiv) No registration of the Securities under
the Securities Act, and no qualification of an indenture
under the Trust Indenture Act, is required in connection
with the offer and sale of the Notes by the Company to the
Initial Purchaser or in connection with the initial resale
of the Notes by the Initial Purchaser in the manner
contemplated in this Agreement and the Offering Memorandum.
Such counsel shall also have furnished to the Initial
Purchaser a written statement, addressed to the Initial Purchaser and
dated the Closing Date, in form and substance satisfactory to the
Initial Purchaser, to the effect that (i) the Offering Memorandum
(including the Supplement) conforms in all material respects to the
requirements of, and contains all information that would be required
to be presented by, the Securities Act and the rules and regulations
promulgated thereunder that would have been applicable thereto if such
Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act, however, had the
Company submitted the Offering Memorandum to the staff of the
Commission, there may have been comments from the staff requiring
amendments before the offer document was declared effective, and (ii)
(x) such counsel has acted as counsel to the Company in connection
with the preparation of the Offering Memorandum (including the
Supplement) and (y) based on the foregoing, no facts have come to the
attention of such counsel which gave it reason to believe that the
Offering Memorandum (including the Supplement) (other than the
financial statements, statistical and other financial data contained
therein or omitted therefrom, as to which such counsel has not been
requested to comment), as of its date or the Closing Date, contained
or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in
light of circumstances under which they were made, not misleading. The
foregoing opinion and statement may be qualified by a statement to the
effect that such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum except for the statements made in the Offering
Memorandum under the captions "Description of the Notes" and "Certain
United States Federal Income Tax Consequences" insofar as such
statements relate to the provisions of the Securities, this Agreement,
the Indenture, and the Registration Rights Agreement or concern legal
matters.
<PAGE>
26
In rendering such opinion, such counsel may (i) state that
its opinion is limited to matters governed by the federal laws of the
United States of America, the laws of the State of New York and the
General Corporation Law of the State of Delaware (and may contain such
assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchaser) and (ii) rely (to the extent such
counsel deems proper and specifies in its opinion) as to matters
involving the application of the laws of Germany, Italy and Austria
upon the opinions of Besner Kreifels Weber, Avv. Fausto D'Ambrosio and
Dr. Thomas Herndl, respectively, referred to in Sections 6(d)(1), (2)
and (3) below.
(d) (1) Besner Kreifels Weber shall have furnished to the
Initial Purchaser its written opinion, as German counsel to the
Company, addressed to the Initial Purchaser and dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to
the effect that:
(i) Each of Cybernet AG, Cybernet GmbH, Cybernet
E-Commerce, Carolin and Open:Net (the "German Subsidiaries")
-------------------
has been duly incorporated and is validly existing as a
corporation (and, in the case of Cybernet E-Commerce, is a
limited partnership validly existing as a limited
partnership) in good standing under the laws of Germany, is
duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its
business requires such qualification and has all power and
authority necessary to own or hold its properties and
conduct the businesses in which it is engaged;
(ii) All of the issued shares of capital stock of
the German Subsidiaries have been duly and validly
authorized and issued and are fully paid, nonassessable and
are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(iii) To the best of such counsel's knowledge and
other than as set forth in the Offering Memorandum there are
no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which
any property or asset of the Company or any of its
subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries might have a
material adverse effect on the consolidated financial
position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries;
and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) The execution, delivery and performance of
the Operative Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and
thereby, do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or
<PAGE>
27
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries
pursuant to, any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or
instrument to which the Company or any of its subsidiaries
is subject, nor will such actions result in any violation of
(A) the provisions of the Articles of Association or bylaws
or equivalent constitutive documents of any of the German
Subsidiaries, (B) any existing applicable law, rule or
regulation of any court or governmental agency or body of
Germany or (C) any order, known to such counsel, of any
government, governmental instrumentality or court of Germany
having jurisdiction over the Company or any of its
properties or assets;
(v) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body of Germany or any political
subdivision thereof is required for the consummation of the
transactions contemplated by the Operative Documents in
connection with the issuance or sale of the Notes by the
Company (assuming compliance with the terms of the Operative
Documents by the parties thereto), except, with respect to
the transactions contemplated by the Registration Rights
Agreement;
(vi) Under German law, the Company would be deemed to
have had sufficient contacts with the United States and
would be recognized as a validly existing Delaware
corporation and as the holding company and owner of all the
issued shares of capital stock of Cybernet AG and the other
German Subsidiaries.
(vii) The descriptions in the Offering Memorandum of
statutes, legal and governmental proceedings and contracts
and other documents are accurate in all material respects to
the extent the foregoing concern the laws of Germany; the
statements set forth in the Offering Memorandum under the
captions "Risk Factors -- There May be Questions about our
Status Under German Law," "Risk Factors -- We Are Subject to
Regulation" and "Business -- Regulation," to the extent that
they constitute summaries of matters of German law or
regulation or legal conclusions, fairly summarize the
matters described therein in all material respects;
(viii) Any judgment obtained in a United States federal
or state court of competent jurisdiction sitting in New York
City arising out of or in relation to the obligations of the
Company under the Operative Documents would be enforced
against the Company in the courts of Germany without
substantive reexamination or relitigation on the merits of
the subject matter thereof;
(ix) The Initial Purchaser would be permitted to
commence proceedings against the Company in German courts
based on this Agreement, and the holders of Notes and
Conversion Shares (or the
<PAGE>
28
Trustee acting on their behalf) (the "Holders") would be
-------
permitted to commence proceedings against the Company in
German courts based on the Operative Documents (to the
extent that such Initial Purchaser and Holders have direct
contractual rights against the Company under such Operative
Documents, Notes, or Conversion Shares, as appropriate,
which arise as a result of valid and binding obligations of
the Company under such documents in accordance with the laws
of the State of New York), and such German courts would
recognize the choice of law provisions of the Operative
Documents;
(x) Under German law, the agreement of the Company
that Operative Documents shall be governed by the laws of
the State of New York will, if it constitutes a binding
agreement under the laws of the State of New York, be
recognized by the courts of Germany;
(xi) The indemnification and contribution provisions
set forth in Section 7 herein do not contravene the public
policy or laws of Germany;
(xii) Under German law, the submission by the Company
to the jurisdiction of the United States federal or New York
state courts sitting in New York City set forth in each of
the Operative Documents, is enforceable against the Company,
and service of process effected in the manner set forth in
the Operative Documents, assuming validity under the laws of
the State of New York, will be effective, insofar as German
law is concerned;
(xiii) All real property and buildings held under lease
by the Company and the German Subsidiaries are held by them
under valid subsisting and enforceable leases; and
(xiv) No stamp, registration or other similar taxes or
duties are payable in Germany by or on behalf of the Initial
Purchaser upon or in connection with the sale and delivery
to or by the Initial Purchaser of the Notes as contemplated
by the Offering Memorandum, and it is not necessary, prior
to the Initial Purchaser seeking enforcement of any of the
Operative Documents in Germany, that any stamp or similar
tax be paid.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by German law (and may contain
such assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchaser) and shall state that each of
Powell, Goldstein, Frazer & Murphy LLP and Simpson Thacher & Bartlett
may rely upon its opinion with respect to matters of German law.
(2) Avv. Fausto D'Ambrosio, Italian counsel to the Company,
shall have furnished to the Initial Purchaser its written opinion,
addressed to the Initial
<PAGE>
29
Purchaser and dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser, to the effect that:
(i) Flashnet and Eclipse (the "Italian Subsidiaries")
--------------------
have been duly incorporated and are validly existing as
corporations in good standing under the laws of Italy, are
duly qualified to do business and are in good standing as
foreign corporations in each jurisdiction in which their
ownership or lease of property or the conduct of their
businesses requires such qualification and have all power
and authority necessary to own or hold their properties and
conduct the businesses in which they are engaged; and
(ii) All of the issued shares of capital stock of the
Italian Subsidiaries have been duly and validly authorized
and issued and are fully paid and nonassessable; and all of
the issued shares of capital stock of Flashnet and 66% of
the issued shares of capital stock of Eclipse are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Italian law (and may contain
such assumptions and qualifications as are satisfactory in form and
substance to the Initial Purchaser) and shall state that each of
Powell, Goldstein, Frazer & Murphy LLP and Simpson Thacher & Bartlett
may rely upon its opinion with respect to matters of Italian law.
(3) Dr. Thomas Herndl, Austrian counsel to the Company,
shall have furnished to the Initial Purchaser its written opinion
addressed to the Initial Purchaser and dated the Closing Date, in form
and substance satisfactory to the Initial Purchaser, to the effect
that:
(i) Vianet has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Austria, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of
its businesses requires such qualification and has all power
and authority necessary to own or hold its properties and
conduct the businesses in which it is engaged; and
(ii) All of the issued shares of capital stock of
Vianet have been duly and validly authorized and issued and
are fully paid and nonassessable and are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by Austrian law (and may
contain such assumptions and qualifications as are satisfactory in
form and substance to the Initial Purchaser) and shall state that each
of Powell, Goldstein, Frazer & Murphy LLP
<PAGE>
30
and Simpson Thacher & Bartlett may rely upon its opinion with respect to
matters of Austrian law.
(e) The Trustee shall have furnished to the Initial Purchaser an
officer's certificate, dated the Closing Date, in form and substance
satisfactory to the Initial Purchaser to the effect that (i) the Indenture
has been duly authorized, executed and delivered by the Trustee, (ii) each
person who, on behalf of the Trustee, executed and delivered the Indenture
was at the date thereof and is now duly elected, appointed or authorized,
qualified and acting as an officer or authorized signatory of the Trustee
and duly authorized to perform such acts at the respective times of such
acts and the signatures of such persons appearing on such document are
their genuine signatures and (iii) such other matters reasonably requested
by the Initial Purchaser to be included in such officer's certificate.
Attached to such officer's certificate shall be an extract of the bylaws of
the Trustee, duly adopted by its Board of Directors, respecting the signing
authority of the persons mentioned in clause (ii) above and a letter from
an officer of the Trustee authorizing, pursuant to such bylaws, such
signing authority, which bylaws and letter at the Closing Date are in full
force and effect.
(f) With respect to the letter of Schitag Ernst & Young, AG delivered
to the Initial Purchaser and dated the date hereof referred to in Section
4(p) (as used in this paragraph, the "initial letter"), the Company shall
--------------
have furnished to the Initial Purchaser a letter (as used in this
paragraph, the "bring-down letter") of such accountants, addressed to the
-----------------
Initial Purchaser and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of such bring-down letter (or,
with respect to matters involving changes or developments since the date as
of which specified financial information is given in the Offering
Memorandum, as of a date not more than five days prior to the date of each
such bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its
initial letter and (iii) confirming in all material respects the
conclusions and findings set forth in its initial letter.
(g) The Company shall have furnished to the Initial Purchaser a
certificate, dated the Closing Date, of Andreas Eder, Chairman, President
and Chief Executive Officer, and Robert Eckert, Chief Financial Officer and
Treasurer, stating, on behalf of the Company, that:
(1) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the Closing Date; and
the Company has complied with all its agreements contained herein;
and
(2) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Memorandum (A) any loss or interference with
its business from fire, explosion, flood or other calamity, whether
or not covered by
<PAGE>
31
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Offering
Memorandum or (B) any change in the share capital (except for the
one-for-one conversion of shares of Series A Preferred Stock
occurring after August 2, 1999 for Common Stock) or long-term debt of
the Company or any of its subsidiaries or any change in or generally
affecting the affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the Offering Memorandum; and
(3) They have carefully examined the Offering Memorandum
(including the Supplement) and, in their opinion (A) the Offering
Memorandum (including the Supplement), as of its date, did not
include any untrue statement of a material fact and did not omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) since such date
no event has occurred which should have been set forth in an
amendment to the Offering Memorandum so that the Offering Memorandum,
as so amended or supplemented, would not include any untrue statement
of a material fact and would not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances in which they
were made, not misleading.
(h) (1) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Offering
Memorandum and (2) since such date there shall not have been any change in
the share capital (except for the one-for-one conversion of shares of
Series A Preferred Stock occurring after August 2, 1999 for Common Stock)
or long-term debt of the Company or any of its subsidiaries or any change,
or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than
as set forth in the Offering Memorandum, the effect of which, in any such
case described in clause (1) or (2), is, in the judgment of the Initial
Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering of the Securities on the terms and
in the manner contemplated in the Offering Memorandum.
(i) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (1) trading in securities
generally on the New York Stock Exchange, Inc. or the Nasdaq National
Market System, or trading in any securities of the Company on any exchange,
shall have been suspended or minimum prices shall have been established on
any such exchange or such market by the Commission, by such exchange or by
any other regulatory body or governmental authority having jurisdiction,
(2) a banking moratorium
<PAGE>
32
shall have been declared by New York State or U.S. federal authorities or
by authorities in Germany or European Union authorities, (3) the United
States or Germany shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or
Germany or there shall have been a declaration of a national emergency or
war by the United States or Germany or (iv) there shall have occurred such
a material adverse change in general, United States, or German economic,
political or financial conditions or in currency exchange rates, taxation,
exchange controls or foreign investment regulations (or the effect of
international conditions on the financial markets in the United States or
Germany shall be such) as to make it, in the judgment of the Initial
Purchaser, impracticable or inadvisable to proceed with completion of the
offering or sale of and payment for the Securities.
(j) The Initial Purchaser shall have received on the Closing Date a
counterpart of the Registration Rights Agreement which shall have been
executed and delivered by the duly authorized officers of the Company.
(k) The Indenture (in form and substance satisfactory to the Initial
Purchaser) shall have been duly executed and delivered by the Company and
the Trustee on the Closing Date and shall be in full force and effect on
such date and the Notes shall have been duly executed and delivered by the
Company and duly authenticated by the Trustees on the Closing Date.
(l) The NASD shall have accepted the Securities for trading in the
PORTAL Market.
(m) The Notes shall have been duly authorized, executed and
delivered by the Company.
(n) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchaser
would materially impair the ability of the Initial Purchaser to purchase,
hold or effect resales of the Securities as contemplated hereby.
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body which would, as of the Closing Date, prevent the issuance or
sale of the Notes; and no injunction, restraining order or order of any
other nature by any court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance or sale of the
Notes.
(p) The Company shall have furnished to the Initial Purchaser such
further information, certificates and documents as the Initial Purchaser
may reasonably request.
<PAGE>
33
(q) The Initial Purchaser shall have received and be reasonably
satisfied with the content of the Offering Memorandum (including the
Supplement) on or prior to the Closing Date. The Supplement shall contain
Consolidated Statements of Loss and Comprehensive Loss and Consolidated
Statements of Cash Flows, each as of and for the six months ended June 30,
1998 and 1999, Consolidated Balance Sheets as of the year ended December
31, 1998 and the six months ended June 30, 1999, a "Management's Discussion
and Analysis of Financial Condition and the Results of Operations"
comparing the six months ended June 30, 1999 with the six months ended June
30, 1998 and pro forma consolidated financial information for the Company
as of and for the six months ended June 30, 1999 reflecting, among other
transactions, the acquisition of Flashnet.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchaser.
7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each of the
Initial Purchaser, its officers and employees and each person, if any, who
controls each of the Initial Purchaser within the meaning of the Securities
Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to,
any loss, claim, damage, liability or action relating to purchases and
sales of the Securities), to which each of the Initial Purchaser, its
officers, employees or controlling persons may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Offering
Memorandum or in any amendment or supplement thereto (including the
Supplement), (ii) the omission or alleged omission to state in the Offering
Memorandum or in any amendment or supplement thereto (including the
Supplement) any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by the Initial Purchaser in connection with,
or relating in any manner to, t he Securities or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon matters covered by
clause (i) or (ii) above (provided that the Company shall not be liable in
the case of any matter covered by this clause (iii) to the extent that it
is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any
such act or failure to act undertaken or omitted to be taken by the Initial
Purchaser through its gross negligence or wilful misconduct), and shall
reimburse each of the Initial Purchaser and such officer, employee and
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Initial Purchaser, officer, employee or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim,
<PAGE>
34
damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Offering Memorandum, or in any
such amendment or supplement, in reliance upon and in conformity with the
written information furnished to the Company by the Initial Purchaser
specifically for inclusion therein and described in Section 7(e). The
foregoing indemnity agreement is in addition to any liability which the
Company may otherwise have to the Initial Purchaser or to any officer,
employee or controlling person of the Initial Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless the
Company, its officers and employees, each of its directors and each person,
if any, who controls the Company within the meaning of the Securities Act,
from and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Company or any such director,
officer or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state in the Offering Memorandum or in any amendment or supplement thereto
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with the written information
furnished to the Company by or on behalf of the Initial Purchaser
specifically for inclusion therein and described in Section 7(e), and shall
reimburse the Company and any such director, officer or controlling person
for any legal or other expenses reasonably incurred by the Company, as the
case may be, or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which the Initial Purchaser may otherwise have to the Company or any such
director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 7 except to the extent it has been materially prejudiced by such
failure and, provided, further, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7. If any such claim or
action shall be brought against an indemnified party, and it shall notify
the indemnifying party thereof,
<PAGE>
35
the indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory
to the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 7 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, any indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying
party in writing, (ii) such indemnified party shall have been advised by
such counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii)
the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which
case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to one
separate firm of attorneys as local counsel, if appropriate under the
circumstances) at any time for all such indemnified parties, which firm
shall be designated in writing by the Initial Purchaser, if the indemnified
parties under this Section 7 consist of the Initial Purchaser or any of its
officers, employees or controlling persons, or by the Company, if the
indemnified parties under this Section consist of the Company or any of its
directors, officers, employees or controlling persons. Each indemnified
party, as a condition of the indemnity agreements contained in Sections
7(a) and 7(b), shall use its reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld)
settle or compromise or consent to the entry of any judgment with respect
to any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent (a) includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (b) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party, or (ii) be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a
<PAGE>
36
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and
against any loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and
the Initial Purchaser on the other from the offering of the Securities or
if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Initial Purchaser on the other
with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Initial Purchaser on the other with
respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under
this Agreement (before deducting expenses but after deducting discounts and
commissions) received by the Company on the one hand, and the total
discounts and commissions received by the Initial Purchaser with respect to
the Securities purchased under this Agreement, on the other hand, bear to
the total gross proceeds from the offering of the Securities under this
Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or the Initial
Purchaser on the other hand, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchaser agree that it
would not be just and equitable if contributions pursuant to this Section
7(d) were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(d) shall be deemed to include,
for purposes of this Section 7(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7(d), the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the total price at which the
Securities purchased by it were resold exceeds the amount of any damages
which the Initial Purchaser has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent
<PAGE>
37
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.
(e) The Initial Purchaser confirms that the statements with
respect to the offering of the Notes set forth in the first and ninth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum are correct and constitute the only information furnished in
writing to the Company by or on behalf of the Initial Purchaser
specifically for inclusion in the Offering Memorandum.
8. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 6(h) or 6(i) shall have
occurred or if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
9. Reimbursement of Initial Purchaser's Expenses. If this Agreement
shall be terminated by the Initial Purchaser because of any failure or refusal
on the part of the Company to comply with the terms or to fulfil any of the
conditions of Section 6 (other than Subsections 6(h), (i) and (o)) of this
Agreement, the Company shall reimburse the Initial Purchaser for fees and
expenses of its counsel and for such other out-of-pocket expenses as shall have
been reasonably incurred by it in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Company shall pay the
full amount thereof to the Initial Purchaser.
10. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by
mail, telex or facsimile transmission to: Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, NY 10036, Attention: Syndicate
Department (Fax: +1-212-761-0192);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate, 21/st/ Floor,
London, EC2M 3YH, Attention: William R. Dougherty, Esq. (Fax: +44-171-422-
4022);
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to Cybernet Internet Services International Inc.,
Stefan-George-Ring 19-23, 81929 Munich, Germany, Attention: Robert Eckert,
Chief Financial Officer and Treasurer (Fax: +49-89-993-15199);
With a copy to Powell, Goldstein, Frazer & Murphy LLP, 1001 Pennsylvania
Avenue, N.W., Washington D.C. 20004, Attention: Joseph M. Berl, Esq. (Fax:
+1-202-624-7222).
11. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Initial Purchaser, the Company, and
their respective
<PAGE>
38
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that the representations, warranties,
indemnities and agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the officers and employees of the Initial
Purchaser and the person or persons, if any, who control the Initial Purchaser
within the meaning of Section 15 of the Securities Act and the indemnity
agreement of the Initial Purchaser contained in Section 7(b) of this Agreement
shall be deemed to be for the benefit of directors, officers and employees of
the Company and any person controlling the Company within the meaning of Section
15 of the Securities Act. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
11, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
12. Survival. The respective indemnities, representations, warranties
and agreements of the Company and the Initial Purchaser contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect regardless of any investigation made by or
on behalf of any of them or any person controlling any of them.
13. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, the term "business day" means any day on which the
----------
Nasdaq National Market System is open for trading and the term "subsidiary" has
----------
the meaning set forth in Rule 405 under the Securities Act.
14. Governing Law. This Agreement and the rights and duties of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of New York.
15. Submission to Jurisdiction; Appointment of Agent for Service;
Waiver; Currency Indemnity. To the fullest extent permitted by applicable law,
the Company irrevocably submits to the non-exclusive jurisdiction of any federal
or state court in the Borough of Manhattan in the City of New York, County and
State of New York, United States of America, in any suit or proceeding based on
or arising under this Agreement, and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in any such court. The
Company, to the fullest extent permitted by applicable law, irrevocably and
fully waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding and hereby irrevocably designates and appoints Corporation
Services Company, at New York, New York (the "Authorized Agent"), for a period
----------------
of ten years from the date hereof or until such time as no Notes are
outstanding, as its authorized agent upon whom process may be served in any such
suit or proceeding. The Company represents that it has notified the Authorized
Agent of such designation and appointment and that the Authorized Agent has
accepted the same in writing. The Company hereby irrevocably authorizes and
directs its Authorized Agent to accept such service. The Company further agrees
that service of process upon its Authorized Agent and written notice of said
service to the Company mailed by first class mail or delivered to its Authorized
Agent shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
any person to serve process in any other manner permitted by law. The Company
agrees that a final action in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other lawful manner. Notwithstanding the foregoing, any action
<PAGE>
39
against the Company arising out of or based on this Agreement or the
transactions contemplated hereby may also be instituted by the Initial
Purchaser, its respective officers and employees or any person who controls the
Initial Purchaser within the meaning of the Securities Act in any competent
court in Germany and the Company expressly accepts the jurisdiction of any such
court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 15(a) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchaser and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(a) The Company shall indemnify the Initial Purchaser against
any loss incurred by it as a result of any judgment or order being
given or made and expressed and paid in a currency (the "Judgment
--------
Currency") other than U.S. dollars and as a result of any variation as
--------
between (i) the rate of exchange at which the U.S. dollar amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in New York, New York at
which the Initial Purchaser on the date of payment of such judgment or
order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by the Initial Purchaser. If the U.S.
dollars so purchased are greater than the amount originally due to the
Initial Purchaser hereunder, the Initial Purchaser agrees to pay the
Company an amount equal to the excess of the U.S. dollars so purchased
over the amount originally due to the Initial Purchaser hereunder. The
foregoing shall constitute a separate and independent obligation of
the Company and the Initial Purchaser, as the case may be, and shall
continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase
of, or conversion into, U.S. dollars.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement among the Company
and the Initial Purchaser, please indicate your acceptance in the space provided
for that purpose below.
Very truly yours,
Cybernet Internet Services International, Inc.
By: /s/ Andreas Eder
--------------------------------------
Name: Andreas Eder
Title: President and Chief Executive Officer
<PAGE>
Accepted:
Morgan Stanley & Co. International Limited
By: /s/ Jorg Mohaupt
----------------------------------
Authorized Representative
<PAGE>
SCHEDULE I
Aggregate Initial
Accreted Value
Initial Purchaser of Notes
- ----------------- -------------------
Morgan Stanley & Co. International Limited.. $15,002,183
-------------------
Total....................................... $15,002,183
===================
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
================================================================================
UNIT AGREEMENT
Dated as of July 8, 1999
among
CYBERNET INTERNET
SERVICES INTERNATIONAL, INC.
and
THE BANK OF NEW YORK,
as Unit Agent, Trustee and Warrant Agent
================================================================================
<PAGE>
UNIT AGREEMENT (this "Agreement"), dated as of July 8, 1999, between
---------
Cybernet Internet Services International, Inc., a Delaware corporation (the
"Company"), and The Bank of New York, as Unit Agent (in such capacity, the "Unit
------- ----
Agent"), as Trustee (in such capacity, the "Trustee") and as Warrant Agent (in
- ----- -------
such capacity, the "Warrant Agent").
-------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company proposes to issue $150,000,000 aggregate
principal amount of 14.0% Senior Dollar Notes due 2009 (the "Initial Notes"; and
-------------
together with any Exchange Notes, the "Notes") pursuant to an Indenture dated as
-----
of July 8, 1999 (the "Indenture"; unless otherwise defined herein, terms defined
---------
in the Indenture are used herein as defined therein) between the Company and the
Trustee, and the Company proposes to issue 150,000 Warrants (the "Warrants") to
--------
purchase 4,534,604 shares of common stock, par value $.001, of the Company (the
"Warrant Shares"), pursuant to a Warrant Agreement dated as of July 8, 1999
--------------
(the "Warrant Agreement") between the Company and the Warrant Agent;
-----------------
WHEREAS, the Notes and the Warrants will initially be represented by
Units (the "Units"), with each Unit consisting of $1,000 principal amount of
-----
Notes and one Warrant to purchase 30.2310693 Warrant Shares;
WHEREAS, the Company, the Trustee and the Warrant Agent desire to
appoint The Bank of New York to act as their agent for the purpose of issuing
certificates ("Unit Certificates") representing the Units and for the
-----------------
registration of transfers and exchanges thereof; and
WHEREAS, the Units will be exchangeable for the Notes and the Warrants
represented thereby upon the earliest to occur of: (i) the commencement of an
exchange offer or the effectiveness of a shelf registration statement with
respect to the Notes and (ii) such other date as Lehman Brothers International
(Europe) and Morgan Stanley & Co. International Limited shall jointly determine
in their sole discretion (such earliest date, "Separation Date").
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Definitions.
-----------
"Affiliate" as applied to any Person means any other Person directly
---------
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
is defined to mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent Members" means members of, or participants in, DTC.
-------------
<PAGE>
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
--------------
state or foreign law for the relief of creditors.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banking institutions are authorized or
required by law to close in New York City or Munich.
"Cedel" means Cedel Bank, societe anonyme.
-----
"Company" means the party named as such in the preamble of this
-------
Agreement until a successor replaces it in accordance with the provisions
of the Indenture and thereafter means such successor.
"Company Order" means a written order or request signed in the name of
-------------
the Company by two Officers of the Company and delivered to the Unit Agent.
"Definitive Units" means Units in definitive registered form
----------------
substantially in the form of Exhibit B.
"DTC" means The Depository Trust Company or its successors.
---
"DWAC" means the Depositary/Deposit Withdraw at Custodian system.
----
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
---------
office), as operator of the Euroclear System.
"Event of Default" shall have the meaning set forth in Section 6.1 of
----------------
the Indenture.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations of the SEC promulgated thereunder.
"Holder" means a Person in whose name a Unit is registered on the
------
Registrar's books.
"Initial Purchasers" means Lehman Brothers International (Europe) and
------------------
Morgan Stanley & Co. International Limited.
"Issue Date" means the date on which the Units are originally issued
----------
under this Agreement.
"Officer" means, with respect to any Person, the chairman of the board
-------
of directors, any director, the president, the principal executive officer,
the principal financial officer, the principal accounting officer, the
treasurer, the controller or the secretary of such Person.
2
<PAGE>
"Officers' Certificate" means a certificate, signed on behalf of the
---------------------
Company by two Officers of the Company, that meets the requirements set
forth in Sections 5.2 and 5.3.
"Opinion of Counsel" means a written opinion of legal counsel who is
------------------
reasonably acceptable to the Unit Agent, which opinion is addressed to the
Unit Agent and complies with the requirements of Sections 5.2 and 5.3.
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
"Private Placement Legend" means the legend set forth in Section
------------------------
2.7(c).
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Registrar" shall have the meaning set forth in Section 2.4.
---------
"Rule 144" means Rule 144 under the Securities Act.
--------
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Rule 144A Global Unit" shall have the meaning set forth in Section
---------------------
2.2.
"Rule 144A Unit" shall have the meaning set forth in Section 2.2.
--------------
"Rule 144A Global Unit" shall have the meaning set forth in Section
---------------------
2.2.
"SEC" means the U.S. Securities and Exchange Commission.
---
"Securities Act" means the U.S. Securities Act of 1933, as amended,
--------------
and the rules and regulations of the SEC promulgated thereunder.
"Units" shall have the meaning set forth in the preamble to this
-----
Agreement.
SECTION 1.2 Appointment of Unit Agent. (a) The Company hereby
-------------------------
appoints the Unit Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Unit Agent hereby
accepts such appointment.
(b) The Trustee and the Company hereby appoint the Unit Agent as
Authenticating Agent and Registrar with respect to Notes represented by Units
for so long as such Notes are represented by the Units. In its capacity as
Authenticating Agent and Registrar, the Unit Agent shall have the rights,
obligations, protections, privileges, benefits and immunities
3
<PAGE>
provided for such capacities in the Indenture. The Trustee hereby appoints, and
the Company hereby consents to the appointment of, the Unit Agent, as its agent
with respect to all such rights and obligations of the Trustee under the
Indenture with respect to Notes represented by Units for so long as such Notes
are represented by the Units, and the Unit Agent hereby accepts such
appointment.
(c) The Warrant Agent and the Company hereby appoint the Unit Agent
as an agent of the Warrant Agent for the purposes of countersigning Warrants so
long as such Warrants are represented by the Units, and for maintaining a
register of the registered owners of and the registration of transfers and
exchanges of Warrants for so long as such Warrants are represented by the Units.
The Warrant Agent hereby appoints, and the Company hereby consents to the
appointment of, the Unit Agent with respect to all such rights and obligations
of the Warrant Agent under the Warrant Agreement with respect to Warrants
represented by Units for so long as such Warrants are represented by the Units,
and the Warrant Agent hereby accepts such appointment.
SECTION 2 Unit Certificates.
-----------------
2.1 Issuance of Units. Units consisting of Notes and Warrants shall
-----------------
be issued by the Company on the Issue Date. The Notes and the Warrants shall
not be separately transferable until on or after the Separation Date as provided
in Section 3 hereof.
2.2 Form of Unit. The Units and the notation relating to the Unit
------------
Agent's certificate of authentication shall be substantially in the form of
Exhibits A or B. The Units may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Company and the Unit Agent shall
approve the form of the Units and any notation, legend or endorsement thereon.
Each Unit shall be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Units, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Agreement and, to the extent applicable, the Company and the Unit Agent by
their execution and delivery of this Agreement expressly agree to such terms and
provisions and to be bound thereby.
Units offered and sold in their initial distribution in reliance on
Rule 144A shall be initially issued as one or more global Units, in registered
global form, substantially in the form of Exhibit A hereto, with such applicable
legends as are provided in Exhibit A hereto, except as otherwise permitted
herein. Such Global Units shall be referred to collectively herein as the "Rule
----
144A Global Unit." Such Rule 144A Global Unit shall be deposited on behalf of
- ----------------
the holders of the Units represented thereby by the Unit Agent as custodian for
DTC, duly executed by the Company and authenticated by the Unit Agent or
Authenticating Agent as provided herein. The aggregate amount of the Rule 144A
Global Unit outstanding may from time to time be increased or decreased by
adjustments made on the records of the Unit Agent, as custodian for DTC, or the
records of DTC or its nominee, as the case may be, as hereinafter provided (or
by the issue of a further Rule 144A Global Unit), in connection with or in
consequence of the issue of
4
<PAGE>
Definitive Units or the issue of additional Rule 144A Units, as hereinafter
provided. The Rule 144A Global Unit and all other Units initially evidenced by
such Rule 144A Global Unit, shall collectively be referred to herein as the
"Rule 144A Units."
---------------
The Company may also elect, in its sole discretion, to create
additional forms of global Units containing transfer and other restrictions
which comply with applicable U.S., securities and other laws from time to time,
although the Company is not obligated to do so.
SECTION 2.3 Execution and Authentication. Two Officers (each of whom
----------------------------
shall have been duly authorized by all requisite corporate actions) shall sign
the Units for the Company by manual or facsimile signature.
If an Officer whose signature is on a Unit was an Officer at the time
of such execution but no longer holds that office or position at the time the
Unit Agent authenticates the Unit, the Unit shall be nevertheless valid.
A Unit shall not be valid until an authorized signatory of the Unit
Agent manually signs the certificate of authentication on the Unit. The
signature shall be conclusive evidence that the Unit has been authenticated
under this Agreement.
The Unit Agent shall authenticate 150,000 Units upon receipt of a
Company Order in the form of an Officers' Certificate. The Officers'
Certificate shall specify the number of Units to be authenticated, the series
and type of Units and the date on which the Units are to be authenticated,
whether the Units are to be issued as Definitive Units or Global Units and
whether or not the Units shall bear the Private Placement Legend, or such other
information as the Unit Agent may reasonably request. In authenticating the
Units and accepting the responsibilities under this Agreement in relation to the
Units, the Unit Agent shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the form and terms thereof
have been established in conformity with the provisions of this Agreement. The
aggregate number of Units outstanding at any time may not exceed 300,000 Units
except as provided in Section 2.8. Upon receipt of a Company Order, the Unit
Agent shall authenticate Units in substitution of Units originally issued to
reflect any name change of the Company.
SECTION 2.4 Registrar. The Company shall maintain an office or
---------
agency in the Borough of Manhattan, the City of New York where (i) Global Units
may be presented or surrendered for registration of transfer or for exchange
("Registrar") and (ii) notices and demands in respect of such Global Units and
---------
this Agreement may be served. In the event that Definitive Units are issued,
(x) Definitive Units may be presented or surrendered for registration of
transfer or for exchange, (y) Definitive Units may be presented or surrendered
for payment and (z) notices and demands in respect of the Definitive Units and
this Agreement may be served at an office of the Registrar in the Borough of
Manhattan, the City of New York. The Registrar shall keep a register of the
Units and of their transfer and exchange. The Company, upon notice to the Unit
Agent, may have one or more co-Registrars reasonably acceptable to the Unit
Agent. The term "Registrar" includes any co-Registrar. The Company may change
any Registrar without notice to any Holder. In the case of a transfer of a
Definitive Unit in part, upon surrender of the
5
<PAGE>
Definitive Unit to be transferred, a Definitive Unit shall be issued to the
transferee in respect of the aggregate number of Units transferred and a
Definitive Unit shall be issued to the transferor in respect of the aggregate
balance of Units that remain outstanding after the transfer at the office of any
transfer agent.
SECTION 2.5 List of Holders. The Unit Agent 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. If the Unit Agent is not the Registrar,
the Company shall furnish to the Unit Agent before each Record Date and at such
other times as the Unit Agent may request in writing a list as of such date and
in such form as the Unit Agent may reasonably require of the names and addresses
of Holders, which list may be conclusively relied upon by the Unit Agent.
SECTION 2.6 Book-Entry Provisions for Global Units. (a) The Global
--------------------------------------
Units initially shall (i) be registered in the name of DTC or the nominee of
such depositary, (ii) be delivered to the Unit Agent as custodian for such
depositary and (iii) bear legends as set forth in Section 2.7(b) hereto.
(b) Restrictions on Transfer and Exchange of Global Units.
-----------------------------------------------------
Notwithstanding any other provisions of this Agreement, transfers of a Global
Unit shall be limited to transfers of such Global Unit in whole, but not in
part, by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
successor of DTC or a nominee of such successor depositary. Interests of
beneficial owners in the Global Units may be transferred or exchanged for
Definitive Units in accordance with the rules and procedures of DTC or its
successor and the provisions of Section 2.7. All Global Units shall be
exchanged by the Company (with authentication by the Unit Agent) for one or more
Definitive Units, (a) if DTC (i) has notified the Company that it is unwilling
or unable to continue as, or ceases to be, a clearing agency registered under
the Exchange Act and (ii) a successor to DTC registered as a clearing agency
under the Exchange Act is not able to be appointed by the Company within 90 days
of such notification or (b) at any time at the option of the Company. Whenever
all of a Global Unit is exchanged for one or more Definitive Units, it shall be
surrendered by the Holder thereof to the Unit Agent for cancellation. Whenever
a part of a Global Unit is exchanged for one or more Definitive Units the Global
Unit shall be surrendered by the Holder thereof to the Unit Agent who shall
cause an adjustment to be made to Schedule A of such Global Unit such that the
number of such Global Units will be equal to the remainder of such Global Units
not exchanged and shall thereafter return the Global Unit to such Holder. A
Global Unit may not be exchanged for a Definitive Unit other than as provided in
this Section 2.6(b).
(c) In connection with the transfer of an entire Global Unit to
beneficial owners pursuant to paragraph (b) of this Section 2.6, the Global
Units shall be deemed to be surrendered to the Unit Agent for cancellation, and
the Company shall execute, and the Unit Agent shall, upon written instructions
from the Company, authenticate and make available for delivery, to each
beneficial owner identified by DTC, in exchange for its beneficial interest in
the Global Units, an equal aggregate amount of Definitive Units. In connection
with any transfer of a portion of the beneficial interest in a Global Unit
pursuant to subsection (b) of this Section to beneficial owners who will
thereafter hold Definitive Units, the Unit Agent shall reflect on its
6
<PAGE>
books and records the date and decrease the amount of such Global Unit in an
amount equal to the amount of the beneficial interest in the Global Unit to be
transferred, and the Company shall execute, and the Unit Agent shall
authenticate and deliver, one or more Definitive Units of like tenor and amount.
(d) Any Definitive Unit constituting a Rule 144A Unit delivered in
exchange for an interest in a Global Unit pursuant to paragraph (b) of this
Section 2.6 shall, except as otherwise provided by Section 2.7, bear the Private
Placement Legend.
(e) The Holder of any Global Unit may grant proxies and otherwise
authorize any Person, including DTC and its Agent Members and Persons that may
hold interest through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Units.
(f) Cancellation and/or Adjustment of a Global Unit. At such time as
-----------------------------------------------
all beneficial interests in a Global Unit have either been exchanged for
Definitive Units, redeemed, repurchased or canceled, such Global Unit shall be
returned to or retained and canceled by the Unit Agent. At any time prior to
such cancellation, if any beneficial interest in a Global Unit is exchanged for
Definitive Units, redeemed, repurchased or canceled, the number of Units
represented by such Global Unit shall be reduced and an endorsement shall be
made on such Global Unit by the Unit Agent to reflect such reduction.
SECTION 2.7 Registration of Transfer and Exchange. (a) Prior to the
-------------------------------------
Separation Date, notwithstanding any provision to the contrary herein, transfers
of beneficial interests in Global Units or transfers of Definitive Units, in
whole or in part, shall be made only in accordance with this Section 2.7.
(b) Other Exchanges. In the event that a Global Unit is exchanged for
Definitive Units pursuant to Section 2.6(b), or a Definitive Unit in registered
form is exchanged for another such Definitive Unit in registered form, or a
Definitive Unit is exchanged for a beneficial interest in a Global Unit, such
Units may be exchanged or transferred for one another only in accordance with
such procedures as are substantially consistent with the provisions of Sections
2.6 and 2.7 herein and as may be from time to time adopted by the Company and
the Unit Agent.
(c) Private Placement Legend. Each Unit issued hereunder shall, upon
------------------------
issuance, bear the legend set forth herein and such legend shall not be removed
from such Unit except as provided in the next sentence. The legend required for
a Rule 144A Unit may be removed from a Rule 144A Unit if there is delivered to
the Company and the Unit Agent such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as may be reasonably required by the Company, that neither such legend nor
the restrictions on transfer set forth therein are required to ensure that
transfers of such Unit will not violate the registration requirements of the
Securities Act. Upon provision of such satisfactory evidence, the Unit Agent,
at the direction of the Company, shall authenticate and deliver in exchange for
such Unit another Unit or Units of equal aggregate amount that does not bear
such legend. If such a legend required for a Rule 144A Unit has been removed
from a Rule 144A Unit as provided above, no other Unit issued in exchange for
all or any part of such Unit
7
<PAGE>
shall bear such legend, unless the Company has reasonable cause to believe that
such other Unit is a "restricted security" within the meaning of Rule 144 and
instructs the Unit Agent to cause a legend to appear thereon.
The Units shall bear the following legends (the "Private Placement
-----------------
Legend") on the face thereof:
- ------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
--------------
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
(2) AGREES THAT IT WILL NOT, PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
------
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
----------------------------
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (D) WITH THE CONSENT OF THE COMPANY
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND; PROVIDED THAT, IN CONSENTING TO ANY SALE OR OFFER PURSUANT TO
--------
CLAUSE (D) ABOVE, THE COMPANY SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND
8
<PAGE>
DELIVERED BY THE TRANSFEROR TO THE UNIT AGENT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS
PART OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME
THEREAFTER, DIRECTLY OR INDIRECTLY, OTHER THAN TO
(INVESTMENT) BANKS, PENSION FUNDS, INSURANCE COMPANIES,
SECURITIES FIRMS, INVESTMENT INSTITUTIONS, CENTRAL
GOVERNMENTS, LARGE INTERNATIONAL AND SUPRA-NATIONAL
ORGANIZATIONS AND OTHER COMPARABLE ENTITIES, INCLUDING,
AMONG OTHERS, TREASURIES AND FINANCE COMPANIES OF LARGE
ENTERPRISES, WHICH ARE ACTIVE ON A REGULAR AND PROFESSIONAL
BASIS IN THE FINANCIAL MARKETS FOR THEIR OWN ACCOUNT.
The Global Units shall also bear the following legend on the face
thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
---
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL BECAUSE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.6 OF THE UNIT AGREEMENT PURSUANT TO
WHICH THEY WERE ISSUED.
(d) General. By its acceptance of any Unit bearing the Private
-------
Placement Legend, each Holder of such a Unit acknowledges the restrictions on
transfer of such Unit set forth in this Agreement and in the Private Placement
Legend and agrees that it will transfer such Unit only as provided in this
Agreement.
The Unit Agent shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under this
Agreement or under applicable law with respect to any transfer of any interest
in any Unit (including any transfers between or among Agent Members or
beneficial owners of interest in any Global Unit) other than to require delivery
of such certificates and other documentation or evidence as are expressly
9
<PAGE>
required by, and to do so if and when expressly required by the terms of, this
Agreement, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.6 or this Section 2.7.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(e) Definitive Units shall be transferable only upon the surrender of
a Definitive Unit for registration of transfer. When a Definitive Unit is
presented to the Registrar or a co-registrar with a request to register a
transfer, the Registrar shall register the transfer as requested if its
requirements for such transfers are met. When Definitive Units are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
amount of Definitive Units of other denominations, the Registrar shall make the
exchange as requested if the same requirements are met. To permit registration
of transfers and exchanges, the Company shall execute and the Unit Agent shall
authenticate Definitive Units at the Registrar's or co-registrar's request.
(f) The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with any transfer
or exchange pursuant to this Section 2.7.
(g) All Units issued upon any transfer or exchange pursuant to the
terms of this Agreement will be entitled to the same benefits under this
Agreement as the Units surrendered upon such transfer or exchange.
(h) Holders of Units (or holders of interests therein) and
prospective purchasers designated by such Holders (or holders of interests
therein) will have the right to obtain from the Company upon request by such
Holders (or holders of interests therein) or prospective purchasers, during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, or is exempt from reporting pursuant to 12g3-2(b) under the
Exchange Act, the information required by paragraph d(4)(i) of Rule 144A in
connection with any transfer or proposed transfer of such Units.
(i) The Company, the Unit Agent and any agent may treat the person in
whose name a Unit is registered as the absolute owner of such Unit for all
purposes whatsoever.
SECTION 2.8 Replacement Units. If a mutilated Definitive Unit is
-----------------
surrendered to the Registrar, if a mutilated Global Unit is surrendered to the
Company or if the Holder of a Unit claims that such Unit has been lost,
destroyed or wrongfully taken, the Company shall issue and the Unit Agent shall
authenticate a replacement Unit in such form as the Unit being replaced if the
requirements of the Unit Agent, the Registrar and the Company are met. If
required by the Unit Agent, the Registrar or the Company, such Holder must
provide an indemnity bond or other indemnity, sufficient in the judgment of the
Company, the Registrar and the Unit Agent, to protect the Company, the
Registrar, the Unit Agent and any agent from any loss which any of
10
<PAGE>
them may suffer if a Unit is replaced. The Company may charge such Holder for
its reasonable, out-of-pocket expenses in replacing a Unit, including reasonable
fees and expenses of counsel. Every replacement Unit is an obligation of the
Company.
SECTION 2.9 Outstanding Units. Units outstanding at any time are all
-----------------
the Units that have been authenticated by the Unit Agent except those canceled
by it, those delivered to it for cancellation, those reductions in the Global
Unit effected in accordance with the provisions hereof and those described in
this Section as not outstanding. Subject to Section 2.10, a Unit does not cease
to be outstanding because the Company or any of its Affiliates holds the Unit.
If a Unit is replaced pursuant to Section 2.8 (other than a mutilated
Unit surrendered for replacement), it ceases to be outstanding unless the Unit
Agent receives proof satisfactory to it that the replaced Unit is held by a bona
----
fide purchaser. A mutilated Unit ceases to be outstanding upon surrender of
- ----
such Unit and replacement thereof pursuant to Section 2.8.
SECTION 2.10 Treasury Units. In determining whether the Holders of
--------------
the required amount of Units have concurred in any direction, waiver or consent,
Units owned by the Company or its Affiliates shall be disregarded, except that,
for the purposes of determining whether the Unit Agent shall be protected in
relying on any such direction, waiver or consent, only Units that the Unit Agent
actually knows are so owned shall be disregarded.
The Company shall notify the Unit Agent, in writing, when it or any of
its Affiliates repurchases or otherwise acquires Units of the amount of such
Units so repurchased or otherwise acquired. The Unit Agent may require an
Officers= Certificate listing Units owned by the Company, a subsidiary of the
Company or an Affiliate of the Company.
SECTION 2.11 Temporary Units. Until permanent Definitive Units are
---------------
ready for delivery, the Company may prepare and the Unit Agent shall
authenticate temporary Definitive Units upon receipt of a Company Order in the
form of an Officers' Certificate. The Officers' Certificate shall specify the
amount of temporary Definitive Units to be authenticated and the date on which
the temporary Definitive Units are to be authenticated. Temporary Definitive
Units shall be substantially in the form of permanent Definitive Units but may
have variations that the Company considers appropriate for temporary Definitive
Units. Without unreasonable delay, the Company shall prepare and the Unit Agent
shall authenticate upon receipt of a Company Order permanent Definitive Units in
exchange for temporary Definitive Units.
SECTION 2.12 Cancellation. The Company at any time may deliver Units
------------
to the Unit Agent for cancellation. The Unit Agent, and no one else, shall
cancel and, at the written direction of the Company, shall dispose of (subject
to the record retention requirements of the Exchange Act) all Units surrendered
for transfer, exchange, payment or cancellation; provided, however, that the
-------- -------
Unit Agent may, but shall not be required to, destroy such canceled Units.
Subject to Section 2.7, the Company may not issue new Units to replace Units
that it has paid or delivered to the Unit Agent for cancellation. If the
Company shall acquire any of the Units, such acquisition shall not operate as a
redemption of such Units unless and until the same are surrendered to the Unit
Agent for cancellation pursuant to this Section 2.12.
11
<PAGE>
SECTION 2.13 CUSIP, ISIN and Common Code Numbers. The Company in
-----------------------------------
issuing the Units may use a "CUSIP", "ISIN" or "Common Code" number, and if so,
the Unit Agent shall use the CUSIP, ISIN and Common Code number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
-------- -------
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN and Common Code number printed in the notice or on
the Units, and that reliance may be placed only on the other identification
numbers printed on the Units. The Company shall promptly notify the Unit Agent
of any change in any CUSIP, ISIN or Common Code number.
SECTION 2.14 Certain Matters Relating to the Global Units. Agent
--------------------------------------------
Members shall have no rights under this Agreement with respect to any Global
Unit held on their behalf by DTC or the Unit Agent as its custodian, or under
the Global Unit, and DTC may be treated by the Company, the Unit Agent and any
agent of the Company or the Unit Agent as the absolute owner of the Global Unit
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Unit Agent or any agent of the Company or the
Unit Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
Holder of any Unit.
SECTION 3 Separation of the Notes and the Warrants.
----------------------------------------
After the Separation Date, the Notes and the Warrants represented by
the Units shall be separately transferable. Upon presentation after the
Separation Date of any Unit Certificate for exchange for Warrants and Notes or
for registration of transfer or otherwise, the Unit Agent shall notify the
Trustee, the Registrar and the Warrant Agent of the number of Units so
presented, the registered owner thereof, such owner=s registered address, the
nature of any legends or restrictive endorsements set forth on such Unit
Certificate and any other information provided by the holder thereof in
connection therewith. The Company will notify the Unit Agent of any additional
requirements in connection with a particular transfer or exchange.
Following the Separation Date, no Unit Certificates shall be issued
upon transfer, or exchange of Unit Certificates, or otherwise.
SECTION 4 Rights of Unit Holders.
----------------------
The registered owner of a Unit Certificate shall have all the rights
and privileges of a registered owner of the principal amount of Notes of the
Company represented thereby and the number of Warrants of the Company
represented thereby and shall be treated as the registered owner thereof for all
purposes.
SECTION 5 Unit Agent.
----------
5.1 Rights and Duties of Unit Agent. (a) In acting under this
-------------------------------
Agreement and in connection with the Unit Certificates, the Unit Agent is acting
solely as agent of the Company,
12
<PAGE>
the Warrant Agent and the Trustee and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Unit
Certificates or beneficial owners of Units.
(b) The Unit Agent may consult with counsel satisfactory to it (who
may be counsel for the Company), and the advice of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(c) The Unit Agent shall be protected and shall incur no liability
for or in respect of any action taken or thing suffered by it in reliance upon
any Unit Certificate, notice, resolution, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(d) The Unit Agent shall be obligated to perform only such duties as
are specifically set forth herein and in the Unit Certificates and no implied
duties or obligations shall be read into this Agreement or the Unit Certificates
against the Unit Agent. The Unit Agent shall not be under any obligation to
institute any action, suit or legal proceeding or to take any other action
hereunder which may tend to involve it in any expense or liability for which it
does not receive indemnity if such indemnity is requested. The Unit Agent shall
not be accountable or under any duty or responsibility for the use by the
Company of any of the Unit Certificates countersigned by the Unit Agent and
delivered by it to the Holders or on behalf of the Holders pursuant to this
Agreement or for the application by the Company of the proceeds of the Units.
The Unit Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained herein
or in the Unit Certificates or in the case of the receipt of any written demand
from a Holder with respect to such default, including any duty or responsibility
to initiate or attempt to initiate any proceedings at law or otherwise.
(e) All rights of action under this Agreement or under any of the
Units may be enforced by the Unit Agent without the possession of any of the
Unit Certificates or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding instituted by the Unit
Agent shall be brought in its name as Unit Agent and any recovery of judgment
shall be for the ratable benefit of the registered holders of the Units, as
their respective rights or interests may appear.
(f) The Unit Agent shall not be liable for any action taken or omitted
or for any loss or injury resulting from its actions or its performance or lack
of performance of its duties hereunder or in connection with its appointment in
Section 1.2 in the absence of gross negligence or willful misconduct on its
part. In no event shall the Unit Agent be liable (i) for any indirect,
consequential, punitive or special damages, regardless of the form of action and
whether or not any such damages were foreseeable or contemplated, or (ii) for
the acts or omissions of its nominees, correspondents, designees, agents,
subagents or independent contractors.
(g) The Unit Agent shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance or its
duties hereunder.
13
<PAGE>
(h) Whenever in the administration of this Agreement the Unit Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Unit Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, conclusively rely upon an Officers= Certificate.
SECTION 5.2 Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Company to the Unit Agent to take any
action under this Agreement, the Company shall furnish to the Unit Agent at the
request of the Unit Agent:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Unit Agent (which shall include the statements set
forth in Section 5.3), stating that, in the opinion of the signatories
thereto, all conditions precedent and covenants, if any, provided for in
this Agreement relating to the proposed action have been satisfied or
complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Unit Agent (which shall include the statements set
forth in Section 5.3) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied or complied
with.
SECTION 5.3 Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of 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.
The Unit Agent shall not be liable for any action which it takes or
intends to take in good faith in reliance on any such certificate or opinion.
14
<PAGE>
SECTION 5.4 Rules by Unit Agent. The Unit Agent may make reasonable
--------------------
rules for its functions.
SECTION 5.5 Individual Rights of Unit Agent. The Unit Agent and any
--------------------------------
stockholder, director, officer or employee of the Unit Agent may buy, sell or
deal in any of the Units or other securities of the Company or its Affiliates or
become pecuniarily interested in transactions in which the Company or its
Affiliates may be interested, or contract with or lend money to the Company or
its Affiliates or otherwise act as fully and freely as though it were not the
Unit Agent under this Agreement. Nothing herein shall preclude the Unit Agent
from acting in any other capacity for the Company or for any other legal entity.
SECTION 5.6 Unit Agent's Disclaimer. The Unit Agent shall not be
------------------------
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Unit Certificates and it shall not be responsible for any
statement in this Agreement or the Unit Certificates other than its certificate
of authentication thereon.
SECTION 5.7 Compensation and Indemnity. The Company shall pay to the
---------------------------
Unit Agent from time to time such compensation as the Company and the Unit Agent
shall from time to time agree in writing for its acceptance of this Agreement
and services hereunder. The Company shall reimburse the Unit Agent upon request
for all reasonable disbursements, expenses and advances (including reasonable
fees and expenses of counsel) incurred or made by it in addition to the
compensation for their services, except any such disbursements, expenses and
advances as may be attributable to the Unit Agent's gross negligence or bad
faith. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Unit Agent's accountants, experts and counsel.
The Company shall indemnify each of the Unit Agent and any predecessor
Unit Agent for, and hold them harmless against, any and all loss, damage, claim,
expense or liability including taxes (other than taxes based on the income of
the Unit Agent) incurred by the Unit Agent without gross negligence, willful
misconduct or bad faith on its part in connection with acceptance of
administration of this trust and its duties under this Agreement, including the
reasonable expenses and attorneys' fees and expenses of defending itself against
any claim of liability arising hereunder. The Unit Agent shall notify the
Company promptly of any claim asserted against the Unit Agent for which it may
seek indemnity. However, the failure by the Unit Agent to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Unit Agent shall cooperate in the defense (and may
employ its own counsel satisfactory to the Unit Agent) at the Company's expense.
The Unit Agent may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its written consent, which consent shall not be
unreasonably withheld. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Unit Agent as a result of the
violation of this Agreement by the Unit Agent if such violation arose from the
Unit Agent's gross negligence, willful misconduct or bad faith.
15
<PAGE>
To secure the Company's payment obligations in this Section 5.7, the
Unit Agent and the Agents shall have a senior Lien prior to the Notes against
all money or property held or collected by the Unit Agent, in its capacity as
Unit Agent, except money or property held in trust to pay principal or premium,
if any, or interest on particular Notes.
The Company's obligations under this Section 5.7 and any claim arising
hereunder shall survive the termination of this Agreement, the resignation or
removal of any Unit Agent or Agent and any rejection or termination under any
Bankruptcy Law.
SECTION 5.8 Successor Unit Agent. (a) The Unit Agent may at any time
---------------------
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 30 days after the date
- -------- -------
on which such notice is given unless the Company otherwise agrees. The Unit
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 30 days after such notice is given unless the Unit Agent otherwise
agrees. Any removal under this Section 5.8 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Unit Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Unit Agent.
(b) In case at any time the Unit Agent shall resign, or shall be
removed, or shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or shall commence a voluntary case under federal bankruptcy laws, as
now or hereafter constituted, or under any other applicable federal or state
bankruptcy, insolvency or similar law or shall consent to the appointment of or
taking possession by a receiver, custodian, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Unit Agent or its property or
affairs, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall take corporate action in furtherance of any such action, or a decree or
order for relief by a court having jurisdiction in the premises shall have been
entered in respect of the Unit Agent in an involuntary case under federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or similar law; or a decree or order by
a court having jurisdiction in the premises shall have been entered for the
appointment of a receiver, custodian, liquidator, assignee, trustee or
sequestrator (or similar official) of the Unit Agent or of its property or
affairs, or any public officer shall take charge or control of the Unit Agent or
of its property or affairs for the purpose of rehabilitation, conservation,
winding up of or liquidation, a successor Unit Agent, qualified as aforesaid,
shall be appointed by the Company by an instrument in writing, filed with the
successor Unit Agent. Upon the appointment as aforesaid of a successor Unit
Agent and acceptance by the successor Unit Agent of such appointment, the Unit
Agent shall cease to be Unit Agent hereunder; provided, however, that in the
-------- -------
event of the resignation of the Unit Agent hereunder, such resignation shall be
effective on the earlier of (i) the date specified in the Unit Agent's notice of
resignation and (ii) the appointment and acceptance of a successor Unit Agent
hereunder. If a successor Unit Agent does not accept such appointment within 60
days after the notice of
16
<PAGE>
resignation or removal is given, the Unit Agent may petition any court of
competent jurisdiction for the appointment of a successor.
(c) Any successor Unit Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Company an instrument
accepting such appointment hereunder, and thereupon such successor Unit Agent,
without any further act, deed or conveyance, shall become vested with all the
rights and obligations of such predecessor with like effect as if originally
named as Unit Agent hereunder, and such predecessor, upon payment of its charges
and disbursements then unpaid, shall thereupon become obligated to transfer,
deliver and pay over, and such successor Unit Agent shall be entitled to
receive, all monies, securities and other property on deposit with or held by
such predecessor, as Unit Agent hereunder.
(d) Any corporation into which the Unit Agent hereunder may be merged
or consolidated, or any corporation resulting from any merger or consolidation
to which the Unit Agent shall be a party, or any corporation to which the Unit
Agent shall sell or otherwise transfer all or substantially all the assets and
business of the Unit Agent (provided that it shall be qualified as aforesaid)
shall be the successor Unit Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
SECTION 6 Miscellaneous.
-------------
SECTION 6.1 Notices. Any notices or other communications required or
--------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or first-class mail, postage prepaid, addressed
as follows:
if to the Company:
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
D-81929 Munchen
Facsimile: +49-89-993-15199
Attention: Robert Eckert
with a copy to:
Powell, Goldstein, Frazer and Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile: (202) 624-7222
Attention: Joseph M. Berl
17
<PAGE>
if to the Unit Agent, Warrant Agent or Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Facsimile: 212-815-5915
Attention: Corporate Trust Trustee Administration
Each of the Company and the Unit Agent, Warrant Agent and Trustee by
written notice to each other such Person may designate additional or different
addresses for notices to such Person. Any notice or communication to the
Company and the Unit Agent, Warrant Agent and Trustee, shall be deemed to have
been given or made: (i) as of the date so delivered, if personally delivered;
(ii) when receipt is confirmed, if telecopied; and (iii) upon receipt, if sent
by first class mail, postage prepaid (except that a notice of change of address
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Person by first-class mail or other equivalent means at such Person's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given
whether or not the addressee receives it.
Notices regarding the Units will be (i) published by the Company in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) or (ii) in the case of Definitive Units, mailed
to Holders by first-class mail at their respective addresses as they appear on
the registration books of the Registrar. Notices given by publication will be
deemed given on the first date on which publication is made and notices given by
first-class mail, postage prepaid, will be deemed given five calendar days after
mailing.
SECTION 6.2 Supplements and Amendments. The Company, the Unit Agent,
--------------------------
the Trustee and the Warrant Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Unit Certificates in order to
cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company, the Trustee, the Warrant Agent and the Unit Agent may deem
necessary or desirable and which shall not in any way adversely affect the
interests of the holders of Unit Certificates. Any amendment or supplement to
this Agreement that has a material adverse effect on the interests of Unit
holders shall require the written consent of registered holders of Units
representing not less than a majority of the then outstanding Units.
18
<PAGE>
Prior to executing any supplement or amendment, the Unit Agent,
Trustee and Warrant Agent shall be entitled to receive and rely upon an Opinion
of Counsel to the effect that such supplement or amendment is permitted or
authorized by this Agreement.
SECTION 6.3 Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company, the Trustee, the Warrant Agent
or the Unit Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
SECTION 6.4 Governing Law. This Agreement and the Units shall be
-------------
governed by, and construed and interpreted in accordance with, the law of the
State of New York.
SECTION 6.5 Submission to Jurisdiction; Appointment of Agent for
----------------------------------------------------
Service; Waiver. To the fullest extent permitted by applicable law, the Company
- ---------------
irrevocably submits to the nonexclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement and the Units, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints Corporation Services Company (the "Authorized Agent"), for a period of
----------------
ten years from the date hereof or until such time as no Units, Notes or Warrants
remain outstanding, as its authorized agent upon whom process may be served in
any such suit or proceeding. The Company represents that it has notified the
Authorized Agent of such designation and appointment and that the Authorized
Agent has accepted the same in writing. The Company hereby irrevocably
authorizes and directs its Authorized Agent to accept such service. The Company
further agrees that service of process upon its Authorized Agent and written
notice of said service to the Company mailed by first class mail or delivered to
its Authorized Agent shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of any person to serve process in any other manner permitted by
law. The Company agrees that a final action in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other lawful manner. Notwithstanding the foregoing, any
action against the Company arising out of or based on this Agreement, the Units
or the transactions contemplated hereby may also be instituted in any competent
court in Germany, and the Company expressly accepts the jurisdiction of any such
court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement, the Unit Certificates or the
transactions contemplated hereby.
To the extent permitted by applicable law, the Company and the Unit
Agent each waive any right to have a jury participate in resolving any dispute,
whether sounding in contract,
19
<PAGE>
tort, or otherwise arising out of, connected with, related to or incidental to
the relationship established between them in connection with this Agreement.
Instead, any disputes resolved in court will be resolved in a bench trial
without a jury.
The provisions of this Section 6.5 are intended to be effective upon
the execution of this Agreement and the Unit Certificates without any further
action by the Company or the Unit Agent and the introduction of a true copy of
this Agreement into evidence shall be conclusive and final evidence as to such
matters.
SECTION 6.6 Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Trustee, the Warrant Agent, the Unit Agent and the registered holders of the
Unit Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Trustee, the Warrant Agent, the Unit Agent and the registered
holders of the Unit Certificates.
SECTION 6.7 Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 6.8 Severability. In case any one or more of the provisions
------------
in this Agreement or in the Units shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 6.9 Headings, etc. The Headings of the Articles and Sections
--------------
of this Agreement have been inserted for convenience of reference only, are not
to be considered a part of this Agreement and shall in no way modify or restrict
any of the terms or provisions hereof.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
By: /s/ Authorized Signatory
-----------------------------------
By: /s/ Authorized Signatory
-----------------------------------
21
<PAGE>
THE BANK OF NEW YORK, as Unit Agent
By: /s/ Authorized Signatory
--------------------------------
THE BANK OF NEW YORK, as Trustee
By: /s/ Authorized Signatory
--------------------------------
THE BANK OF NEW YORK, as Warrant Agent
By: /s/ Authorized Signatory
--------------------------------
22
<PAGE>
Exhibit A to
Unit Agreement
[FORM OF GLOBAL UNIT CERTIFICATE]
150,000 Units
THIS UNIT (THIS "UNIT") IS A GLOBAL UNIT WITHIN THE MEANING OF THE UNIT
----
AGREEMENT HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
--------------
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
------------------------------
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) WITH THE CONSENT OF THE
COMPANY PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND; PROVIDED THAT, IN CONSENTING TO ANY SALE OR OFFER
--------
PURSUANT TO CLAUSE (D) ABOVE, THE COMPANY AND THE UNIT AGENT SHALL HAVE THE
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
UNIT AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION
---
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE &
CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.6 OF THE UNIT AGREEMENT
PURSUANT TO WHICH THEY WERE ISSUED.
A-1
<PAGE>
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT. EACH OF THE UNITS
CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 14.0% SENIOR NOTES DUE 2009 (THE "NOTES")
-----
OF CYBERNET INTERNET SERVICES INTERNATIONAL, INC. (THE "COMPANY") AND ONE
-------
WARRANT (THE "WARRANTS") OF THE COMPANY TO PURCHASE 30.2310693 SHARES OF COMMON
--------
STOCK, PAR VALUE $.001, OF THE COMPANY. THE NOTES AND WARRANTS WILL NOT BE
TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL THE SEPARATION
DATE, WHICH SHALL BE THE EARLIEST OF (I) THE COMMENCEMENT OF AN EXCHANGE OFFER
OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES
AND (II) SUCH OTHER DATE AS LEHMAN BROTHERS INTERNATIONAL (EUROPE) AND MORGAN
STANLEY & CO. INTERNATIONAL LIMITED SHALL JOINTLY DETERMINE IN THEIR SOLE
DISCRETION.
A-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
Units, Each Consisting of $1,000 Principal Amount of 14.0 % Senior
Notes due 2009 and One Warrant to Purchase 30.2310693 shares of
common stock, par value $.001, of Cybernet Internet Services International, Inc.
No. 1 CUSIP No. 232503AA0
Cybernet Internet Services International, Inc., a Delaware
corporation, hereby certifies that Cede & Co., or its registered assigns, is the
registered owner of the number of Units listed on Schedule A, transferable only
on the books of the Company by the holder thereof in person or by his or her
duly authorized attorney, on surrender of this Unit Certificate properly
endorsed. This Unit is issued pursuant to the Unit Agreement, dated as of July
8, 1999 (the "Unit Agreement"; unless otherwise defined herein, terms defined in
--------------
the Unit Agreement are used herein as defined therein) between the Company and
The Bank of New York, as Unit Agent (the "Unit Agent"), as Warrant Agent and as
----------
Trustee, and is subject to the terms and provisions contained therein, all of
which terms and provisions the holder of this Unit consents to by acceptance
hereof.
Each Unit consists of (i) $1,000 principal amount of 14.0 % Senior
Notes due 2009 of the Company and (ii) one Warrant to purchase 30.2310693 shares
of common stock, par value $.001 per share, of the Company.
Reference is made to the provisions of the Notes and Warrants attached
hereto, which will for all purposes have the same effect as if set forth at this
place.
The Notes and Warrants attached to this Unit shall be non-detachable
and not separately transferable until the earlier to occur of: (i) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement with respect to the Notes and (ii) such other date as Lehman Brothers
International (Europe) and Morgan Stanley & Co. International Limited shall
jointly determine in their sole discretion (such earliest date, the "Separation
Date").
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Unit to be signed
manually or by facsimile by its duly authorized Officers.
Dated: July 8, 1999
Cybernet Internet Services International, Inc.
By: ____________________
Name:
Title:
By: ____________________
Name:
Title:
A-4
<PAGE>
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
THE BANK OF NEW YORK,
as Unit Agent
By:___________________________
Authorized Signatory
A-5
<PAGE>
ASSIGNMENT FORM
If you, the Holder, want to assign this Unit, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Unit to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
--------------------------------------
transfer this Unit on the books of Cybernet Internet Services International,
Inc. The agent may substitute another to act for him.
Dated: Signed:
--------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Unit)
A-6
<PAGE>
Schedule A
SCHEDULE OF INCREASES OR DECREASES OF UNITS
The following increases or decreases in this Global Unit have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Units of
Amount of decrease Amount of increase this Global Unit Signature of
Date of in number of Units in number of Units following such authorized signatory
Exchange of this Global Unit of this Global Unit decrease or increase of Unit Agent
- ------------------------------------------------------------------------------------------------------
</TABLE>
A-7
<PAGE>
Exhibit B to
Unit Agreement
[FORM OF DEFINITIVE UNIT CERTIFICATE]
________ Units
THIS UNIT (THIS "UNIT") IS A DEFINITIVE UNIT WITHIN THE MEANING OF THE
----
UNIT AGREEMENT HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
--------------
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO (X) THE DATE
WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
------------------
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
- ----------------
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) WITH THE CONSENT OF THE
COMPANY PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND; PROVIDED THAT, IN CONSENTING TO ANY SALE OR OFFER
--------
PURSUANT TO CLAUSE (D) ABOVE, THE COMPANY AND THE UNIT AGENT SHALL HAVE THE
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
UNIT AGENT, THIS
B-1
<PAGE>
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THESE SECURITIES HAVE BEEN OFFERED AS PART OF A UNIT. EACH OF THE
UNITS CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 14.0 % SENIOR NOTES DUE 2009 (THE
"NOTES") OF CYBERNET INTERNET SERVICES INTERNATIONAL, INC. (THE "COMPANY") AND
- ------ -------
ONE WARRANT (THE "WARRANTS") OF THE COMPANY TO PURCHASE 30.2310693 SHARES OF
--------
COMMON STOCK, PAR VALUE $.001, OF THE COMPANY. THE NOTES AND WARRANTS WILL NOT
BE TRANSFERABLE BY A HOLDER THEREOF SEPARATELY FROM EACH OTHER UNTIL THE
SEPARATION DATE, WHICH SHALL BE THE EARLIEST OF (I) THE COMMENCEMENT OF AN
EXCHANGE OFFER OR THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH
RESPECT TO THE NOTES AND (II) SUCH OTHER DATE AS LEHMAN BROTHERS INTERNATIONAL
(EUROPE) AND MORGAN STANLEY & CO. INTERNATIONAL LIMITED SHALL JOINTLY DETERMINE
IN THEIR SOLE DISCRETION.
B-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
Units, Each Consisting of $1,000 Principal Amount of 14.0 % Senior
Notes due 2009 and One Warrant to Purchase 30.2310693 shares of
common stock, par value $.001, of Cybernet Internet Services International, Inc.
No. ________ CUSIP No.
Cybernet Internet Services International, Inc., a Delaware
corporation, hereby certifies that ___________ is the owner of ______________
Units as described above, transferable only on the books of the Company by the
holder thereof in person or by his or her duly authorized attorney, on surrender
of this Unit Certificate properly endorsed. This Unit is issued pursuant to the
Unit Agreement, dated as of July 8, 1999 (the "Unit Agreement"; unless otherwise
--------------
defined herein, terms defined in the Unit Agreement are used herein as defined
therein) between the Company and The Bank of New York, as Unit Agent (the "Unit
----
Agent"), as Warrant Agent and as Trustee, and is subject to the terms and
- -----
provisions contained therein, all of which terms and provisions the holder of
this Unit consents to by acceptance hereof.
Each Unit consists of (i) $1,000 principal amount of 14.0 % Senior
Notes due 2009 of the Company and (ii) one Warrant to purchase 30.2310693 shares
of common stock, par value $.001 per share, of the Company.
Reference is made to the provisions of the Notes and Warrants attached
hereto, which will for all purposes have the same effect as if set forth at this
place.
The Notes and Warrants attached to this Unit shall be non-detachable
and not separately transferable until the earlier to occur of: (i) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement with respect to the Notes and (ii) such other date as Lehman Brothers
International (Europe) and Morgan Stanley & Co. International Limited shall
jointly determine in their sole discretion (such earliest date, the "Separation
Date").
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Unit to be signed
manually or by facsimile by its duly authorized officers.
Dated: July 8, 1999
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
By: ____________________
Name:
Title:
By: ____________________
Name:
Title:
B-4
<PAGE>
Certificate of Authentication:
This is one of the Units
referred to in the within
mentioned Unit Agreement.
THE BANK OF NEW YORK,
as Unit Agent
By:___________________________
Authorized Signatory
B-5
<PAGE>
ASSIGNMENT FORM
If you, the Holder, want to assign this Unit, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Unit to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________, agent to
transfer this Unit on the books of Cybernet Internet Services International,
Inc. The agent may substitute another to act for him.
Dated: _____________ Signed: ________________________________
(Sign exactly as your name appears
on the other side of this Unit)
B-6
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
================================================================================
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
as Company,
and
THE BANK OF NEW YORK
as Trustee, Registrar and
Paying Agent
-------------
INDENTURE
Dated as of July 8, 1999
-------------
$150,000,000 aggregate principal amount of 14.0% Senior Notes due 2009
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE......................... 1
SECTION 1.1 Definitions................................................. 1
SECTION 1.2 Incorporation by Reference of TIA........................... 20
SECTION 1.3 Rules of Construction....................................... 20
ARTICLE II THE NOTES.......................................................... 20
SECTION 2.1 Form and Dating............................................. 20
SECTION 2.2 Execution and Authentication................................ 21
SECTION 2.3 Registrar and Paying Agent.................................. 22
SECTION 2.4 Paying Agent To Hold Assets in Trust........................ 23
SECTION 2.5 List of Holders............................................. 23
SECTION 2.6 Book-Entry Provisions for Global Notes...................... 23
SECTION 2.7 Registration of Transfer and Exchange....................... 24
SECTION 2.8 Replacement Notes........................................... 28
SECTION 2.9 Outstanding Notes........................................... 29
SECTION 2.10 Treasury Notes.............................................. 29
SECTION 2.11 Temporary Notes............................................. 29
SECTION 2.12 Cancellation................................................ 30
SECTION 2.13 Defaulted Interest.......................................... 30
SECTION 2.14 CUSIP, ISIN and Common Code Numbers......................... 30
SECTION 2.15 Deposit of Moneys........................................... 31
SECTION 2.16 Certain Matters Relating to Global Notes.................... 31
ARTICLE III REDEMPTION......................................................... 31
SECTION 3.1 Optional Redemption......................................... 31
SECTION 3.2 Notices to Trustee.......................................... 31
SECTION 3.3 Selection of Notes to Be Redeemed........................... 31
SECTION 3.4 Notice of Redemption........................................ 32
SECTION 3.5 Effect of Notice of Redemption.............................. 33
SECTION 3.6 Deposit of Redemption Price................................. 33
SECTION 3.7 Notes Redeemed in Part...................................... 34
ARTICLE IV COVENANTS.......................................................... 34
SECTION 4.1 Payment of Notes............................................ 34
SECTION 4.2 Maintenance of Office or Agency............................. 34
SECTION 4.3 Limitation on Restricted Payments........................... 35
SECTION 4.4 Limitation on Indebtedness.................................. 37
SECTION 4.5 Corporate Existence......................................... 41
SECTION 4.6 Payment of Taxes and Other Claims........................... 41
SECTION 4.7 Maintenance of Properties and Insurance..................... 41
SECTION 4.8 Compliance Certificate; Notice of Default................... 42
SECTION 4.9 Compliance with Laws........................................ 42
SECTION 4.10 Reports..................................................... 43
SECTION 4.11 Waiver of Stay; Extension or Usury Laws..................... 44
</TABLE>
<PAGE>
<TABLE>
Page
<S> <C> <C>
SECTION 4.12 Limitation on Transactions with Shareholders
and Affiliates.............................................. 44
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries........................... 45
SECTION 4.14 Limitation on Liens......................................... 46
SECTION 4.15 Change of Control........................................... 46
SECTION 4.16 Limitation on Asset Sales................................... 48
SECTION 4.17 Limitation on Issuance of Guarantees of Indebtedness by
Restricted Subsidiaries..................................... 51
SECTION 4.18 Business of the Company; Restriction on Transfers of
Existing Business........................................... 52
SECTION 4.19 Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries..................................... 52
SECTION 4.20 Additional Amounts.......................................... 52
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges............. 53
SECTION 4.22 Restriction on Sale/Leaseback Transactions.................. 53
SECTION 4.23 Limitation on Investment Company Activities................. 53
ARTICLE V SUCCESSOR CORPORATION.............................................. 54
SECTION 5.1 Consolidation, Merger, and Sale of Assets................... 54
SECTION 5.2 Successor Corporation Substituted........................... 54
ARTICLE VI DEFAULT AND REMEDIES............................................... 55
SECTION 6.1 Events of Default........................................... 55
SECTION 6.2 Acceleration................................................ 56
SECTION 6.3 Other Remedies.............................................. 56
SECTION 6.4 The Trustee May Enforce Claims Without Possession of
Securities.................................................. 57
SECTION 6.5 Rights and Remedies Cumulative.............................. 57
SECTION 6.6 Delay or Omission Not Waiver................................ 57
SECTION 6.7 Waiver of Past Defaults..................................... 57
SECTION 6.8 Control by Majority......................................... 58
SECTION 6.9 Limitation on Suits......................................... 58
SECTION 6.10 Rights of Holders To Receive Payment........................ 58
SECTION 6.11 Collection Suit by Trustee.................................. 58
SECTION 6.12 Trustee May File Proofs of Claim............................ 59
SECTION 6.13 Priorities.................................................. 59
SECTION 6.14 Restoration of Rights and Remedies.......................... 60
SECTION 6.15 Undertaking for Costs....................................... 60
SECTION 6.16 Compliance Certificate; Notices of Default.................. 60
ARTICLE VII TRUSTEE............................................................ 60
SECTION 7.1 Duties of Trustee........................................... 60
SECTION 7.2 Rights of Trustee........................................... 61
SECTION 7.3 Individual Rights of Trustee................................ 63
SECTION 7.4 Trustee's Disclaimer........................................ 63
SECTION 7.5 Notice of Default........................................... 63
</TABLE>
<PAGE>
<TABLE>
Page
<S> <C> <C>
SECTION 7.6 Report by Trustee to Holders................................ 63
SECTION 7.7 Compensation and Indemnity.................................. 64
SECTION 7.8 Replacement of Trustee...................................... 65
SECTION 7.9 Successor Trustee by Merger, etc............................ 66
SECTION 7.10 Corporate Trustee Required; Eligibility..................... 66
SECTION 7.11 Disqualification; Conflicting Interests..................... 66
SECTION 7.12 Preferential Collection of Claims Against Company........... 66
ARTICLE VIII SATISFACTION AND DISCHARGE OF INDENTURE............................ 67
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.... 67
SECTION 8.2 Legal Defeasance and Discharge.............................. 67
SECTION 8.3 Covenant Defeasance......................................... 67
SECTION 8.4 Conditions to Legal or Covenant Defeasance.................. 68
SECTION 8.5 Satisfaction and Discharge of Indenture..................... 69
SECTION 8.6 Survival of Certain Obligations............................. 70
SECTION 8.7 Acknowledgment of Discharge by Trustee...................... 70
SECTION 8.8 Application of Trust Moneys................................. 70
SECTION 8.9 Repayment to the Company; Unclaimed Money................... 70
SECTION 8.10 Reinstatement............................................... 71
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS................................ 71
SECTION 9.1 Without Consent of Holders of Notes......................... 71
SECTION 9.2 With Consent of Holders of Notes............................ 72
SECTION 9.3 Compliance with TIA......................................... 73
SECTION 9.4 Revocation and Effect of Consents........................... 73
SECTION 9.5 Notation on or Exchange of Notes............................ 74
SECTION 9.6 Trustee to Sign Amendments, etc............................. 74
ARTICLE X COLLATERAL AND SECURITY............................................. 74
SECTION 10.1 Collateral Agreement........................................ 74
SECTION 10.2 Recording and Opinions...................................... 75
SECTION 10.3 Release of Collateral....................................... 75
SECTION 10.4 Certificates of the Company................................. 76
SECTION 10.5 Authorization of Actions to Be Taken by the Trustee Under
the Collateral Agreement.................................... 76
SECTION 10.6 Authorization of Receipt of Funds by the Trustee Under the
Collateral Agreement........................................ 76
SECTION 10.7 Termination of Security Interest............................ 77
ARTICLE XI MISCELLANEOUS....................................................... 77
SECTION 11.1 TIA Controls................................................ 77
SECTION 11.2 Notices..................................................... 77
SECTION 11.3 Communications by Holders with Other Holders................ 78
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.......... 79
SECTION 11.5 Statements Required in Certificate or Opinion............... 79
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar................... 79
</TABLE>
<PAGE>
<TABLE>
Page
<S> <C> <C>
SECTION 11.7 Legal Holidays.............................................. 79
SECTION 11.8 Governing Law............................................... 80
SECTION 11.9 Submission to Jurisdiction; Appointment of Agent for
Service; Waiver............................................. 80
SECTION 11.10 No Adverse Interpretation of Other Agreements............... 81
SECTION 11.11 No Personal Liability of Directors, Officers, Employees,
Stockholders or Incorporators............................... 81
SECTION 11.12 Currency Indemnity.......................................... 81
SECTION 11.13 Successors.................................................. 81
SECTION 11.14 Counterpart Originals....................................... 81
SECTION 11.15 Severability................................................ 82
SECTION 11.16 Table of Contents, Headings, etc............................ 82
</TABLE>
<PAGE>
EXHIBITS
Exhibit A - Form of Initial Global Note
Exhibit B - Form of Initial Definitive Note
Exhibit C - Form of Exchange Global Note
Exhibit D - Form of Exchange Definitive Note
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
part of this Indenture.
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1)........................................ 7.10
(a)(2)........................................ 7.10
(a)(3)........................................ NA
(a)(4)........................................ NA
(a)(5)........................................ 7.8; 7.11
(b)........................................... 7.8; 7.11
(c)........................................... NA
311(a)........................................... 7.12
(b)........................................... 7.12
(c)........................................... NA
312(a)........................................... 2.5
(b)........................................... 11.3
(c)........................................... 11.3
313(a)........................................... 7.6
(b)(1)........................................ 11.3
(b)(2)........................................ 7.6
(c)........................................... 7.6; 11.2
(d)........................................... 7.6
314(a)........................................... 4.8; 4.10; 11.2; 11.4
(b)........................................... 11.2
(c)(1)........................................ 7.2; 11.4
(c)(2)........................................ 7.2; 11.4
(c)(3)........................................ NA
(d)........................................... 11.3;11.4; 11.5
(e)........................................... 11.5
(f)........................................... NA
315(a)........................................... 7.1(c)
(b)........................................... 7.5; 11.2
(c)........................................... 7.1(a)
(d)........................................... 6.8; 7.1(c)
(e)........................................... 6.15
316(a)(last sentence)............................ 2.9
(a)(1)(A)..................................... 6.8
(a)(1)(B)..................................... 6.7
(a)(2)........................................ NA
(b)........................................... 6.10
317(a)(1)........................................ 6.11
(a)(2)........................................ 6.12
(b)........................................... 2.4
318(a)........................................... 11.1
(c)........................................... 11.1
- ----------------------
</TABLE>
NA means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
INDENTURE, dated as of July 8, 1999, between Cybernet Internet
Services International, Inc., a Delaware corporation (the "Company"),
-------
and The Bank of New York, a New York banking corporation, as Trustee,
Registrar and Paying Agent.
The Company has duly authorized the creation and issuance of (i) its 14.0%
Senior Notes due 2009 issued on the date hereof (the "Original Notes"), (ii)
--------------
Additional Notes (as defined herein) that may be issued on any Issue Date (all
such notes referred to in (i) and (ii) being referred to as the "Initial
-------
Notes"), and (iii) 14.0% Senior Notes due 2009 to be issued in exchange for
- -----
Initial Notes pursuant to a Registration Rights Agreement (the "Exchange Notes"
--------------
and, together with the Initial Notes, the "Notes"); and, to provide therefor,
-----
the Company has duly authorized the execution and delivery of this Indenture.
Except as otherwise provided herein, the Notes shall be limited to $350,000,000
in aggregate principal amount outstanding, of which $150,000,000 in aggregate
principal amount shall be initially issued on the date hereof. Subject to the
conditions and compliance with the covenants set forth herein, the Company may
issue up to $200,000,000 aggregate principal amount of Additional Notes.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions. For purposes of this Indenture, unless
-----------
otherwise specifically indicated herein, the term "consolidated" with respect to
any Person refers to such Person consolidated with its Restricted Subsidiaries,
and excludes from such consolidation any Unrestricted Subsidiary as if such
Unrestricted Subsidiary were not an Affiliate of such Person. In addition, for
purposes of the following definitions and this Indenture generally, all
calculations and determinations shall be made in accordance with U.S. GAAP and
shall be based upon the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with U.S. GAAP. As used in this Indenture,
the following terms shall have the following meanings:
"Acquired Indebtedness" means, Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or is merged or consolidated
with or into the Company or any Restricted Subsidiary or assumed in connection
with an Asset Acquisition by the Company or a Restricted Subsidiary and not
incurred in connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary, such merger or consolidation 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 the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into the Company or any Restricted Subsidiary or such
Asset Acquisition shall not be Indebtedness.
"Additional Amounts" shall have the meaning set forth in Section 4.20.
"Additional Notes" means up to $200,000,000 aggregate principal amount of
14.0% Senior Notes due 2009 issued under the terms of this Indenture after the
Closing Date.
<PAGE>
"Affiliate" as applied to any Person means any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, 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, Paying Agent, Authenticating Agent or co-
Registrar.
"Agent Members" shall have the meaning set forth in Section 2.16.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary 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 an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transactions) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person (other than the Company or any of its Restricted
Subsidiaries) of (i) all or any of the Equity Interests in any Subsidiary, (ii)
all or substantially all of the property and assets of an operating unit or line
of business of the Company or any of its Restricted Subsidiaries or (iii) any
other property and assets of the Company or any of its Restricted Subsidiaries
outside the ordinary course of business (including the receipt of proceeds paid
on account of the loss of or damage to any property or asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceedings). For the purposes of this definition, the term "Asset Sale" shall
not include (a) any transaction consummated in compliance with Section 5.1 and
the creation of any Lien not prohibited by Section 4.14; provided, however, that
any transaction consummated in compliance with such Section 5.1, involving a
sale, conveyance, assignment, transfer, lease or other disposal of less than all
of the properties or assets of the Company and the Restricted Subsidiaries shall
be deemed to be an Asset Sale with respect to the properties or assets of the
Company and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; (c) sales of telecommunications
network capacity of the Company or any Restricted Subsidiary including sales of
indefeasible rights of use of or transfers of dark fiber optic transmission
cable, in each case in the ordinary course of business; and (d) any transaction
consummated in compliance with Section 4.3. In addition, solely for purposes of
Section 4.16, any sale, conveyance, transfer, lease or other
2
<PAGE>
disposition of any property or asset, whether in one transaction or a series of
related transactions, involving assets with a Fair Market Value not in excess of
C1.0 million in any fiscal year shall be deemed not to be an "Asset Sale."
"Asset Sale Offer" shall have the meaning set forth in Section 4.16.
"Attributable Debt" means, in respect of a Sale/Leaseback Transaction, as
at the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Authenticating Agent" shall have the meaning set forth in Section 2.2.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of creditors.
"Board of Directors" means the Board of Directors of the Company.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City or Munich.
"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, including, without limitation,
if such Person is a partnership, partnership interests (whether general or
limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
"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 U.S.
GAAP, is required to be capitalized and reflected as a liability on the balance
sheet of such Person; and "Capitalized Lease Obligation" is defined to mean, at
the time any determination thereof is to be made, the discounted present value
of the rental obligations under such lease.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the U.S. government or any agency or instrumentality
thereof or by the German government or any agency or instrumentality thereof
having maturities of not more than 360 days from the date of acquisition; (b)
overnight bank deposits or certificates of deposit, eurodollar time deposits and
bankers' acceptances with maturities of 360 days or less from the date of
acquisition, in each case with any commercial bank having capital and surplus in
excess of $500 million and outstanding debt rated at least "A" or the equivalent
thereof by S&P or Moody's; provided, however, that securities deposited in the
Collateral Account may have a
3
<PAGE>
Stated Maturity as late as July 1, 2002; (c) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clauses (a) and (b) entered into with any financial institution meeting the
qualifications specified in clause (b) above; (d) commercial paper rated at
least A-1 or P-1, or the equivalent thereof, by S&P or Moody's, respectively,
and in each case maturing within 360 days after the date of acquisition; and (e)
direct obligations of, or obligations fully and unconditionally guaranteed by,
any member of the European Community rated at least "AAA" or the equivalent
thereof by both S&P and Moody's.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (other than a
Permitted Holder) becomes 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
then outstanding Voting Stock of the Company on a fully diluted basis, provided
that the relevant threshold in the case of Cybermind Interactive Europe and
Holger Timm shall be 40%; (ii) individuals who at the beginning of any period of
two consecutive calendar years constituted the Board of Directors (together with
any directors who are members of the Board of Directors on the date hereof and
any new directors whose election by the Board of Directors or whose nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the members of the Board of Directors then still in office who
either were members of the Board of Directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the members of such Board of Directors
then in office; (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company to any
such "person" or "group" (other than to a Restricted Subsidiary); or (iv) the
merger or consolidation of the Company with or into another corporation or the
merger of another corporation with or into the Company with the effect that
immediately after such transaction any such "person" or "group" of persons or
entities shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of the total
voting power of the then outstanding Voting Stock of the surviving corporation.
"Change of Control Offer" shall have the meaning set forth in Section
4.15.
"Change of Control Payment" shall have the meaning set forth in Section
4.15.
"Change of Control Payment Date" shall have the meaning set forth in
Section 4.15.
"Closing Date" means the date of this Indenture.
"Collateral" means all funds and securities in the Collateral Account and
the proceeds thereof.
"Collateral Account" means (i) the account established by the Collateral
Agent pursuant to the terms of the Collateral Agreement for the deposit of
funds, the Government Securities or the Cash Equivalents (as defined therein)
purchased by, or purchased at the
4
<PAGE>
direction of, the Company with a portion of the net proceeds from the offering
of the Initial Notes and (ii) a similar account established in connection with
the issuance of Additional Notes.
"Collateral Agent" means (i) The Bank of New York, as collateral agent
under the Collateral Agreement dated the date hereof until a successor replaces
it in accordance with the terms of the Collateral Agreement and thereafter means
such successor and (ii) a collateral agent appointed under a collateral
agreement executed in connection with the issuance of Additional Notes.
"Collateral Agreement" means (i) the Collateral Agreement, dated the date
hereof, between the Company and The Bank of New York as Trustee and Collateral
Agent, governing the disbursement of funds from the Collateral Account or (ii) a
similar collateral agreement executed in connection with the issuance of
Additional Notes.
"Commission" is defined to mean the United States Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of the Indenture such commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Company Order" means a written order or request signed in the name of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company or any other officer so authorized
and delivered to the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the (i) Consolidated Net Income of such Person for such period plus, to the
extent deducted in computing such Consolidated Net Income (and without
duplication) Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (iii) any amount attributable
to depreciation and amortization expense and (iv) all other non-cash items
reducing Consolidated Net Income (excluding any non-cash charge to the extent
that it requires or represents an accrual of, or reserve for, cash charges in
any future period), less all non-cash items increasing Consolidated Net Income
(excluding any items which represent the reversal of an accrual of, or reserve
for, anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with U.S. GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.
5
<PAGE>
"Consolidated Fixed Charges" means, with respect to any Person for any
period, Consolidated Interest Expense plus dividends declared and payable on
Preferred Stock.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate amount of interest in respect of Indebtedness (including
capitalized interest, amortization of original issue discount on any
Indebtedness and the interest portion of any deferred payment obligation)
calculated in accordance with U.S. GAAP; 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 such Person or any of its
Restricted Subsidiaries, less the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by such Person and its Restricted Subsidiaries during such period;
excluding, however, any amount of such interest of any Restricted Subsidiary to
the extent the net income of such Restricted Subsidiary is excluded in the
calculation of Consolidated Net Income pursuant to the last proviso of such
definition.
"Consolidated Net Income" means, for any period, the net income (or loss)
of the Company and its consolidated Restricted Subsidiaries determined in
accordance with U.S. GAAP; provided, however, that there will not be included in
such Consolidated Net Income: (i) any net income (loss) of any Person if such
Person is not a Restricted Subsidiary, except that (a) subject to the
limitations contained in clauses (iv), (v) and (vi) below, the Company's equity
in the net income of any such Person for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iii) below) and (b) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period will be included in
determining such Consolidated Net Income to the extent such loss has been funded
with cash from the Company or a Restricted Subsidiary; (ii) any net income
(loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (a) subject to the limitations
contained in clauses (iv), (v) and (vi) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary as a dividend (subject, in the case of a
dividend to another Restricted Subsidiary, to the limitation contained in this
clause) and (b) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such Consolidated Net
Income; (iv) any gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not
sold or otherwise disposed of in the ordinary course of business and any gain
(loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (v) any extraordinary gain or loss; and (vi) the cumulative effect of a
change in accounting principles.
6
<PAGE>
"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 such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with U.S. 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 address of the Trustee specified in
Section 11.2.
"Covenant Defeasance" shall have the meaning set forth in Section 8.3.
"Credit Facilities" means one or more senior credit agreements, senior
loan agreements or similar senior facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" means, for the period beginning on the
Issue Date through and including the end of the last fiscal quarter (taken as
one accounting period) preceding the date of any proposed Restricted Payment,
Consolidated Cash Flow of the Company and its Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with U.S. GAAP.
"Cumulative Consolidated Fixed Charges" means, for the period beginning on
the Issue Date through and including the end of the last fiscal quarter (taken
as one accounting period) preceding the date of any proposed Restricted Payment,
Consolidated Fixed Charges of the Company and its Restricted Subsidiaries for
such period determined on a consolidated basis in accordance with U.S. GAAP.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement and any other arrangement or agreement designed to provide protection
against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Default Interest Payment Date" shall have the meaning set forth in
Section 2.13.
7
<PAGE>
"Definitive Notes" means Notes in definitive registered form substantially
in the form of Exhibits B and D.
"DTC" means The Depository Trust Company or its successors.
"DWAC" means the Depositary/Deposit Withdraw at Custodian system.
"Eligible Accounts Receivable" means the accounts receivables (net of any
reserves and allowances for doubtful accounts in accordance with U.S. GAAP) of
any Person that are not more than 60 days past their due date and that were
entered into in the ordinary course of business on normal payment terms as shown
on the most recent consolidated balance sheet of such Person filed with the
Commission, all in accordance with U.S. GAAP.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
office), as operator of the Euroclear System.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Excess Proceeds" shall have the meaning set forth in Section 4.16.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations thereunder.
"Exchange Notes" have the meaning provided in the preamble to this
Indenture.
"Exchange Offer" means an offer by the Company, pursuant to a Registration
Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to
such Holders, in exchange for their Initial Notes, a like aggregate principal
amount of Exchange Notes registered under the Securities Act.
"Fair Market Value" means, with respect to any asset or property, the
price (after taking into account any liabilities relating to such assets) which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is under
any compulsion to complete the transaction; provided, however, that the Fair
Market Value of any such asset or assets shall be determined conclusively by the
Board of Directors acting in good faith, which determination shall be evidenced
by a resolution of such Board delivered to the Trustee.
"Global Note" shall mean the Rule 144A Global Note.
8
<PAGE>
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged and are
not callable or redeemable at the option of the issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation in any
manner (including, without limitation, letters of credit and reimbursement
agreements in respect thereof) of any other Person; provided that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"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 Indebtedness by reason of the acquisition of more
than 50% of the Equity Interests in any Person; provided that none of the
accrual of interest, the payment of interest in the form of additional
Indebtedness or 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,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the 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, (D)
representing Capitalized Lease Obligations, (ii) 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, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of determination
and (v) 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 that (x) the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with U.S. GAAP, (y) money borrowed and set aside at the time of
the Incurrence of any Indebtedness for the sole purpose of prefunding the
payment of interest on such Indebtedness (and which is pledged in favor of the
holders of such Indebtedness pending such application) shall not be deemed to be
"Indebtedness" so long as such money is held to secure the
9
<PAGE>
payment of such interest and (z) Indebtedness shall not include any liability
for federal, state, local or other taxes.
"Indebtedness to Consolidated Cash Flow Ratio" shall have the meaning set
forth in Section 4.4.
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time in accordance with the terms hereof.
"Initial Global Notes" means the Rule 144A Global Note.
"Initial Notes" shall have the meaning set forth in the preamble to this
Indenture.
"Initial Purchasers" means Lehman Brothers International (Europe) and
Morgan Stanley & Co. International Limited.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate insurance, and any other arrangement or
agreement designed to provide protection against fluctuations in interest rates.
"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 U.S. GAAP, recorded as accounts
receivable on the balance sheet of such Person or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other tangible
or intangible property to another Person or any payment for any property or
services for the account or use of another Person), or any purchase or
acquisition of Equity Interests, bonds, notes, debentures, or other similar
instruments issued by, any other Person. For purposes of the definition of
"Unrestricted Subsidiary" and Sections 4.3 and 4.19, (i) "Investment" shall
include (a) the Fair Market Value of the assets (net of liabilities) of any
Restricted Subsidiary of the Company at the time that such Restricted Subsidiary
of the Company is designated an Unrestricted Subsidiary and shall exclude the
Fair Market Value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company and (b) the Fair Market Value, in the case
of a sale of Equity Interests in accordance with Section 4.19 such that a Person
no longer constitutes a Restricted Subsidiary, of the remaining assets (net of
liabilities) of such Person after such sale, and shall exclude the Fair Market
Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Company and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.
"Issue Date" means the date on which the Notes are originally issued under
this Indenture.
10
<PAGE>
"Legal Defeasance" shall have the meaning set forth in Section 8.2.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of Munich, Germany or The City of New York or a place
of payment are authorized or required by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Lien" means, any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind in respect of an asset, whether or not filed, recorded or
otherwise perfected under applicable law (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any option or other agreement to sell or give any security interest).
"Liquidated Damages" shall have the meaning set forth in the Registration
Rights Agreement.
"Maturity Date" means July 1, 2009.
"Most Recent Balance Sheet" means, with respect to any Person, the most
recent consolidated balance sheet of such Person reported on by an
internationally recognized firm of independent accountants without qualification
as to scope.
"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 of the
Company) 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) taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing agreements), (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
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 U.S. GAAP;
provided that such amounts which cease to be held as reserves shall be deemed
Net Cash Proceeds; and (b) with respect to any issuance or sale of Equity
Interests (other than Redeemable Stock and excluding any Equity Interests issued
in connection with the Offering), 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
11
<PAGE>
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent (1) such
obligations are financed, directly or indirectly, with money borrowed from the
Company or any Restricted Subsidiary or otherwise financed or sold with recourse
to the Company or any Restricted Subsidiary or (2) the purchase of the Equity
Interests is otherwise financed, directly or indirectly, by the Company or any
Restricted Subsidiary, including through funds contributed, extended, guaranteed
or otherwise advanced by the Company or any Affiliate) and proceeds from the
conversion of other property received when converted to cash or Cash
Equivalents, net of attorneys' 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" shall have the meaning set forth in the preamble of this
Indenture.
"Offer Amount" shall have the meaning set forth in Section 4.16.
"Offer Period" shall have the meaning set forth in Section 4.16.
"Officer" means, with respect to any Person (other than any Agent), the
Chairman of the Board, any Director, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Treasurer, the Assistant
Treasurer, the Controller or the Secretary of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Sections 11.4 and 11.5.
"Opinion of Counsel" means a written opinion from legal counsel which and
who are reasonably acceptable to, and addressed to, the Trustee complying with
the requirements of Sections 11.4 and 11.5. Unless otherwise required by the
TIA, the legal counsel may be an employee of or counsel to the Company.
"Original Notes" shall have the meaning set forth in the preamble to this
Indenture.
"Paying Agent" shall have the meaning set forth in Section 2.3.
"Permitted Assets" means, with respect to any Person, assets used in the
Permitted Business (or Equity Interests of a Person that becomes a Restricted
Subsidiary, the assets of which consist principally of such Permitted Assets)
that are purchased or acquired by the Company or a Restricted Subsidiary after
the Issue Date.
"Permitted Business" means the business of (i) operating an Internet
connectivity or internet enhancement service as it may exist from time to time,
including, without limitation, providing dial up or dedicated internet service,
web hosting or co-location services, security solutions, configuration services,
electronic commerce, intranet solutions, data backup and
12
<PAGE>
restoral, business content and collaboration or consulting services with respect
to the foregoing (including without limitation, any business conducted by the
Company or any Restricted Subsidiary on the Issue Date), (ii) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (iii) constructing, creating,
developing, providing or marketing communications-related network equipment,
products, software and other devices for use in an Internet or
telecommunications business or (iv) evaluating, participating in or pursuing any
other activity or opportunity that is primarily related to those identified in
clause (i), (ii) or (iii) above. A good faith determination by a majority of the
Board of Directors as to whether a business meets the requirements of this
definition shall be conclusive, absent manifest error.
"Permitted Holder" means Andreas Eder, Alessandro Giacalone and any
Affiliate of the foregoing Persons.
"Permitted Investment" means (i) an Investment in a Restricted Subsidiary
or a Person which will, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into or transfer or convey all
or substantially all its assets to, the Company or a Restricted Subsidiary; (ii)
payroll, travel and similar advances to cover matters that are expected at the
time of such advance ultimately to be treated as expenses in accordance with
U.S. GAAP; (iii) stock, obligations or securities received (a) in satisfaction
of judgments or (b) in settlement of debts, or as a result of foreclosure,
perfection or enforcement of any Lien, in each case under this clause (b)
arising in the ordinary course of business and not in contemplation of the
acquisition of such stock, obligations or securities; (iv) Investments in Cash
Equivalents; (v) Investments made as a result of the receipt of noncash
consideration from any Asset Sale made in compliance with Section 4.16; (vi)
Investments in negotiable instruments held for collection, lease, utility and
workers' compensation, performance and other similar pledges or deposits, and
other pledges or deposits permitted under Section 4.14; (vii) obligations under
Interest Rate Agreements or Currency Agreements; provided that such agreements
(a) are designed solely to protect the Company or the Restricted Subsidiary, as
the case may be, 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; (viii) Investments made in the ordinary course
of business and on ordinary business terms in the Permitted Business in
consortia formed to construct transmission infrastructure for use primarily in
the Permitted Business, provided such Investment entitles the Company to rights
of way or rights of use on such transmission infrastructure; and (ix) any
Investment in Pledged Securities.
"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
U.S. GAAP shall have been made; (ii) statutory Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with U.S. GAAP
shall have been made; (iii) Liens incurred or
13
<PAGE>
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or other
similar legislation and other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers under
insurance or self-insurance arrangements); (iv) 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; (v)
Liens (including extensions and renewals thereof) upon real or personal property
of a Restricted Subsidiary purchased or leased after the Issue Date; provided
that (a) such Lien is created solely for the purpose of securing Indebtedness
Incurred by such Restricted Subsidiary in compliance with Section 4.4 and
Section 4.17 (1) to finance the cost 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 and the Incurrence of such Indebtedness or
(2) to refinance any Indebtedness of a Restricted Subsidiary previously so
secured, (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; (vi) any
interest or title of a lessor in the property subject to any Capitalized Lease
or operating lease of a Restricted Subsidiary which, in each case, is permitted
under this Indenture; (vii) Liens on property of, or on Equity Interests in or
Indebtedness of, any Person existing at the time such Person becomes, or becomes
a part of, any Restricted Subsidiary; provided that such Liens were not created,
incurred or assumed in contemplation of such transaction and do not extend to or
cover any property or assets of the Company or any Restricted Subsidiary other
than the property or assets so acquired; (viii) Liens arising from the rendering
of a final judgment or order against the Company or any Restricted Subsidiary of
the Company that does not give rise to an Event of Default; (ix) Liens
encumbering customary initial deposits and margin deposits and other Liens that
are either within the general parameters customary in the industry or incurred
in the ordinary course of business, in each case, securing Indebtedness under
Interest Rate Agreements and Currency Agreements; (x) 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 Issue Date; (xi) Liens
existing on the Issue Date or securing the Notes or any Guarantee of the Notes;
(xii) Liens granted after the Issue Date on any assets or Equity Interests in
the Company or its Restricted Subsidiaries created in favor of the holders;
(xiii) Liens with respect to the assets of a Restricted Subsidiary granted by
such Restricted Subsidiary to the Company or another Restricted Subsidiary to
secure Indebtedness owing to the Company or such Restricted Subsidiary and
Incurred in compliance with clause (ii) of paragraph (b) of Section 4.4; (xiv)
Liens created in connection with the incurrence of any Indebtedness permitted to
be Incurred under clause (iii) of paragraph (b) of Section 4.4; provided that
the Indebtedness which it refinances is secured by similar Liens; (xv) Liens
securing Indebtedness under Credit Facilities incurred in compliance with clause
(viii) of paragraph (b) of Section 4.4; (xvi) Liens incurred or deposits made to
secure the performance of tenders, bids, leases, subleases, licenses,
sublicenses, obligations for utilities, statutory or regulatory obligations,
bankers' acceptances, letters of credit, surety and appeal bonds, government or
other contracts, completion guarantees, 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); (xvii)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties
14
<PAGE>
in connection with the importation of goods; (xviii) Liens created to secure
Attributable Debt in connection with Sale/Leaseback Transactions permitted to be
entered into under Section 4.22; and (xix) Liens with respect to the Collateral
Account (or any similar collateral account established in connection with the
issuance of any Additional Notes or any other notes which are pari passu with
the Notes) arising under the Collateral Agreement (or any similar collateral
agreement established in connection with the issuance of any Additional Notes or
any other notes which are pari passu with the Notes).
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Pledged Securities" means the Government Securities purchased by the
Company and deposited in the Collateral Account.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
"Private Placement Legend" means the legend set forth in Section 2.7(c).
"Pro Forma Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Cash Flow of such Person for such period calculated
on a pro forma basis to give effect to any Asset Sale or Asset Acquisition
(including acquisitions of other Persons by merger, consolidation or purchase of
Equity Interests) during such period as if such Asset Sale or Asset Acquisition
had taken place on the first day of such period and income (or losses) ceased to
accrue or accrued, as the case may be, therefrom from such date.
"Purchase Agreement" means (i) the Purchase Agreement dated July 8, 1999,
among the Company, Parent and the Initial Purchasers and (ii) any other similar
purchase agreement relating to Additional Notes.
"Purchase Date" shall have the meaning set forth in Section 4.16.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Redeemable Stock or
(iii) is redeemable or must be purchased, upon the occurrence of certain
15
<PAGE>
events or otherwise, by such Person at the option of the holder thereof, in
whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Notes; provided, however, that any Capital Stock that
would not constitute Redeemable Stock but for provisions thereof giving holders
thereof the right to require such Person to purchase or redeem such Capital
Stock upon the occurrence of an "asset sale" or "change of control" occurring
prior to the first anniversary of the Stated Maturity of the Notes shall not
constitute Redeemable Stock if (x) the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the terms applicable to the Notes and
described under Section 4.15 and Section 4.16 and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.
"Redemption Date" when used with respect to any Note to be redeemed, means
the date fixed for such redemption pursuant to this Indenture and Paragraphs 8
and 9 of the Initial Notes and Paragraphs 7 and 8 of the Exchange Notes.
"Redemption Price" when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and
Paragraphs 8 and 9 of the Initial Notes and Paragraphs 7 and 8 of the Exchange
Notes.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" means (i) the Registration Rights
Agreement among the Company and the Initial Purchasers, relating to the Original
Notes and dated as of July 8, 1999, as the same may be amended, supplemented or
modified from time to time in accordance with the terms thereof and (ii) any
similar registration rights agreement relating to Additional Notes, as the same
may be amended, supplemented or modified from time to time in accordance with
the terms thereof.
"Relevant Taxing Jurisdiction" shall have the meaning set forth in Section
4.20.
"Replacement Assets" means any property, plant or equipment of a nature or
type that are used or usable in the Permitted Business (as determined in good
faith by the Board of Directors, whose determination shall be evidenced by a
Board Resolution).
"Restricted Subsidiary" means, at any time, any direct or indirect
Subsidiary of the Company that is then not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 (including any successor regulation thereto)
under the Securities Act, as it may be amended from time to time.
"Rule 144A" means Rule 144A (including any successor regulation thereto)
under the Securities Act, as it may be amended from time to time.
"Rule 144A Global Note" shall have the meaning set forth in Section 2.1.
16
<PAGE>
"Rule 144A Notes" shall have the meaning set forth in Section 2.1.
"S&P" means Standard and Poor's Ratings Services, a division of the
McGraw-Hill Companies, and its successors.
"Sale/Leaseback Transaction" is defined to mean an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person, other than leases between the Company and
a Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations thereunder.
"Share Capital" means, at any time of determination, the stated capital of
the Equity Interests (other than Redeemable Stock) and additional paid-in
capital of the Company as set forth on the Most Recent Balance Sheet of the
Company at such time.
"Significant Subsidiary" means, at any time of determination, 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.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person (i) any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is at the time of determination owned, directly or indirectly, by
such Person or one or more other Subsidiaries of such Person and (ii) any
partnership, joint venture, limited liability company or similar entity of which
(A) more than 50% of the capital accounts, distribution rights, total equity and
voting interests or general or limited partnership interests, as applicable, are
owned or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person or a combination thereof whether in the
form of membership, general, special or limited partnership or otherwise and (B)
such Person or any Restricted Subsidiary of such Person is a controlling general
partner, co-venturer or manager or is in a similar position or otherwise
controls such entity.
"Successor Company" shall have the meaning set forth in Section 5.1.
"Taxes" shall have the meaning set forth in Section 4.20.
17
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb), as it may be amended from time to time.
"Trade Payables" means any accounts payable or any other indebtedness or
monetary obligation to trade creditors created, assumed or Guaranteed by the
Company or any of its Restricted Subsidiaries arising in the ordinary course of
business in connection with the acquisition of goods and services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trust Officer" means any officer within the corporate trust department
(or any successor group of the Trustee), including any vice president, assistant
vice president, corporate trust officer, assistant corporate trust officer,
assistant secretary or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unit Agent" means the Unit Agent under the Unit Agreement.
"Unit Agreement" means (i) the Unit Agreement, dated the date hereof,
relating to the offering of 150,000 Units, each consisting of $1,000 principal
amount of the Company's 14.0% Senior Notes due 2009 and one Warrant to purchase
30.2310693 shares of Common Stock of the Company, among the Company and The Bank
of New York, as Unit Agent, Trustee and Warrant Agent thereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated 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 Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary, or any of its
Subsidiaries, owns any Equity Interests or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary; provided that
(a) the Company certifies in an Officers' Certificate that such designation
complies with the covenants described under Section 4.3, (b) such Subsidiary is
not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might reasonably be
obtained in a comparable arm's-length transaction at the time from Persons who
are not Affiliates of the Company, (c) neither the Company nor any of its
Restricted Subsidiaries has any direct or
18
<PAGE>
indirect obligation (1) to subscribe for additional Equity Interests in such
Subsidiary or any Subsidiary of such Subsidiary or (2) to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve any
specified levels of operating results and (d) such Subsidiary and its
Subsidiaries have not at the time of designation, and do not thereafter, Incur
any Indebtedness other than Unrestricted Subsidiary Indebtedness. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur C1.00 of additional Indebtedness under
Section 4.4(a) on a pro forma basis taking into account such designation and (y)
no Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of any
Unrestricted Subsidiary (i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of the Company or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles as in effect in the United States of America which are
applicable at the date of determination and which are consistently applied for
all applicable periods.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act or any successor to such Rule.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily entitled to vote for the election of directors thereof
at a meeting of Stockholders called for such purpose, without the occurrence of
any additional event or contingency.
"Warrant Agreement" means the Warrant Agreement, dated the date hereof,
between the Company and The Bank of New York, as Warrant Agent.
"Warrants" means warrants issued under the Warrant Agreement.
"Weighted Average Life to Maturity" means, at any date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) (a) the
sum of the products of the number of years from such date of determination to
the dates of each successive scheduled principal payment of, or redemption or
similar payment with respect to, such Indebtedness multiplied by (b) the amount
of such principal payment, by (ii) the sum of all such principal payments.
19
<PAGE>
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all
of the outstanding voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.2 Incorporation by Reference of TIA. This Indenture is
----------------------------------
subject to the mandatory provisions of the TIA which as of the date hereof and
thereafter as in effect are 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;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.3 Rules of Construction. Unless the context otherwise
----------------------
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with U.S. GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) "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.
ARTICLE II
THE NOTES
---------
SECTION 2.1 Form and Dating. The Initial Notes and the notation
----------------
relating to the Trustee's certificate of authentication thereof, shall be
substantially in the form of Exhibits A or
20
<PAGE>
B, as applicable. The Exchange Notes, and the notation relating to the Trustee's
certificate of authentication thereof, shall be substantially in the form of
Exhibits C or D, as applicable. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company and the
Trustee shall approve the form of the Notes and any notation, legend or
endorsement on them. Each Note shall be dated the date of its issuance and shall
show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A, B, C, D shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. The Notes will initially be represented
by the Initial Global Notes.
Notes offered and sold in their initial distribution in reliance on Rule
144A shall be initially issued as one or more global notes in registered, global
form without interest coupons, substantially in the form of Exhibit A hereto,
with such applicable legends as are provided in Exhibit A, except as otherwise
permitted herein. Such Initial Global Notes shall be referred to collectively
herein as the "Rule 144A Global Note." Such Rule 144A Global Notes shall be
---------------------
deposited on behalf of the holders of the Notes represented thereby by the
Trustee, at its New York office, as custodian for DTC, duly executed by the
Company and authenticated by the Trustee or an Authenticating Agent as provided
herein; provided until such time as the Notes Separate from the Warrants, the
Rule 144A Global Note shall be represented by a Global Unit deposited with the
Unit Agent as custodian for and registered in the name of DTC or its nominee.
The aggregate principal amount of the Rule 144A Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC, or the records of DTC or its nominee, as the case
may be, as hereinafter provided (or by the issue of a further Rule 144A Global
Note) in consequence of the issue of Definitive Notes or additional Rule 144A
Notes, as hereinafter provided. The Rule 144A Global Note and all other Initial
Notes, if any, evidencing the debt, or any portion of the debt, initially
evidenced by such Rule 144A Global Note, shall collectively be referred to
herein as the "Rule 144A Notes."
---------------
SECTION 2.2 Execution and Authentication. Two Officers shall sign, or
-----------------------------
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
Except as otherwise provided herein, the aggregate principal amount of
Notes which may be outstanding at any time under this Indenture is $350,000,000.
The Trustee shall
21
<PAGE>
authenticate an aggregate principal amount of Notes not to exceed $350 million
for issuance, which shall consist of (i) Original Notes for original issue on
the Closing Date in the aggregate principal amount not to exceed $150,000,000,
(ii) Additional Notes from time to time for issue in an aggregate principal
amount not to exceed $200,000,000, which may be issued by the Company after the
Closing Date, and (iii) Exchange Notes from time to time for issue in the
aggregate principal amount not to exceed $350,000,000 for issuance in exchange
for a like principal amount of Initial Notes pursuant to an exchange offer
registration statement under the Securities Act or pursuant to a Private
Exchange (as defined in the Registration Rights Agreement dated the date
hereof), in each case upon receipt of a Company Order in the form of an
Officers' Certificate. Exchange Notes may have such distinctive series
designation, and such changes in the form thereof, as are specified in the
written order referred to in the preceding sentence. Additional Notes will be
treated as the same series of Notes as the Original Notes for all purposes under
this Indenture, including, without limitation, for purposes of waivers,
amendments, redemptions and offers to purchase. The Officers' Certificate shall
specify the aggregate principal amount of Notes to be authenticated, the series
and type of Notes, the date on which the Notes are to be authenticated, the
issue price, whether the Notes are to be Original Notes, Additional Notes or
Exchange Notes, whether the Notes are to be issued as Definitive Notes or Global
Notes and whether or not the Notes shall bear the Private Placement Legend, or
such other information as the Trustee may reasonably request. In authenticating
the Notes and accepting the responsibilities under this Indenture in relation to
the Notes the Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the form and terms thereof
have been established in conformity with the provisions of this Indenture. Upon
receipt of a Company Order, the Trustee shall authenticate Notes in substitution
of Notes originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent ("Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate Notes. Unless otherwise
provided in the appointment, 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 Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes shall be issuable only in denominations of $1,000 and any
integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an
---------------------------
office or agency in the Borough of Manhattan, The City of New York and, if and
so long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of such stock exchange so require, in Luxembourg, where (i) Global Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (ii) Global Notes may be presented or surrendered for payment
- -----------
("Paying Agent") and (iii) notices and demands in respect of such Global Notes
- --------------
and this Indenture may be served. In the event that Definitive Notes are issued,
(x) Definitive Notes may be presented or surrendered for registration of
transfer or for exchange, (y) Definitive Notes may be presented or surrendered
for payment and (z) notices and demands in respect of the Definitive Notes and
this Indenture may be served at an office of the Registrar or the Paying Agent,
as applicable, in the Borough of Manhattan, The City of New York. The Registrar
shall keep a
22
<PAGE>
register of the Notes and of their transfer and exchange. The Company, upon
notice to the Trustee, may have one or more co-Registrars and one or more
additional Paying Agents. The term "Registrar" includes any co-Registrar and the
term "Paying Agent" includes any additional Paying Agent. The Company initially
appoints The Bank of New York as Registrar and Paying Agent until such time as
The Bank of New York has resigned or a successor has been appointed. The Company
may change any Registrar or Paying Agent without notice to any Holder. Payment
of principal will be made upon the surrender of Definitive Notes at the office
of the Paying Agent, including, if any, the Paying Agent in Luxembourg. In the
case of a transfer of a Definitive Note in part, upon surrender of the
Definitive Note to be transferred, a Definitive Note shall be issued to the
transferee in respect of the principal amount transferred and a Definitive Note
shall be issued to the transferor in respect of the balance of the principal
amount of the transferred Definitive Note at the office of any transfer agent,
including, if any, the transfer agent in Luxembourg.
If the notes are listed on the Luxembourg Stock Exchange, the Company will
appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg, as an additional paying and transfer agent. Upon the issuance of
Definitive Notes, Holders will be able to receive principal and interest on the
Notes and will be able to transfer Definitive Notes at the Luxembourg office of
such paying and transfer agent, subject to the right of the Company to mail
payments in accordance with the terms of this Indenture.
SECTION 2.4 Paying Agent To Hold Assets in Trust. The Company shall
-------------------------------------
require each Paying Agent other than the Trustee to agree in writing that each
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
assets held by the Paying Agent for the payment of principal of, Additional
Amounts, if any, Liquidated Damages, if any, premium, if any, or interest on,
the Notes, and shall notify the Trustee of any Default by the Company in making
any such payment. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
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
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
SECTION 2.5 List of Holders. 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. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee before each Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.6 Book-Entry Provisions for Global Notes. (a) The Global
--------------------------------------
Notes initially shall (i) be registered in the name of DTC or the nominee of
such depositary, (ii) be delivered to the Trustee as custodian for such
depositary and (iii) bear legends as set forth in Section 2.7(c) hereto.
23
<PAGE>
(b) Restrictions on Transfer and Exchange of Global Notes.
-----------------------------------------------------
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another successor of DTC or a nominee of such successor depositary.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Definitive Notes in accordance with the rules and procedures of
DTC and the provisions of Section 2.7. All Global Notes shall be exchanged by
the Company (with authentication by the Trustee) for one or more Definitive
Notes, if (a) any of DTC, Euroclear and Cedel (i) has notified the Company that
it is unwilling or unable to continue as a clearing agency, or (in the case of
DTC) ceases to be a clearing agency registered under the Exchange Act and (ii) a
successor to DTC, Euroclear or Cedel, as the case may be, that (in the case of
DTC) is registered as a clearing agency under the Exchange Act, is not able to
be appointed by the Company within 90 days of such notification or (b) at any
time at the option of the Company. If an Event of Default occurs and is
continuing, the Company shall, at the request of the Holder thereof, exchange
all or part of a Global Note for one or more Definitive Notes (with
authentication by the Trustee); provided, however, that the principal amount at
maturity of such Definitive Notes and such Global Note after such exchange shall
be $1,000 or integral multiples thereof. Whenever all of a Global Note is
exchanged for one or more Definitive Notes, it shall be surrendered by the
Holder thereof to the Trustee for cancellation. Whenever a part of a Global Note
is exchanged for one or more Definitive Notes the Global Note shall be
surrendered by the Holder thereof to the Trustee who shall cause an adjustment
to be made to Schedule A of such Global Note such that the principal amount of
such Global Note will be equal to the portion of such Global Note not exchanged
and shall thereafter return such Global Note to such Holder. A Global Note may
not be exchanged for a Definitive Note other than as provided in this Section
2.6(b).
(c) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.6, the Global
Notes shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall upon written instructions from the
Company authenticate and make available for delivery, to each beneficial owner
in exchange for its beneficial interest in the Global Notes, an equal aggregate
principal amount of Definitive Notes of authorized denominations.
(d) Any Definitive Note constituting a Rule 144A Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) of this
Section 2.6 shall, except as otherwise provided by Section 2.8, bear the Private
Placement Legend.
SECTION 2.7 Registration of Transfer and Exchange. (a) Notwithstanding
-------------------------------------
any provision to the contrary herein, so long as a Note remains outstanding,
transfers of beneficial interests in Global Notes or transfers of Definitive
Notes, in whole or in part, shall be made only in accordance with this Section
2.7.
(b) Other Exchanges. In the event that a Global Note is exchanged for
---------------
Definitive Notes in registered form without interest coupons, pursuant to
Section 2.6(b), or a Definitive Note is exchanged for a beneficial interest in a
Global Note, such Notes may be exchanged or transferred for one another only in
accordance with such procedures as are substantially
24
<PAGE>
consistent with the provisions of Sections 2.6 and 2.7 herein and as may be from
time to time adopted by the Company and the Trustee.
(c) Private Placement Legend. Each Note issued hereunder shall, upon
------------------------
issuance, bear the legend set forth herein and such legend shall not be removed
from such Note except as provided in the next sentence. The legend required for
a Rule 144A Note may be removed from a Rule 144A Note if there is delivered to
the Company and the Trustee such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as may be reasonably required by the Company and the Trustee, that neither
such legend nor the restrictions on transfer set forth therein are required to
ensure that transfers of such Note will not violate the registration
requirements of the Securities Act. Upon provision of such satisfactory
evidence, the Trustee, at the direction of the Company, shall authenticate and
deliver in exchange for such Note another Note or Notes having an equal
aggregate principal amount that does not bear such legend. If such a legend
required for a Rule 144A Note has been removed from a Rule 144A Note as provided
above, no other Note issued in exchange for all or any part of such Note shall
bear such legend, unless the Company has reasonable cause to believe that such
other Note is a "restricted security" within the meaning of Rule 144 and
instructs the Trustee to cause a legend to appear thereon.
The Initial Notes shall bear the following legend (the "Private Placement
-----------------
Legend") on the face thereof:
- ------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
--------------
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
------
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
----------------------------
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT
25
<PAGE>
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) WITH THE
CONSENT OF THE COMPANY, PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT, IN CONSENTING TO
ANY SALE OR OFFER PURSUANT TO CLAUSE (D) ABOVE, THE COMPANY SHALL HAVE THE
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE, THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS PART
OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR
INDIRECTLY, OTHER THAN TO (INVESTMENT) BANKS, PENSION FUNDS, INSURANCE
COMPANIES, SECURITIES FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS,
LARGE INTERNATIONAL AND SUPRA-NATIONAL ORGANIZATIONS AND OTHER COMPARABLE
ENTITIES, INCLUDING, AMONG OTHERS, TREASURIES AND FINANCE COMPANIES OF
LARGE ENTERPRISES, WHICH ARE ACTIVE ON A REGULAR AND PROFESSIONAL BASIS IN
THE FINANCIAL MARKETS FOR THEIR OWN ACCOUNT.
After Separation (as defined in the Unit Agreement), the Global Notes
shall also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
---
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY
26
<PAGE>
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.6 OF THE INDENTURE DATED JULY 8, 1999 PURSUANT TO WHICH
THEY WERE ISSUED.
(d) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Agent Members or
beneficial owners of interest in any Global Note) other than to require delivery
of such certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by the terms of, this
Indenture, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
Each Holder of a Security agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Security in violation of any provision of this Indenture and/or
applicable United States Federal or state securities law.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.6 or this Section 2.7.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(e) Any Initial Notes which are presented to the Registrar for exchange
pursuant to the Exchange Offer shall be exchanged for Exchange Notes of equal
principal amount upon surrender to the Registrar or an exchange agent of the
Initial Notes to be exchanged; provided, however, that the Initial Notes so
surrendered for exchange shall be duly endorsed and accompanied by a letter of
transmittal or written instrument of transfer in form satisfactory to the
Company, the Trustee and the Registrar or an exchange agent duly executed by the
Holder thereof or his attorney who shall be duly authorized in writing to
execute such document. Whenever any Initial Notes are so surrendered for
exchange, the Company shall execute, and upon receipt of the Company Order
provided for in Section 2.2, the Trustee shall authenticate and deliver to the
Holder the same aggregate principal amount of Exchange Notes as those Initial
Notes that have been surrendered.
27
<PAGE>
(f) Definitive Notes shall be transferable only upon the surrender of a
Definitive Note for registration of transfer. When a Definitive Note is
presented to the Registrar or a co-registrar with a request to register a
transfer, the Registrar shall register the transfer as requested if its
requirements for such transfers are met. When Definitive Notes are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Definitive Notes of other denominations, the Registrar shall
make the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Notes at the Registrar's or co-registrar's
request.
(g) The Company shall not be required to make, and the Registrar need not
register transfers or exchanges of, Definitive Notes selected for redemption
(except, in the case of Definitive Notes to be redeemed in part, the portion
thereof not to be redeemed) or any Definitive Notes for a period of 15 days
before a selection of Definitive Notes to be redeemed.
(h) Prior to the due presentation for registration of transfer of any
Note, the Company, the Trustee, the Paying Agent, the Registrar or any co-
registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal, interest, Additional Amounts, if any, or Liquidated Damages, if any,
on such Note and for all other purposes whatsoever, whether or not such Note is
overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
(i) The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section 2.7 (other than in respect of an Exchange
Offer, except as otherwise provided in a Registration Rights Agreement).
(j) All Notes issued upon any transfer or exchange pursuant to the terms
of this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
(k) Holders of Initial Notes (or holders of interests therein) and
prospective purchasers designated by such Holders (or holders of interests
therein) will have the right to obtain from the Company upon request by such
Holders (or holders of interests therein) or prospective purchasers, during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, or is exempt from reporting pursuant to 12g3-2(b) under the
Exchange Act, the information required by paragraph d(4)(i) of Rule 144A in
connection with any transfer or proposed transfer of such Notes.
SECTION 2.8 Replacement Notes. If a mutilated Definitive Note is
-----------------
surrendered to the Registrar, if a mutilated Global Note is surrendered to the
Company or if the Holder of a Note claims that such Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note in such form as the Note being replaced if the
requirements of the Trustee, the Registrar and the Company are met. If required
by the Trustee, the Registrar or the Company, such Holder must provide an
indemnity bond or other
28
<PAGE>
indemnity, sufficient in the judgment of the Company, the Registrar and the
Trustee, to protect the Company, the Registrar, the Trustee and any Agent from
any loss which any of them may suffer if a Note is replaced. The Company, the
Trustee and Registrar, may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note, including reasonable fees and expenses of counsel.
Every replacement Note is an additional obligation of the Company.
SECTION 2.9 Outstanding Notes. Notes outstanding at any time are all
-----------------
the Notes that have been authenticated by the Trustee except those canceled by
it, those delivered to it for cancellation, those reductions in the Global Note
effected in accordance with the provisions hereof and those described in this
Section as not outstanding. Subject to Section 2.10, a Note does not cease to
be outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.8 (other than a mutilated Note
surrendered for replacement), it ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Note is held by a bona fide
---- ----
purchaser. A mutilated Note ceases to be outstanding upon surrender of such
Note and replacement thereof pursuant to Section 2.8.
If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest, Additional Amounts, if any and
Liquidated Damages, if any, on it cease to accrue.
If on a Redemption Date or the Maturity Date the Paying Agent holds cash
in U.S. dollars or Government Securities sufficient to pay all of the principal
and interest due on the Notes payable on that date, then on and after that date
such Notes cease to be outstanding and interest, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes cease to accrue.
SECTION 2.10 Treasury Notes. In determining whether the Holders of the
--------------
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Company or its Affiliates shall be disregarded,
except that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes that a
Trust Officer of the Trustee actually knows are so owned shall be disregarded.
The Company shall notify the Trustee, in writing, when it or any of its
Affiliates repurchases or otherwise acquires Notes of the aggregate principal
amount of such Notes so repurchased or otherwise acquired. The Trustee may
require an Officers' Certificate listing Notes owned by the Company, a
Subsidiary of the Company or an Affiliate of the Company.
SECTION 2.11 Temporary Notes. Until permanent Definitive Notes are ready
---------------
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Definitive Notes upon receipt of a Company Order in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
temporary Definitive Notes to be authenticated and the date on which the
temporary Definitive Notes are to be authenticated. Temporary Definitive Notes
shall be substantially in the form of permanent Definitive Notes but may have
variations that the Company considers appropriate for temporary Definitive
Notes. Without unreasonable
29
<PAGE>
delay, the Company shall prepare and the Trustee shall authenticate upon receipt
of a Company Order pursuant to Section 2.2 permanent Definitive Notes in
exchange for temporary Definitive Notes.
SECTION 2.12 Cancellation. The Company at any time may deliver Notes to
------------
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written direction of the
Company, shall dispose of (subject to the record retention requirements of the
Exchange Act) all Notes surrendered for transfer, exchange, payment or
cancellation; provided, however, that the Trustee may, but shall not be required
to, destroy such canceled Notes. Subject to Section 2.7, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.12.
SECTION 2.13 Defaulted Interest. If the Company defaults in a payment of
------------------
interest on the Notes, it shall pay the defaulted interest, plus (to the extent
lawful) any interest payable on the defaulted interest, to the Holder thereof on
a subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest.
The Company shall notify the Trustee and Paying Agent in writing of the amount
of defaulted interest proposed to be paid on each Note and the date of the
proposed payment (a "Default Interest Payment Date"), and at the same time the
-----------------------------
Company shall deposit with the Trustee or Paying Agent an amount of money equal
to the aggregate amount proposed to be paid in respect of such defaulted
interest or shall make arrangements satisfactory to the Trustee or Paying Agent
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
defaulted interest as in this Section 2.13; provided, however, that in no event
shall the Company deposit monies proposed to be paid in respect of defaulted
interest later than 10:00 a.m. New York City time on the proposed Default
Interest Payment Date with respect to defaulted interest to be paid on the Note.
At least 15 days before the subsequent special record date, the Company shall
mail to each Holder, with a copy to the Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.14 CUSIP, ISIN and Common Code Numbers. The Company in issuing
-----------------------------------
the Notes may use a "CUSIP", "ISIN" or "Common Code" number, and if so, the
Trustee shall use the CUSIP, ISIN and Common Code number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN and Common Code number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP, ISIN or Common Code number.
30
<PAGE>
SECTION 2.15 Deposit of Moneys. Prior to 10:00 a.m. New York City time
-----------------
on each Interest Payment Date and Maturity Date, the Company shall have
deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, on all Notes then outstanding. Such payments shall be
made by the Company in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or Maturity Date, as the
case may be.
SECTION 2.16 Certain Matters Relating to Global Notes. (a) Members of,
----------------------------------------
or participants in, DTC ("Agent Members") shall have no rights under this
-------------
Indenture with respect to any Global Note held on their behalf by DTC or the
Trustee as its custodian, or under the Global Note, and DTC may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or impair, as
between DTC and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.
(b) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including DTC and its Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
ARTICLE III
REDEMPTION
----------
SECTION 3.1 Optional Redemption. The Company may redeem all or any
-------------------
portion of the Notes, upon the terms and at the redemption prices set forth in
each of the Notes. Any redemption pursuant to this Section 3.1 shall be made
pursuant to the provisions of this Article III.
SECTION 3.2 Notices to Trustee. If the Company elects to redeem Initial
------------------
Notes pursuant to Paragraphs 8 or 9 of such Notes or Exchange Notes pursuant to
Paragraphs 7 or 8 thereof, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed at least 15
days prior to the giving of the notice contemplated by Section 3.4 (or such
shorter period as the Trustee in its sole discretion shall determine). The
Company shall give notice of redemption as required under the relevant paragraph
of the Notes pursuant to which such Notes are being redeemed.
SECTION 3.3 Selection of Notes to Be Redeemed. If less than all of the
---------------------------------
Notes are to be redeemed at any time, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
securities exchange, if any, on which such Notes are listed, or if such Notes
are not so listed or such exchange prescribes no method of selection, on a pro
rata basis, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate (and in such manner as complies with applicable
legal
31
<PAGE>
and exchange requirements); provided, however, that no Note of $1,000 in
aggregate principal amount or less shall be redeemed in part. In the event of
partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the Redemption Date by the Trustee from the outstanding Notes not
previously called for redemption.
SECTION 3.4 Notice of Redemption. At least 30 days but not more than 60
--------------------
days before a Redemption Date, the Company shall publish in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allegmeine Zeitung) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or in the case of Definitive Notes, mail to Holders by
first-class mail, postage prepaid, at their respective addresses as they appear
on the registration books of the Registrar. At the Company's request made at
least 45 days before the Redemption Date (or such shorter period as the Trustee
in its sole discretion shall determine), the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall deliver to the Trustee, an Officers' Certificate
requesting that the Trustee give such notice and setting forth the information
to be stated in such notice as provided in the following items. Each notice for
redemption shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Prices and the amount of interest, if any, Additional
Amounts, if any, and Liquidated Damages, if any, to be paid;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued and unpaid
interest, if any, Additional Amounts, if any, and Liquidated Damages,
if any;
(e) that, unless the Company defaults in making the redemption payment,
interest, Additional Amounts, if any, and Liquidated Damages, if any,
on Notes called for redemption cease to accrue on and after the
Redemption Date, and the only remaining right of the Holders of such
Notes is to receive payment of the Redemption Price upon surrender to
the Paying Agent of the Notes redeemed;
(f) (i) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, interest, Additional Amounts, if any, and Liquidated
Damages, if any, shall cease to accrue on the portion called for
redemption, and upon surrender of such Global Note, the Global Note
with a notation on Schedule A thereof adjusting the principal amount
thereof to be equal to the unredeemed portion, will be returned and
(ii) if any Definitive Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed, and that, after the
32
<PAGE>
Redemption Date, upon surrender of such Definitive Note, a new
Definitive Note or Notes in aggregate principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder
thereof, upon cancellation of the original Note;
(g) if fewer than all the Notes are to be redeemed, the identification of
the particular Notes (or portion thereof) to be redeemed, as well as
the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such
partial redemption;
(h) the paragraph of the Notes pursuant to which the Notes are to be
redeemed; and
(i) the CUSIP, ISIN or Common Code number, and that no representation is
made as to the correctness or accuracy of the CUSIP, ISIN or Common
Code number, if any, listed in such notice or printed on the Notes.
SECTION 3.5 Effect of Notice of Redemption. Once notice of redemption
------------------------------
is given in accordance with Section 3.4, Notes called for redemption become due
and payable on the Redemption Date and at the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages, if
any. Upon surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the Redemption Price (which shall include accrued
and unpaid interest thereon, if any, Additional Amounts, if any, and Liquidated
Damages, if any, to the Redemption Date), but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant Record Dates.
SECTION 3.6 Deposit of Redemption Price. Prior to 10:00 a.m. New York
---------------------------
City time on the Redemption Date, the Company shall deposit with the Paying
Agent cash in U.S. dollars sufficient to pay the Redemption Price plus accrued
and unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages,
if any, of all Notes to be redeemed on that date. The Paying Agent shall
promptly return to the Company any cash in U.S. dollars so deposited which is
not required for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, Additional Amounts, if any, and Liquidated Damages, if any,
interest, Additional Amounts and Liquidated Damages on the Notes to be redeemed
will cease to accrue on and after the applicable Redemption Date, whether or not
such Notes are presented for payment. With respect to Definitive Notes, if a
Definitive Note is redeemed on or after an interest Record Date but on or prior
to the related Interest Payment Date, then any accrued and unpaid interest,
Additional Amounts, if any, and Liquidated Damages, if any, shall be paid to the
Person in whose name such Note was registered at the close of business on such
Record Date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest, Additional Amounts, if any, and Liquidated
Damages, if any, shall be paid on the unpaid principal, from the redemption date
until such principal is paid, and to the extent lawful on any interest not paid
on such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1.
33
<PAGE>
SECTION 3.7 Notes Redeemed in Part. Upon surrender and cancellation of
----------------------
a Definitive Note that is redeemed in part, the Company shall execute and the
Trustee shall authenticate for the Holder (at the Company's expense) a new
Definitive Note equal in principal amount to the unredeemed portion of the
Definitive Note surrendered and canceled; provided, however, that each such
Definitive Note shall be in a principal amount at maturity of $1,000 or an
integral multiple thereof. Upon surrender of a Global Note that is redeemed in
part, the Paying Agent shall forward such Global Note to the Trustee who shall
make a notation on Schedule A thereof to reduce the principal amount of such
Global Note to an amount equal to the unredeemed portion of the Global Note
surrendered; provided, however, that each such Global Note shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof.
ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Notes. (a) The Company shall pay the principal,
----------------
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on the Notes in the manner provided in such Notes and this Indenture.
An installment of principal of or interest on the Notes shall be considered paid
on the date it is due if the Trustee or Paying Agent holds at 10:00 a.m. New
York City time on that date money deposited by the Company in immediately
available funds and designated for, and sufficient to pay the installment in
full and is not prohibited from paying such money to the Holders pursuant to the
terms of this Indenture.
(b) The Company shall pay, to the extent such payments are lawful,
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and on overdue installments of interest
(without regard to any applicable grace periods), on any Additional Amounts, and
on any Liquidated Damages, from time to time on demand at the rate borne by the
Notes plus 1.5% per annum. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 4.2 Maintenance of Office or Agency. The Company shall maintain
-------------------------------
the office or agency (which office may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-Registrar) required under Section 2.3
where Notes may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2. The Company hereby initially
designates the office of Corporation Services Company, located at Two World
Trade Center, Suite 8746, New York, New York, 10048, as its office or agency in
the State of New York as required under Section 2.3 hereof. If the Notes are
listed on the Luxembourg Stock Exchange, the Company will appoint Kredietbank
S.A. Luxembourgeoise, or such other Person located in Luxembourg, as an
additional paying and transfer agent.
34
<PAGE>
SECTION 4.3 Limitation on Restricted Payments. (a) 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 account of any
Equity Interest in the Company or any Restricted Subsidiary to the holders
thereof, including any dividend or distribution payable in connection with any
merger or consolidation (other than (A) dividends or distributions payable
solely in Equity Interests (other than Redeemable Stock) of the Company, (B)
dividends or distributions made only to the Company or a Restricted Subsidiary
and (C) pro rata dividends or distributions of Capital Stock of a Restricted
Subsidiary held by Persons other than the Company or a Restricted Subsidiary),
(ii) purchase, redeem, retire or otherwise acquire for value any Equity
Interests of the Company, an Unrestricted Subsidiary or a Restricted Subsidiary
(other than any such Equity Interests owned by the Company or any Restricted
Subsidiary), (iii) make any principal payment or redeem, purchase, repurchase,
defease, or otherwise acquire or retire for value, in each case, prior to any
scheduled repayment, or maturity, any 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 (all such payments or any other
actions described in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments") unless, at the time of, and after giving effect to,
the proposed Restricted Payment:
(A) no Default or Event of Default shall have occurred and be continuing;
(B) the Company could Incur at least C1.00 of additional Indebtedness
under Section 4.4(a); and
(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, 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) after the Issue Date is less than the sum
of (1) 50% of the aggregate amount of the Consolidated Net Income (or, if
the Consolidated Net Income is a loss, 100% of the amount of such loss)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter beginning
immediately following the Issue 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 the
Section 4.10 plus (2) 100% of the aggregate Net Cash Proceeds received by
the Company after the Issue Date from the issuance and sale of its Equity
Interests (other than Redeemable Stock and excluding any Equity Interests
issued in connection with the Offering) to a Person (other than a
Subsidiary of the Company), except to the extent that such Net Cash
Proceeds are used (I) to purchase, redeem or otherwise retire Equity
Interests or Indebtedness as set forth below in clause (iii) or (iv) of the
immediately succeeding paragraph or (II) to Incur Indebtedness pursuant to
clause (x) of paragraph (b) of Section 4.4, plus (3) the aggregate amount
by which Indebtedness (other than any Indebtedness subordinated in right of
payment to the Notes) of the Company or any Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date
into Equity Interests (other than Redeemable Stock and less the amount of
any cash, or the fair value of property, distributed by the Company or any
Restricted
35
<PAGE>
Subsidiary upon such conversion or exchange), plus (4) without duplication
of any amount included in the calculation of Consolidated Net Income, in
the case of repayment of, or return of capital with respect to, any
Investment constituting a Restricted Payment (including the redesignation
of Unrestricted Subsidiaries as Restricted Subsidiaries) made after the
Issue Date, an amount equal to the lesser of (x) the repayment of, or the
return of capital with respect to such Investment and (y) the cost of such
Investment, in either case less the cost of the disposition of such
Investment and net of taxes.
(b) The foregoing provisions of Section 4.3(a) shall not prohibit: (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 provisions
of this Indenture; (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 paragraph Section 4.4(b); (iii) the repurchase, redemption or
other acquisition of Equity Interests in the Company in exchange for, or out of
the Net Cash Proceeds of, a substantially concurrent offering of Equity
Interests (other than Redeemable Stock and excluding any Equity Interests issued
in connection with the Offering) in the Company to any Person (other than a
Subsidiary); (iv) the repurchase, redemption or other acquisition of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the Net Cash Proceeds of, a substantially
concurrent offering of Equity Interests (other than Redeemable Stock and
excluding any Equity Interests issued in connection with the Offering) in the
Company to any Person (other than a Subsidiary); (v) repurchases of Equity
Interests of the Company from employees of the Company or any of its Restricted
Subsidiaries deemed to occur upon exercise of stock options if such Equity
Interests represent a portion of the exercise price of such options, provided
that any payments made pursuant to this clause (v) may not exceed in the
aggregate C5.0 million in any fiscal year 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 Investment); provided that the aggregate amount of Investments made
pursuant to this clause (vi) does not exceed the sum of (a) C25.0 million, plus
(b) the amount of Net Cash Proceeds received by the Company after the Issue Date
from the issuance and sale of its Equity Interests (other than Redeemable Stock
and excluding any Equity Interests issued in connection with the Offering) to a
Person (other than a Subsidiary of the Company), except to the extent that such
Net Cash Proceeds are used (I) to make Restricted Payments pursuant to clause
(C)(2) of Section 4.3(a) or clauses (iii) or (iv) of Section 4.3(b) or (II) to
Incur Indebtedness pursuant to clause (x) of paragraph (b) of Section 4.4 plus
(c) the aggregate amount by which Indebtedness (other than any Indebtedness
subordinated in right of payment to the Notes) of the Company or any Restricted
Subsidiary is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the Issue
Date into Equity Interests (other than Redeemable Stock and less the amount of
any cash, or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange); and (vii) Investments
acquired in exchange for Capital Stock (other than Redeemable Stock) of the
Company; provided that, in the case of clauses (ii) through (vii), 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.
36
<PAGE>
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payments referred to in clauses (ii) and
(vii) thereof and the Net Cash Proceeds from any issuance of Equity Interests
referred to in clauses (iii) and (iv) thereof) shall be included in calculating
whether the conditions of clause (C) of Section 4.3(a) have been met with
respect to any subsequent Restricted Payments. In the event the proceeds of an
issuance of Equity Interests (other than Redeemable Stock and excluding any
Equity Interests issued in connection with the Offering) of the Company are used
for the redemption, repurchase or other acquisition of the Notes, then the Net
Cash Proceeds of such issuance shall be included in clause (C) of Section 4.3(a)
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
(c) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.3 were computed, which calculations may
be based upon the Company's latest available financial statements. The Trustee
shall have no duty to recompute or recalculate or verify the accuracy of the
information set forth in such Officers' Certificate.
SECTION 4.4 Limitation on Indebtedness. (a) The Company will not,
--------------------------
and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness; provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time, or would occur as a consequence of
the Incurrence of any such Indebtedness, the Company may Incur Indebtedness if
immediately thereafter the ratio of (i) the aggregate principal amount of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the pro forma Consolidated
Cash Flow for the preceding two full fiscal quarters multiplied by two,
determined on a pro forma basis as if any such Indebtedness had been Incurred
and the proceeds thereof had been applied at the beginning of such two fiscal
quarters, would be greater than zero and less than or equal to 6.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi), (x) and (xii) below) any Restricted Subsidiary may Incur
each and all of the following:
(i) Indebtedness (other than Acquired Indebtedness) in an aggregate
principal amount at any one time outstanding not to exceed C100.0 million
Incurred to finance the cost (provided that such Indebtedness is Incurred
at any time on or before, or within 90 days following, the incurrence of
such cost) (including the cost of design, development, construction,
acquisition, transportation, installation or integration) of equipment,
inventory or network assets used in the Permitted Business or Equity
Interests of (A) a Restricted Subsidiary that owns principally such assets
from a Person other than the Company or a Restricted Subsidiary of the
Company or (B) any Person that is principally engaged in the Permitted
Business, that would become a Restricted Subsidiary and owns principally
such assets; provided that (x) any such Indebtedness of a Restricted
Subsidiary must be Incurred under one or more Credit Facilities, under one
or more Capitalized Leases or from the vendor of the equipment, inventory
or network assets acquired with the proceeds of such Indebtedness, (y) the
amount of such Indebtedness of the Company
37
<PAGE>
or any Restricted Subsidiary may not exceed the Fair Market Value of the
assets so acquired and (z) the amount of any such Indebtedness permitted to
be Incurred to acquire Equity Interests pursuant to clauses (A) or (B)
shall be reduced by the amount of any Acquired Indebtedness Incurred in
such acquisition;
(ii) Indebtedness of any Restricted Subsidiary owing to and held by the
Company, Indebtedness of the Company owing to and held by any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary owing to and held
by any other Restricted Subsidiary; provided that any subsequent issuance
or transfer of any Capital Stock or any other 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
the Incurrence of such Indebtedness not permitted by this clause (ii); and
provided, further, that Indebtedness of the Company owing to and held by a
Restricted Subsidiary must be unsecured and subordinated in right of
payment to the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness of the
Company or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (ii), (iv), (vii), (viii), (x) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, and reasonable fees and
expenses); provided that such new Indebtedness shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced or refunded is pari passu with the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness
being refinanced or refunded and (D) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, has a Weighted Average
Life to Maturity which is not less than the remaining Weighted Average Life
to Maturity of the Indebtedness to be refinanced or refunded; and provided
further that in no event may Indebtedness of the Company be refinanced or
refunded 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
or letters of credit supporting Trade Payables, in each case provided in
the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (x) are designed solely to
protect the Company or the Restricted Subsidiary, as the case may be,
against fluctuations in foreign currency exchange rates or interest rates
and (y) do not increase the Indebtedness of the obligor outstanding at any
38
<PAGE>
time other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder, and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, bankers' acceptances, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred
for the purpose of financing such acquisition by the Person acquiring all
or any portion of such business, assets or Restricted Subsidiary), 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, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described in Sections 8.1,
8.2 and 8.3;
(vi) Indebtedness of the Company represented by the Notes;
(vii) Indebtedness represented by a Guarantee of the Notes and Guarantees
of other Indebtedness of the Company by a Restricted Subsidiary in each
case permitted by and made in accordance with Section 4.17;
(viii) Indebtedness under one or more Credit Facilities (which shall be
in addition to any such Indebtedness incurred under one or more Credit
Facilities under clause (b)(i) above), in an aggregate principal amount at
any one time outstanding not to exceed the greater of (x) C50.0 million and
(y) 80.0% of Eligible Accounts Receivable at such time;
(ix) Acquired Indebtedness provided that the aggregate amount of such
Acquired Indebtedness of the Person that is to become a Restricted
Subsidiary, or to be merged or consolidated with or into the Company or any
Restricted Subsidiary in the contemplated transaction, or to be assumed by
the Company or a Restricted Subsidiary in connection with an Asset
Acquisition, outstanding at the time of such transaction does not exceed
the Fair Market Value of the equipment, inventory, network assets and Cash
Equivalents of any Restricted Subsidiary so acquired or that are acquired
in such Asset Acquisition, as the case may be;
(x) Indebtedness of the Company not to exceed, at any one time
outstanding, the sum of:
(A) 2.00 times the Net Cash Proceeds received from the issuance
and sale, other than to a Subsidiary, of Equity Interests (other than
Redeemable Stock and excluding any Equity Interests issued in connection
with the Offering) of the Company, less, (I) the amount of such proceeds
used to make Restricted Payments as provided in clause (C)(2) of
subsection 4.3(a) or clauses (iii) or (iv) of the first paragraph of
subsection 4.3(b) and (II) if such proceeds are used to consummate a
transaction pursuant to which
39
<PAGE>
the Company Incurs Acquired Indebtedness, one-half of the amount of such
Acquired Indebtedness so Incurred and
(B) the Fair Market Value of any Permitted Assets acquired by the
Company in exchange for Equity Interests of the Company issued after the
Issue Date; provided, however, that in determining the Fair Market Value
of any such Permitted Assets so acquired, if the estimated Fair Market
Value of such Permitted Assets exceeds (x) C2.0 million, then the Fair
Market Value of such Permitted Assets will be determined by a majority of
the Board of Directors, which determination will be evidenced by a
resolution thereof, and (y) C10.0 million, then the Company will deliver
the Trustee a written appraisal as to the fair market value of such
Permitted Assets prepared by an internationally recognized investment
banking or public accounting firm (or, if no such investment banking or
public accounting firm is qualified to prepare such an appraisal, by an
internationally recognized appraisal firm); and provided further that
such Indebtedness (other than the Indebtedness Incurred under one or more
Credit Facilities, under one or more Capitalized Leases or from the
vendor of assets, property or services acquired with the proceeds of such
Indebtedness) does not mature prior to the Stated Maturity of the Notes
and the Weighted Average Life to Maturity of such Indebtedness is longer
than that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
(xii) Unsecured Indebtedness of the Company (in addition to Indebtedness
permitted under clauses (i) through (xi) above) in an aggregate principal
amount outstanding at any one time not to exceed C200.0 million.
(c) For purposes of determining any particular amount of Indebtedness
under subsection 4.4, 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; provided, however, that the
foregoing shall not in any way be deemed to limit the provisions of Section
4.17. For purposes of determining compliance with this Section 4.4, (A) 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 of subsection 4.4(b), the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses and (B) the principal amount of Indebtedness issued at a price that
is less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in conformity with U.S. GAAP.
(d) For purposes of determining compliance with any Euro-denominated
restriction on the Incurrence of Indebtedness, the Euro-equivalent principal
amount of Indebtedness denominated in a non-Euro currency shall be calculated
based on the relevant currency exchange rate in effect on the date such
Indebtedness was Incurred, in the case of term Indebtedness, or first committed,
in the case of revolving credit Indebtedness; provided that if such Indebtedness
is Incurred to refinance other Indebtedness denominated in a non-Euro currency,
and such refinancing would cause the applicable Euro-denominated restriction to
be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such Euro-
40
<PAGE>
denominated restriction shall be deemed not to have been exceeded so long as the
principal amount of such refinancing Indebtedness does not exceed the principal
amount of such Indebtedness being refinanced. 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 currency exchange rate applicable to the currencies in which such
refinancing Indebtedness is denominated that is in effect on the date of such
refinancing.
SECTION 4.5 Corporate Existence. Except as otherwise permitted by
-------------------
Article V, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate, partnership, limited liability or other existence of each of its
Subsidiaries in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory) of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right, or
the corporate, partnership, limited liability or other existence of any
Subsidiary, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and each of its Subsidiaries, taken as a whole, and that the loss
thereof is not, and will not be, adverse in any material respect to the Holders.
SECTION 4.6 Payment of Taxes and Other Claims. The Company shall pay or
---------------------------------
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon it or any of its Subsidiaries or upon the income, profits or
property of it or any of its Subsidiaries and (ii) all lawful claims for labor,
materials and supplies which, in each case, if unpaid, might by law become a
material liability or Lien upon the property of it or any of its Subsidiaries;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
SECTION 4.7 Maintenance of Properties and Insurance. (a) The Company
---------------------------------------
shall cause all material properties owned by or leased by it or any of its
Subsidiaries useful and necessary to the conduct of its business or the business
of any of its Subsidiaries to be improved or maintained and kept in normal
condition, repair and working order and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
its judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.7 shall prevent the Company or any of its Subsidiaries
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 Board of Directors or of the board of directors of any
Subsidiary of the Company concerned, or of an officer (or other agent employed
by the Company or of any of its Subsidiaries) of the Company or any of its
Subsidiaries having managerial responsibility for any such property, desirable
in the conduct of the business of the Company or any Subsidiary of the Company,
and if such discontinuance or disposal is not adverse in any material respect to
the Holders.
41
<PAGE>
(b) To the extent available at commercially reasonable rates, the Company
shall maintain, and shall cause its Subsidiaries to maintain, insurance with
responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses of similar size.
SECTION 4.8 Compliance Certificate; Notice of Default. (a) The Company
-----------------------------------------
shall deliver to the Trustee, within 90 days after the close of each fiscal
year, an Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
it has kept, observed, performed and fulfilled, and has caused each of its
Subsidiaries to keep, observe, perform and fulfill its obligations under this
Indenture and the Collateral Agreement and further stating, as to each such
Officer signing such certificate, that, to the best of his or her knowledge, the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and
fulfill each and every such covenant contained in this Indenture and the
Collateral Agreement and no Default occurred during such year and at the date of
such certificate there is no Default which has occurred and is continuing or, if
such signers do know of such Default, the certificate shall describe its status,
with particularity and that, to the best of his or her knowledge, no event has
occurred and remains by reason of which payments on the account of the principal
of or interest, if any, Additional Amounts, if any, or Liquidated Damages, if
any, on the Notes is prohibited or if such event has occurred, a description of
the event and what action each is taking or proposes to take with respect
thereto. The Officers' Certificate shall also notify the Trustee should the
Company elect to change the manner in which it fixes its fiscal year end. The
Company shall notify the Trustee of any default or defaults in the performance
of any covenants or agreements under this Indenture or the Collateral Agreement
within five Business Days of becoming aware of any such default.
(b) The annual financial statements delivered pursuant to Section 4.10
shall include, so long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, a written report of the
Company's independent accountants (who shall be a firm of established
international reputation) that in conducting their audit of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Articles IV, V or VI of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall deliver to the Trustee, within 5 Business Days,
upon any officer becoming aware of any Default or any default or event of
default under any document, instrument or agreement representing Indebtedness of
the Company, an Officers' Certificate specifying the Default or such default or
event of default and describing its status with particularity.
SECTION 4.9 Compliance with Laws. The Company shall comply, and shall
--------------------
cause each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders of the relevant jurisdiction in which they are incorporated
and/or in which they carry on business,
42
<PAGE>
all political subdivisions thereof, and of any relevant governmental regulatory
authority, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as
would not in the aggregate have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole.
SECTION 4.10 Reports. (a) The Company will file on a timely basis with
-------
the Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (which financial statements shall be
prepared in accordance with U.S. GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual financial information, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K, in each case, if the Company had a
class of securities registered under the Exchange Act, whether or not the
Company has such a class of securities registered under the Exchange Act. Such
quarterly financial information shall be filed with the Commission within 45
days following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end of
each fiscal year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed by the
Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company shall also (a) file with the Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply, at the Company's cost, copies
of such reports and documents to any prospective holder promptly upon request.
In addition, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall require, copies of all
reports and information described above will be deposited with and available
during normal business hours at the office of the Company's listing agent in
Luxembourg.
(b) Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(c) Such reports shall be delivered to the Registrar and the Registrar
will mail them at the Company's expense to the Holders at their addresses
appearing in the register of Notes maintained by the Registrar if so requested
by the Holders in writing.
(d) Upon qualification of this Indenture with the TIA, the Company shall
also comply with the provisions of TIA Section 314(a).
43
<PAGE>
SECTION 4.11 Waiver of Stay; Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, 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 Company from paying all or any portion of the
principal of and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture, and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.12 Limitation on Transactions with Shareholders and Affiliates.
-----------------------------------------------------------
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction or series of
transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any direct
or indirect holder (or any Affiliate of such holder) of 5% or more of any class
of Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, unless:
(i) such transaction or series of transactions is on terms that are no
less favorable to the Company or such Restricted Subsidiary than could
reasonably be obtained in a comparable arm's-length transaction with a
Person that is not such a holder or Affiliate;
(ii) if such transaction or series of transactions involves aggregate
consideration in excess of C2.5 million, the Company shall have delivered
to the Trustee a resolution set forth in an Officers' Certificate adopted
by a majority of the Board of Directors, including a majority of the
independent, disinterested directors, approving such transaction or series
of transactions and certifying that such transaction or series of
transactions comply with paragraph (i) above; and
(iii) if such transaction or series of transactions involves aggregate
consideration in excess of C7.5 million, the Company shall have delivered
to the Trustee a written opinion as to the fairness to the Company or such
Restricted Subsidiary of such transaction or series of transactions from a
financial point of view from an internationally recognized investment
banking firm (or, if an investment banking firm is generally not qualified
to give such an opinion, by an internationally recognized appraisal firm or
accounting firm).
(b) The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) the payment of dividends, distributions or other amounts by the Company or
any Restricted Subsidiary permitted by Section 4.3; (iv) issuances of Equity
Interests (other than Redeemable Stock) on terms consistent with the
requirements of paragraph (i) of the preceding subsection; and (v) any payments
or other transactions pursuant to tax-sharing agreements between the Company and
any other Person with which the Company files a
44
<PAGE>
consolidated tax return or with which the Company is part of a consolidated
group for tax purposes.
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. (a) The Company will not, and will not
- ---------------------------------
permit any Restricted Subsidiary to, directly or indirectly, 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 Equity Interests 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.
(b) The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue Date, or
the property or assets of such Restricted Subsidiary, and 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; (iv in the case of clause (iv) of subsection 4.13(a), (A)
that restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is, or is subject to, a lease, purchase mortgage
obligation, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, materially
detract from the value of property or assets of the Company or any Restricted
Subsidiary 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 in, or property and assets of, such Restricted Subsidiary; provided that
such restriction shall terminate if such transaction is abandoned or if such
transaction is not consummated within six months of the date
45
<PAGE>
such agreement was entered into; 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 applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Indebtedness or 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 Board of Directors) and (C) the Board of
Directors determines that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest payments
on the Notes.
(c) Nothing contained in this Section 4.13 shall prevent the Company or
any Restricted Subsidiary from creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.14 that limit the right of the
debtor to dispose of the assets securing such Indebtedness.
SECTION 4.14 Limitation on Liens. The Company will not, and will not
-------------------
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien (other than Permitted Liens) on any asset or
property of the Company or any Restricted Subsidiary without making effective
provisions 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; provided that
any Lien which is granted to secure the Notes under this covenant shall be
discharged at the same time as the discharge of the Lien that gave rise to the
obligation to so secure the Notes.
SECTION 4.15 Change of Control. (a) Upon the occurrence of a Change of
-----------------
Control, the Company will make an offer to purchase all or any part (equal to
$1,000 in principal amount and integral multiples thereof) of the Notes pursuant
to the offer described below (the "Change of Control Offer") at a price in cash
-----------------------
(the "Change of Control Payment") equal to 101% of the aggregate principal
-------------------------
amount thereof plus accrued and unpaid interest, thereon to the date of
repurchase, plus Additional Amounts, if any, and Liquidated Damages, if any, to
the date of repurchase (and in the case of Definitive Notes, subject to the
right of Holders of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). Within 30 days following any
Change of Control, the Company will publish notice of such in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Notes, mail a notice to
each Holder (and if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, will publish
notice in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)), with a copy to the Trustee, with the
following information: (i) a Change of Control Offer is being made pursuant to
this Section 4.15 and all Notes properly tendered pursuant to such Change of
Control Offer will be accepted for payment; (ii) the purchase price and the
purchase date, which will be no earlier than 30 days nor later than 60 days from
the date such notice is published, or where
46
<PAGE>
relevant, mailed, except as may be otherwise required by applicable law (the
"Change of Control Payment Date"); (iii) any Note not properly tendered will
------------------------------
remain outstanding and continue to accrue interest and Liquidated Damages, if
any; (iv) unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest and Liquidated Damages, if any, on the Change of
Control Payment Date; (v) Holders electing to have any Notes purchased pursuant
to a Change of Control Offer will be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent or a depositary and at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (vi) Holders will be entitled to withdraw
their tendered Notes and their election to require the Company to purchase such
Notes; provided that the Paying Agent or a depositary receives, not later than
the close of business on the last Business Day of the offer period, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes tendered for purchase, and a statement that such Holder is
withdrawing his tendered Notes and his election to have such Notes purchased;
and (vii) Holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the principal
amount of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Indenture, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in this Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.
(b) On the Change of Control Payment Date, the Company will, to the
extent permitted by law, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the aggregate Change of Control Payment in
respect of all Notes or portions thereof so tendered and (iii) deliver, or cause
to be delivered, to the Trustee for cancellation the Notes so accepted together
with an Officers' Certificate stating that such Notes or portions thereof have
been tendered to and purchased by the Company. The Paying Agent will promptly
either (x) pay to the Holder against presentation and surrender (or, in the case
of partial payment, endorsement) of the Global Notes or (y) in the case of
Definitive Notes, mail to each Holder of Notes, the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and deliver to the
Holder of the Global Notes a new Global Note or Notes or, in the case of
Definitive Notes, mail to each Holder a new Definitive Note, as applicable,
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided, however, that each new Definitive Note and Global Note will be
in a principal amount of $1,000 or an integral multiple
47
<PAGE>
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
SECTION 4.16 Limitation on Asset Sales. (a) The Company will not, and
-------------------------
will not permit any Restricted Subsidiary to, make any Asset Sale unless (i) the
Company or the Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or disposed of and (ii) at least 75% of the consideration received
for such Asset Sale consists of cash or Cash Equivalents or Replacement Assets
or the assumption of Indebtedness which ranks equal in right of payment with the
Notes.
(b) The Company shall, or shall cause the relevant Restricted Subsidiary
to, apply the Net Cash Proceeds from an Asset Sale within 360 days of the
receipt thereof to (A) permanently prepay, repay or purchase unsubordinated
Indebtedness of the Company or any Restricted Subsidiary providing a Guarantee
pursuant to Section 4.17 or Indebtedness of any other Restricted Subsidiary, in
each case owing to a Person other than the Company or any of its Restricted
Subsidiaries, and elect to permanently reduce the commitments thereunder by the
amount of such Indebtedness prepaid, repaid or purchased, (B) invest in
Replacement Assets or (C) in any combination of prepayment, repayment, purchase
and reinvestment permitted by the foregoing clauses (A) and (B).
Any Net Cash Proceeds from such Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
subsection will be deemed to constitute "Excess Proceeds." If at any time the
---------------
aggregate amount of Excess Proceeds exceeds C5.0 million, the Company shall,
within 15 Business Days thereafter, make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase on a pro rata basis the maximum principal amount
- -----------------
of Notes, that is an integral multiple of $1,000 that may be purchased out of
the Excess Proceeds at an offer price in cash in an amount equal to 100% of the
outstanding principal amount thereof, plus accrued and unpaid interest thereon,
plus Additional Amounts, if any, and Liquidated Damages, if any, to the date
fixed for the closing of such offer (and, in the case of Definitive Notes,
subject to the right of a Holder of record on the relevant record date to
receive interest and Liquidated Damages, if any, due on the relevant interest
payment date and Additional Amounts, if any, in respect thereof), in accordance
with the procedures set forth in this Indenture. The Company will commence an
Asset Sale Offer by publishing and mailing the notice required pursuant to the
terms of this Indenture, with a copy to the Trustee. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, subject to applicable law, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the selection of such Notes for purchase will be made by the
Trustee in the same manner as the Notes are redeemed, as provided in Section
3.1. Upon completion of any such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
------------
Business Days after the termination of the Offer Period (the "Purchase Date"),
-------------
the Company shall purchase the maximum principal amount of
48
<PAGE>
Notes that may be purchased with such Excess Proceeds (or such pro rata portion)
(which maximum principal amount of Notes shall be the "Offer Amount") or, if
------------
less than the Offer Amount has been tendered, all Notes tendered in response to
the Asset Sale Offer.
If the Purchase Date is on or after an interest Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest will
be paid in the case of a Global Note, to the Holder thereof or, in the case of a
Definitive Note, to the Person in whose name such Definitive Note is registered
at the close of business on such Record Date, and no additional interest will be
payable to Holders with respect to Notes tendered pursuant to the Asset Sale
Offer.
At least 30 days but not more than 60 days before a Purchase Date, the
Company shall publish in a leading newspaper having a general circulation in New
York (which is expected to be The Wall Street Journal) and in Frankfurt (which
is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so long as
the Notes are listed on the Luxembourg Stock Exchange and the rules of such
Stock Exchange shall so require, a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)) or, in the case of
Definitive Notes, mail to Holders by first-class mail, postage prepaid, at their
respective addresses as they appear on the registration books of the Registrar
with a copy of such notice to the Trustee (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, publish in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)). The notice shall
contain all instructions and materials (or instructions on how to obtain
instructions and materials) necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer,
shall state:
(A) that the Asset Sale Offer is being made pursuant to this
Section 4.16 and the length of time the Asset Sale Offer shall remain
open;
(B) the Offer Amount (including the amount of accrued and unpaid
interest, if any), the purchase price and the Purchase Date;
(C) that any Note or portion thereof not tendered or accepted
for payment shall continue to accrue interest, Additional Amounts, if
any, and Liquidated Damages, if any, in accordance with the terms
thereof;
(D) that, unless the Company defaults in making payment therefor
any Note or portion thereof accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest, Additional Amounts, if any,
and Liquidated Damages, if any, after the Purchase Date;
(E) (1) if any Global Note is being purchased in part, the
portion of the principal amount of such Note to be purchased and that,
after the Purchase Date, interest, Additional Amounts, if any, and
Liquidated Damages, if any, shall cease to accrue on the portion to be
purchased, and upon surrender of such Global Note, the Global Note
49
<PAGE>
with a notation on Schedule A thereof adjusting the principal amount
thereof to be equal to the unpurchased portion, will be returned and
(2) if a Definitive Note may be purchased in part, that, after the
Purchase Date, upon surrender of such Definitive Note, a new
Definitive Note or Notes in aggregate principal amount equal to the
unpurchased portion thereof will be issued in the name of the Holder
thereof, upon cancellation of the original Note;
(F) that Holders electing to have a Note or portion thereof
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three Business Days before
the Purchase Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(G) that, subject to applicable law, Holders shall be entitled
to withdraw their election if the Company, depositary or Paying Agent,
as the case may be, receives, not later than the second Business Day
before the Purchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note or
portion thereof the Holder delivered for purchase, the Note
certificate number and a statement that such Holder is withdrawing his
election to have the Note or portion thereof purchased;
(H) that, if the aggregate principal amount of Notes tendered by
Holders exceeds the Offer Amount, the selection of such Notes for
purchase will be made by the Trustee in compliance with the
requirements of the principal securities exchange, if any, on which
such Notes are listed, or if such Notes are not so listed or such
exchange prescribes no method of selection, subject to applicable law,
on a pro rata basis by lot or by such other method as the Trustee in
its sole discretion shall deem fair and appropriate (and in such
manner as complies with applicable legal and exchange requirements);
provided, however, that no Notes of $1,000 or less shall be purchased
in part; provided further, that, subject to applicable law, in the
event of partial purchase by lot, the particular Notes to be purchased
shall be selected, unless otherwise provided herein, by the Registrar
or Trustee from the outstanding Notes not previously called for
purchase; and
(I) the instructions that Holders must follow to tender their
Notes.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes or portions
thereof tendered, and deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 4.16. On the Purchase Date, the
Paying Agent shall promptly cause the principal amount of any Global Note so
tendered to be adjusted on Schedule A thereof to be equal to any unpurchased
portion of such Global Note which
50
<PAGE>
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof, and shall promptly authenticate and mail or deliver to each
tendering Holder of a Definitive Note, a new Definitive Note or Notes equal in
principal amount to any unpurchased portion of the Definitive Note surrendered
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. DTC, the Paying Agent or the Company, as the case may
be, shall promptly (but in any case not later than five Business Days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
Offer Amount of the Notes tendered by such Holder and accepted by the Company
for purchase. Any Notes not so accepted shall be promptly mailed or delivered by
or on behalf of the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer not later than the second Business
Day following the Purchase Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions hereunder, the Company will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.17 Limitation on Issuance of Guarantees of Indebtedness by
-------------------------------------------------------
Restricted Subsidiaries. (a) The Company shall not permit any Restricted
- -----------------------
Subsidiary, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of the Company unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee of all of the Company's
obligations under the Notes and this Indenture on terms substantially similar to
the guarantee of such Indebtedness, except that if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such
assumption, Guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to such
Restricted Subsidiary's assumption, Guarantee or other liability with respect to
the Notes substantially to the same extent as such Indebtedness is subordinated
to the Notes and (ii) such Restricted Subsidiary waives, and 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 Guarantee; provided that any Restricted Subsidiary may
guarantee Indebtedness of the Company under a Credit Facility if such
Indebtedness is Incurred in accordance with Section 4.4; and provided further
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.
(b) Notwithstanding the foregoing subsection (a), any Guarantee of all of
the Company's obligations under the Notes and this Indenture by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of
51
<PAGE>
the Company's and each Restricted Subsidiary's Equity Interests in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture), or (ii) the release
or discharge of the guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 4.18 Business of the Company; Restriction on Transfers of
----------------------------------------------------
Existing Business. The Company will not, and will not permit any Restricted
- -----------------
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary will
not be permitted, directly or indirectly, to transfer to any Unrestricted
Subsidiary (i) any of the licenses, permits or authorizations used in the
Permitted Business of the Company or any Restricted Subsidiary or (ii) any
material portion of the "property and equipment" (as such term is used in the
Company's consolidated financial statements) of the Company or any Restricted
Subsidiary used in the licensed service areas of the Company or any Restricted
Subsidiary.
SECTION 4.19 Limitation on the Issuance and Sale of Capital Stock of
-------------------------------------------------------
Restricted Subsidiaries. The Company will not, and will not permit any
- -----------------------
Restricted Subsidiary, directly or indirectly, to issue, transfer, convey, sell,
lease or otherwise dispose of any shares of Capital Stock (including options,
warrants or other rights to purchase shares of such Capital Stock) of such
Restricted Subsidiary or any other Restricted Subsidiary to any Person (other
than (i) to the Company or a Wholly Owned Restricted Subsidiary and (ii)
issuances of director's qualifying shares of Capital Stock of foreign Restricted
Subsidiaries, in each case, to the extent required by applicable law), unless
(A) the Net Cash Proceeds from such issuance, transfer, conveyance, sale, lease
or other disposition are applied in accordance with the provisions of Section
4.16, (B) immediately after giving effect to such issuance, transfer,
conveyance, sale, lease or other disposition, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and (C) any Investment in such
Person remaining after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition would have been permitted to be made under
Section 4.3 if made on the date of such issuance, transfer, conveyance, sale,
lease or other disposition (valued as provided in the definition of "Investment"
in Section 1.1).
SECTION 4.20 Additional Amounts. At least 10 days prior to the first
-------------------
date on which payment of principal, premium, if any, or interest on the Notes is
to be made, and at least 10 days prior to any subsequent such date if there has
been any change with respect to the matters set forth in the Officers'
Certificate described in this Section 4.20, the Company will furnish the Trustee
and the Paying Agent, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and the Paying Agent whether such payment of principal,
premium, if any, or interest on the Notes (whether or not in the form of
Definitive Notes) shall be made to the Holders without withholding for or on
account of any present or future tax, duty, assessment or other governmental
charges of whatever nature (collectively "Taxes") imposed or levied by or on
-----
behalf of The Federal Republic of Germany or any jurisdiction in which the
Company or any Surviving Entity is organized or is otherwise resident for tax
purposes or any political subdivision thereof or any authority having power to
tax therein or any jurisdiction from or through which payment is made (each a
"Relevant Taxing Jurisdiction"), unless the withholding or deduction of such
- -----------------------------
Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any
52
<PAGE>
payments made by the Company with respect to the Notes, including payments of
principal, redemption price, interest or premium, then such Officers'
Certificate shall specify the amount, if any, required to be withheld on such
payments to such Holders and the Company will pay to the Trustee or the Paying
Agent the additional amounts pursuant to paragraph 3 of the Initial Notes and
paragraph 2 of the Exchange Notes, as applicable (the "Additional Amounts") and,
------------------
if paid to a Paying Agent other than the Trustee, shall provide the Trustee with
documentation satisfactory to the Trustee evidencing the payment of such
Additional Amounts. Copies of such documentation shall be made available to the
Holders upon request. The Company shall indemnify the Trustee and the Paying
Agent for, and hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part arising out of or in
connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished to them pursuant to this Section 4.20.
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges. The
-----------------------------------------------
Company will pay any present or future stamp, court or documentary taxes, or any
other excise or property taxes, charges or similar levies which arise in any
jurisdiction from the execution, delivery or registration of the Notes or any
other document or instrument referred to therein, or the receipt of any payments
with respect to the Notes, excluding any such taxes, charges or similar levies
imposed by any jurisdiction outside of The Federal Republic of Germany, the
United States of America, or any jurisdiction in which a Paying Agent is
located, other than those resulting from, or required to be paid in connection
with, the enforcement of the Notes or any other such document or instrument
following the occurrence of any Event of Default with respect to the Notes.
SECTION 4.22 Restriction on Sale/Leaseback Transactions. The Company
------------------------------------------
will not, and will not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (a) the Company
or such Restricted Subsidiary would be entitled to (i) Incur Indebtedness in an
amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to Section 4.4 and (ii) create a Lien on such property
securing such Attributable Debt without equally and ratably securing the Notes
pursuant to Section 4.14, (b) the net cash proceeds received by the Company or
any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are
at least equal to the fair value (as determined in good faith by the Board of
Directors) of such property and (c) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
Section 4.16.
SECTION 4.23 Limitation on Investment Company Activities. The Company
-------------------------------------------
will not, and will not permit any of its Restricted Subsidiaries or controlled
Affiliates to, conduct its business in a fashion that would cause the Company to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act")),
----------------------
or otherwise to become subject to regulation under the Investment Company Act.
For purposes of establishing the Company's compliance with this provision, any
exemption which is or would become available under Section 3(c)(1) or Section
3(c)(7) of the Investment Company Act will be disregarded.
53
<PAGE>
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Consolidation, Merger, and Sale of Assets. 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 in a series of
related transactions) to, any Person or permit any Person to merge with or into
the Company and the Company will not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) the Company will be the continuing Person, or the Person (if other
than the Company) (the "Surviving Entity") formed by such consolidation or into
----------------
which the Company is merged or that acquired or leased such property and assets
of the Company will be a corporation organized and validly existing under the
laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company with respect to
the Notes and under this Indenture and the Collateral Agreement; (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; (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 C1.00
of Indebtedness under subsection 4.4(a); (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 Indenture; and (vi) the Company shall have
delivered to the Trustee an opinion of tax counsel reasonably acceptable to the
Trustee stating that (A) Holders will not recognize income, gain or loss for
U.S. federal or German income tax purposes as a result of such transaction, (B)
any payment of principal, redemption price or purchase price of, premium (if
any) and interest on the Notes by the Company to a Holder after the
consolidation, merger, conveyance, transfer or lease of assets will be exempt
from any Taxes and (C) no other taxes on income (including taxable capital
gains) will be payable under the tax laws of the Relevant Taxing Jurisdiction by
a Holder who is or who is deemed to be a non-resident of the Relevant Taxing
Jurisdiction in respect of the acquisition, ownership or disposition of the
Notes, including the receipt of principal of, premium and interest paid pursuant
to such Notes.
SECTION 5.2 Successor Corporation Substituted. Upon any such
---------------------------------
consolidation, merger, assignment, conveyance, lease, transfer or other
disposition in accordance with Section 5.1, the Successor Company will succeed
to, and be substituted for every duty and obligation of, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor Company had been named as the Company herein, and thereafter
54
<PAGE>
(except in the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Notes.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default. Wherever used herein with respect to any
------------------
series of the Notes, "Event of Default" means any one of the following events
----------------
which shall have occurred and be continuing:
(a) a default for 30 days or more in the payment when due of interest on
the Notes or Additional Amounts, if any, or Liquidated Damages, if any,
with respect to the Notes;
(b) 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;
(c) a default in the payment of principal or interest on Notes required
to be purchased pursuant to an Asset Sale Offer as described under Section
4.16 or pursuant to a Change of Control Offer as described under Section
4.15;
(d) a failure to perform or comply with the provisions described in
Article V;
(e) a default in the performance of or breach of any other covenant or
agreement of the Company in this Indenture or the Collateral Agreement or
under the Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the holders of 25%
or more in aggregate principal amount of the Notes;
(f) a default occurs on any other Indebtedness of the Company or any
Restricted Subsidiary if (i) either (x) such default is a failure to pay
principal of such Indebtedness when due after any applicable grace period
or (y) as a result of such default, the maturity of such Indebtedness has
been accelerated prior to its scheduled maturity and such default has not
been cured within the shorter of 30 days and the applicable grace period,
and such acceleration has not been rescinded and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Restricted Subsidiaries that is also in
default as to principal, or the maturity of which has also been
accelerated, aggregates C5.0 million or more;
(g) failure to pay final judgments and orders against the Company or any
Restricted Subsidiary (not covered by insurance) aggregating in excess of
C5.0 million (treating any deductibles, self-insurance or retention as not
so covered), which final judgments remain unpaid, undischarged and unstayed
for a period in excess 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, discharged or stayed to
exceed C5.0 million;
55
<PAGE>
(h) a court having jurisdiction in the premises enters a decree or order
for (A) relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries or
for all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or (C) the winding up or liquidation of
the affairs of the Company or any of its Significant Subsidiaries and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days;
(i) the Company or any of its Significant Subsidiaries (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
of its Significant Subsidiaries or for all or substantially all of the
property and assets of the Company or any of its Significant Subsidiaries
or (C) effects any general assignment for the benefit of creditors; or
(j) the Company challenges the Lien on the Collateral under the
Collateral Agreement prior to such time as the Collateral is to be released
to the Company, or the Collateral shall become subject to any Lien other
than the Lien under the Collateral Agreement.
SECTION 6.2 Acceleration. If an Event of Default (other than an Event
------------
of Default specified in Sections 6.1(h) or (i)) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company, may declare the
principal of, premium, if any, interest and other monetary obligations
(including Additional Amounts, if any, and Liquidated Damages, if any) on all
the then outstanding Notes to be immediately due and payable. Upon such a
declaration, such principal of, premium, if any, interest and other monetary
obligations on the Notes shall be immediately due and payable. In the event of
a declaration of acceleration because an Event of Default set forth in
subsection 6.1(f) above 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 subsection 6.1(f) shall be
remedied or cured by the Company and/or the relevant Restricted Subsidiaries or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in subsections 6.1(h) or (i) above occurs, the principal of, premium,
if any, accrued interest and other monetary obligations 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.
The Trustee shall have no obligation to accelerate the Notes if in the
best judgment of the Trustee acceleration is not in the best interest of the
Holders of such Notes.
SECTION 6.3 Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the
56
<PAGE>
payment of principal of or, premium, if any, interest, Additional Amounts, if
any, or Liquidated Damages, if any, on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
SECTION 6.4 The Trustee May Enforce Claims Without Possession of
----------------------------------------------------
Securities. All rights of action and claims under this Indenture or the Notes
- ----------
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto.
SECTION 6.5 Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in Section 2.8, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Notes 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 or subsequent assertion or employment of any
other appropriate right or remedy.
SECTION 6.6 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any Holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the Holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders of Notes.
SECTION 6.7 Waiver of Past Defaults. Subject to Sections 6.10 and 9.2,
-----------------------
at any time after a declaration of acceleration with respect to the Notes as
described in Section 6.1, 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 defaults and rescind and annul a declaration of acceleration
and its consequences if (i) all existing Events of Default, other than the
nonpayment of the principal of, premium, if any, interest and other monetary
obligations on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. Such
waiver shall not excuse a continuing Event of Default in the payment of
interest, premium, if any, principal, Additional Amounts, if any, or Liquidated
Damages, if any, on such Note held by a non-consenting Holder, or in respect of
a covenant or a provision which cannot be amended or modified without the
consent of all Holders. In the event of any Event of Default specified in
subsection 6.1(f), such Event of Default and all consequences thereof
(including, without limitation, any acceleration or resulting payment default)
shall be annulled, waived and rescinded, automatically and without any action by
the Trustee or the Holders of the Notes, if within 60 days after such Event of
Default arose (x) the Indebtedness or guarantee that is the basis for such Event
of Default has been discharged, or (y) the holders thereof have rescinded or
waived the acceleration, notice or action (as the case may be) giving rise to
such Event of Default, or (z) if the default that is the basis for such Event of
Default has been cured. The Company shall deliver to the Trustee an Officers'
Certificate stating
57
<PAGE>
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. When a Default or Event of Default is waived,
it is cured and ceases.
SECTION 6.8 Control by Majority. Subject to Section 2.10, the Holders
-------------------
of not less than a majority in principal amount of the outstanding Notes may, by
written notice to the Trustee, 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 it. Subject to Section 7.1, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture
that the Trustee determines may be unduly prejudicial to the rights of another
Holder of Notes, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 6.9 Limitation on Suits. A Holder of Notes may not pursue any
-------------------
remedy with respect to this Indenture or the Notes unless:
(i) the Holder gives to the Trustee written notice of a continuing Event
of Default;
(ii) the Holder or Holders of at least 25% in principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(iv) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(v) during such 30-day period the Holder or Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
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 6.10 Rights of Holders To Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, the right of any Holder to receive payment of
principal of, premium, if any, interest, Additional Amounts, if any and
Liquidated Damages, if any, on a Note, on or after the respective due dates
expressed in such Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.11 Collection Suit by Trustee. If an Event of Default in
--------------------------
payment of principal, premium, if any, interest, Additional Amounts, if any or
Liquidated Damages, if any, specified in subsection 6.1(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Notes for the
whole amount of principal and accrued interest remaining unpaid, together with
58
<PAGE>
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Notes and such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.12 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, accountants and experts) and the Holders allowed in any
judicial proceedings relating to the Company, its creditors or its property or
other obligor on the Notes, its creditors and its property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.7. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders of the Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
SECTION 6.13 Priorities. If the Trustee collects any money or property
----------
pursuant to this Article VI, it shall pay out the money or property in the
following order:
First: to the Trustee, the Agents and their agents and attorneys for
amounts due under Section 7.7, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, interest, Additional Amounts, if any and
Liquidated Damages, if any, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for
principal, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, respectively; and
Third: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.13; provided
that the failure to give any such notice shall not affect the establishment of
such record date or payment date for Holders pursuant to this Section 6.13.
59
<PAGE>
SECTION 6.14 Restoration of Rights and Remedies. If the Trustee or any
----------------------------------
Holder of any Note has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders of Notes shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders of Notes shall continue as though no
such proceeding had been instituted.
SECTION 6.15 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 the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, 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 6.15 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.10, or a suit
by a Holder or Holders of more than 10% in principal amount of the outstanding
Notes.
SECTION 6.16 Compliance Certificate; Notices of Default. The Company is
------------------------------------------
required to deliver to the Trustee annually a statement, in the form of an
Officers' Certificate, regarding compliance with this Indenture, and the Company
is required, within five Business Days, upon becoming aware of any Default or
Event of Default or any default under any document, instrument or agreement
representing Indebtedness of the Company, to deliver to the Trustee a statement,
in the form of an Officers' Certificate, specifying such Default or Event of
Default.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee. (a) If an Event of Default actually
-----------------
known to a Trust Officer of the Trustee has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. Subject to such provisions, the Trustee will be under
no obligation to exercise any of its rights or powers under this Indenture at
the request of any of the Holders of Notes, unless they shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(b) Except during the continuance of an Event of Default actually known
to the Trustee:
(i) The Trustee and the Agents will perform only those duties as are
specifically set forth herein and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee or the
Agents.
60
<PAGE>
(ii) In the absence of bad faith on their part, the Trustee and the
Agents may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions and such other documents delivered to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph does not limit the effect of subsection (b) of
this Section 7.1.
(ii) Neither the Trustee nor Agent shall be liable for any error
of judgment made in good faith by a Trust Officer of such Trustee or
Agent, unless it is proved that the Trustee or such Agent was
negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.8.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or to take or omit to take any action under this
Indenture or take any action at the request or direction of Holders if it shall
have reasonable grounds for believing that repayment of such funds is not
assured to it or it does not receive an indemnity satisfactory to it in its sole
discretion against such risk, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to subsections (a),
(b), (c) and (d) of this Section 7.1.
(f) 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.
(g) Any provision hereof relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.1 and, upon qualification of this Indenture under
the TIA, the TIA.
SECTION 7.2 Rights of Trustee. Subject to Section 7.1:
-----------------
(a) The Trustee and each Agent may rely conclusively on and shall be
protected from acting or refraining from acting based upon any document
believed by the Trustee or each
61
<PAGE>
Agent them to be genuine and to have been signed or presented by the proper
person. Neither the Trustee nor any Agent shall be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent order, approval, appraisal, bond, debenture, note, coupon, security
or other paper or document, but the Trustee or the Agent, as the case may
be, in its discretion, may make reasonable further inquiry or investigation
into such facts or matters stated in such document and if the Trustee or
the Agent as the case may be, shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, at reasonable times during normal business hours,
personally or by agent or attorney and the Trustee and the Agent shall
incur no liability or additional liability of any kind by reason of such
inquiry or investigation. The Trustee shall not be deemed to have notice or
any knowledge of any matter (including without limitation Defaults or
Events of Default) unless a Trust Officer assigned to and working in the
Trustee's Corporate Trust Administration has actual knowledge thereof or
unless written notice thereof is received by the Trustee, attention:
Corporate Trust Administration and such notice references the Notes
generally, the Company or this Indenture;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate or
Company Order and any resolution of the Board of Directors of the Company,
as the case may be, may be sufficiently evidenced by a Board Resolution;
(c) Before the Trustee and any Agent acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both, which
shall conform to the provisions of Sections 11.4 and 11.5. Neither the
Trustee nor any Agent shall be liable for any action it takes or omits to
take in good faith in reliance on such certificate or opinion.
(d) The Trustee and any Agent may act through their attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
or attorney appointed with due care.
(e) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within
its rights or powers conferred upon it by this Indenture; provided,
however, that the Trustee's conduct does not constitute willful misconduct,
negligence or bad faith.
(f) The Trustee or any Agent may consult with counsel of its selection
and the advice or opinion of such counsel shall be full and complete
authorization and protection from liability in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(g) Subject to Section 9.2 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver
or approval required by the terms hereof, but shall not without the consent
of the Holders of not less than a majority
62
<PAGE>
in aggregate principal amount of the Notes at the time outstanding (i) give
any consent, waiver or approval or (ii) agree to any amendment or
modification of this Indenture, in each case, that shall have a material
adverse effect on the interests of any Holder. The Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any consent, waiver, approval, amendment or modification
shall have a material adverse effect on the interests of any Holder.
(h) the rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified,
are extended to, and shall be enforceable by, the Trustee in each of its
capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder or in connection with the transactions
contemplated hereby.
SECTION 7.3 Individual Rights of Trustee. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company, its Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. The Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee and the Agents shall not
--------------------
be responsible for and make no representation as to the validity, effectiveness
or adequacy of this Indenture or the Notes; the Trustee and the Agents shall not
be accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company or upon the Company's direction under
any provision hereof; the Trustee shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee;
and the Trustee and the Agents shall not be responsible for any statement or
recital herein of the Company, or any document issued in connection with the
sale of Notes or any statement in the Notes other than the Trustee's certificate
of authentication.
SECTION 7.5 Notice of Default. If an Event of Default occurs and is
-----------------
continuing and a Trust Officer of the Trustee receives actual notice of such
event, the Trustee shall mail to each Holder, as their names and addresses
appear on the list of Holders described in Section 2.5, notice of the uncured
Default or Event of Default within 90 days after the Trustee receives such
notice. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, interest, Additional Amounts, if any, or
Liquidated Damages, if any, on any Note, including the failure to make payment
on (i) the Change of Control Payment Date pursuant to a Change of Control Offer
or (ii) the Asset Sale Purchase Date pursuant to an Asset Sale Offer, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders.
SECTION 7.6 Report by Trustee to Holders. This Section 7.6 shall not be
----------------------------
operative as a part of this Indenture until this Indenture is qualified under
the TIA, and, until such qualification, this Indenture shall be construed as if
this Section 7.6 were not contained herein.
Within 60 days after each June 15 beginning with June 15, 2000, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous
63
<PAGE>
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such date that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Sections 313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if subsequent to the date
hereof the Notes become listed on any securities exchange or of any delisting
thereof.
SECTION 7.7 Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing for its acceptance of this Indenture and
services hereunder. The Trustee's and the Agents' compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee and the Agents upon request for all
reasonable disbursements, expenses and advances (including reasonable fees and
expenses of counsel) incurred or made by it in addition to the compensation for
their services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's or any Agent's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's and Agents' accountants, experts and counsel and any taxes or
other expenses incurred by a trust created pursuant to Section 8.4 hereof.
The Company shall indemnify each of the Trustee, any predecessor Trustee
and the Agents for, and hold them harmless against, any and all loss, damage,
claim, expense or liability including taxes (other than taxes based on the
income of the Trustee) incurred by the Trustee or an Agent without negligence,
willful misconduct or bad faith on its part in connection with the acceptance or
administration of this trust and its duties under this Indenture and the
Collateral Agreement and the Unit Agreement, including the reasonable expenses
and attorneys' fees and expenses of defending itself against any claim or
liability arising hereunder. The Trustee and the Agents shall notify the
Company promptly of any claim asserted against the Trustee or such Agent for
which it may seek indemnity. However, the failure by the Trustee or the Agent
to so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Trustee or such Agent
shall cooperate in the defense (and may employ its own counsel reasonably
satisfactory to the Trustee) at the Company's expense. The Trustee or such
Agent may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its written consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee or such Agent as a result of the violation of
this Indenture by the Trustee or such Agent if such violation arose from the
Trustee's or such Agent's negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee and the Agents shall have a senior Lien prior to the Notes against all
money or property held or collected by the Trustee and the Agents, in its
capacity as Trustee or Agent, except money or property held
64
<PAGE>
in trust to pay principal or premium, if any, or interest on particular Notes
and except for any assets held in the Collateral Account.
When the Trustee or an Agent incurs expenses or renders services after
the occurrence of an Event of Default specified in subsection 6.1(h) or (i), the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.7 and any claim arising hereunder shall survive the
termination of this Indenture, the resignation or removal of any Trustee or
Agent, the discharge of the Company's obligations pursuant to Article VIII and
any rejection or termination under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of this
Indenture.
SECTION 7.8 Replacement of Trustee. The Trustee may resign at any time
----------------------
by so notifying the Company in writing. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by so notifying the
Company and the Trustee in writing and may appoint a successor trustee with the
Company's consent. 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. The Company may remove
the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a receiver or other public officer takes charge of the Trustee or
its property; or
(iv) the Trustee becomes incapable of acting with respect to its duties
hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the then outstanding Notes may, with the Company's consent, appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.7, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
65
<PAGE>
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee and the Company shall pay to any replaced or removed
Trustee all amounts owed under Section 7.7 upon such replacement or removal.
SECTION 7.9 Successor Trustee by Merger, etc. If the Trustee
--------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by consolidation, merger or conversion to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 7.10 Corporate Trustee Required; Eligibility. There shall be at
---------------------------------------
all times a Trustee hereunder which shall be eligible to act as Trustee under
the TIA and shall have a combined capital and surplus of at least $50,000,000
and have its Corporate Trust Office in the Borough of Manhattan, The City of New
York. If such Person publishes reports of condition at least annually, pursuant
to law or to the requirements of a Federal, State or District of Columbia
supervising or examining authority within the United States of America, then for
the purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 7.11 Disqualification; Conflicting Interests. If the Trustee has
---------------------------------------
or shall acquire a conflicting interest within the meaning of the TIA, the
Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the TIA and this
Indenture.
SECTION 7.12 Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee, in its capacity as Trustee hereunder, shall comply with TIA Section
311(a), excluding any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
66
<PAGE>
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.2 or 8.3 be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article VIII.
SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's exercise
------------------------------
under Section 8.1 of the option applicable to this Section 8.2, the Company
shall be deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
----------------
means that the Company shall be deemed to have paid and discharged all the
Obligations relating to the outstanding Notes and the Notes shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.6, Section 8.8 and
the other Sections of this Indenture referred to below in this Section 8.2, and
to have satisfied all of their other obligations under such Notes and this
Indenture and cured all then existing Events of Default (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, interest, Additional Amounts, if any, and Liquidated Damages, if any, on
such Notes when such payments are due or on the Redemption Date solely out of
the trust created pursuant to this Indenture; (b) the Company's obligations with
respect to Notes concerning issuing temporary Notes, or, where relevant,
registration of such Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust; (c) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith; and (d) this
Article VIII and the obligations set forth in Section 8.6 hereof.
Subject to compliance with this Article VIII, the Company may exercise
its option under Section 8.2 notwithstanding the prior exercise of its option
under Section 8.3 with respect to the Notes.
SECTION 8.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.1 of the option applicable to this Section 8.3, the Company shall be
released from any obligations under the covenants contained in Sections 4.3,
4.4, 4.10, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.22, 4.23 and 5.1
hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
-------------------
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term,
67
<PAGE>
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or Event of Default under subsection 6.1(e), nor shall any event referred to in
subsection 6.1(f) or (g) thereafter constitute a Default or Event of Default,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby.
SECTION 8.4 Conditions to Legal or Covenant Defeasance. The following
-------------------------------------------
shall be the conditions to the application of either Section 8.2 or Section 8.3
to the outstanding Notes:
(i) the Company must irrevocably deposit, or cause to be irrevocably
deposited, with the Trustee, in trust, for the benefit of the Holders of
the Notes, cash in U.S. dollars, Government Securities or a combination
thereof in such amounts as will be sufficient, in the opinion of an
internationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, interest, Additional Amounts, if any,
and Liquidated Damages, if any, due on the outstanding Notes on the stated
maturity date or on the applicable Redemption Date, as the case may be, of
such principal, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, due on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee (A) an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions, (1) the Company has received from, or there has been
published by, the U.S. Internal Revenue Service a ruling or (2) since the
Issue Date, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel in the United States shall confirm that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Legal Defeasance and will be subject to U.S. federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred and (B) an
Opinion of Counsel in The Federal Republic of Germany reasonably acceptable
to the Trustee to the effect that (1) Holders will not recognize income,
gain or loss for German income tax purposes as a result of such Legal
Defeasance and will be subject to German income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred and (2) payments from the defeasance
trust will be free and exempt from any and all withholding and other income
taxes of whatever nature imposed or levied by or on behalf of the German
government or any political subdivision thereof or therein having the power
to tax;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to such tax on the
68
<PAGE>
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred and (B) an Opinion of
Counsel in The Federal Republic of Germany reasonably acceptable to the
Trustee to the effect that (1) Holders will not recognize income, gain or
loss for German income tax purposes as a result of such Covenant Defeasance
and will be subject to German income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred and (2) payments from the defeasance trust will
be free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the German government
or any political subdivision thereof or therein having the power to tax;
(iv) no Default or Event of Default shall have occurred and be continuing
with respect to certain Events of Default on the date of such deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material
agreement or instrument to which the Company is a party or by which the
Company is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable German law or U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which opinion
of counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 8.5 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
will be discharged and will cease to be of further effect as to all Notes issued
thereunder when either (i) all such Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to the Trustee for
cancellation or (ii) (A) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable within one
year and the Company has irrevocably deposited or caused to be deposited with
such Trustee as trust funds in trust an amount of money sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee
69
<PAGE>
for cancellation for principal, premium, if any, and accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
date of maturity or redemption; (B) no Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which it is bound; (C) the Company has paid,
or caused to be paid, all sums payable by it under this Indenture; and (D) the
Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of such Notes at
maturity or the Redemption Date, as the case may be. In addition, the Company
must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee
stating that all conditions precedent to satisfaction and discharge have been
satisfied.
SECTION 8.6 Survival of Certain Obligations. Notwithstanding the
-------------------------------
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 8.1, 8.2, 8.3, 8.4 or 8.5, the respective obligations of the Company and
the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10, 2.11, 2.12, 2.13,
2.14, 4.1, 4.2, 4.5, 4.21, 6.10, Article VII, 8.7, 8.8, 8.9 and 8.10 shall
survive until the Notes are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.7, 8.7, 8.8, 8.9 and
8.10 shall survive. Nothing contained in this Article VIII shall abrogate any
of the obligations or duties of the Trustee under this Indenture.
SECTION 8.7 Acknowledgment of Discharge by Trustee. Subject to Section
--------------------------------------
8.10, after (i) the conditions of Section 8.4 or 8.5 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of all of the Company's
obligations under this Indenture except for those surviving obligations
specified in this Article VIII.
SECTION 8.8 Application of Trust Moneys. All cash in U.S. dollars and
---------------------------
Government Securities deposited with the Trustee pursuant to Section 8.4 or 8.5
in respect of Notes shall be held in trust and applied by it, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any Paying Agent as the Trustee may determine, to the Holders of the
Notes of all sums due and to become due thereon for principal, premium, if any,
interest, Additional Amounts, if any, and Liquidated Damages, if any, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Securities deposited
pursuant to Section 8.4 or 8.5 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of outstanding Notes.
SECTION 8.9 Repayment to the Company; Unclaimed Money. The Trustee and
-----------------------------------------
any Paying Agent shall promptly pay or return to the Company upon Company Order
any cash or Government Securities held by them at any time that are not required
for the payment of the principal of, premium, if any, interest, Additional
Amounts, if any, and Liquidated Damages, if
70
<PAGE>
any, on the Notes for which cash or Government Securities have been deposited
pursuant to Section 8.4 or 8.5.
Any money held by the Trustee or any Paying Agent under this Article, in
trust for the payment of the principal of, premium, if any, interest, Additional
Amounts, if any, and Liquidated Damages, if any, on any Note and remaining
unclaimed for two years after such principal, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, has become due and
payable shall be paid to the Company upon Company Order or if then held by the
Company shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company give notice to the Holders or cause to be
published notice once, in a leading newspaper having a general circulation in
New York (which is expected to be The Wall Street Journal) and in Frankfurt
(which is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so
long as the Notes are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange shall so require, a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)) or in the case of
Definitive Notes, mail to Holders by first-class mail, postage prepaid, at their
respective addresses as they appear on the registration books of the Registrar
(and, if and so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such Stock Exchange shall so require, publish in a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)), that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 8.10 Reinstatement. If the Trustee or Paying Agent is unable to
-------------
apply any cash or Government Securities, as applicable, in accordance with
Section 8.2, 8.3, 8.4 or 8.5 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 Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2, 8.3, 8.4 or 8.5 until such time as
the Trustee or Paying Agent is permitted to apply all such cash or Government
Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5; provided, however,
that if the Company has made any payment of interest on, premium, if any,
principal, Additional Amounts, if any, and Liquidated Damages, if any, of any
Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or Government Securities, as applicable, held by the Trustee or
Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders of Notes. Notwithstanding
-----------------------------------
Section 9.2 hereof, the Company and the Trustee together may amend or supplement
this Indenture or the Notes without the consent of any Holder of a Note (i) to
cure any ambiguity, omission, defect or
71
<PAGE>
inconsistency, (ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes, or to provide for additional forms of global Notes
containing transfer and other restrictions and which comply with applicable U.S.
securities and other laws, (iii) to comply with the covenant relating to
mergers, consolidations and sales of assets, (iv) to provide for the assumption
of the Company's obligations to Holders of such Notes, (v) to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under this Indenture of any
such Holder, (vi) to add covenants for the benefit of the Holders or to
surrender any right or power conferred upon the Company, (vii) to comply with
requirements of the Commission in order to effect or maintain the qualification
of this Indenture under the TIA, or (viii) to execute and deliver any documents
necessary or appropriate to release Liens on any Collateral as permitted by the
Collateral Agreement.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amendment or supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture which adversely affects its own rights, duties
or immunities hereunder or otherwise.
SECTION 9.2 With Consent of Holders of Notes. The Company and the
--------------------------------
Trustee may amend or supplement this Indenture or the Notes or any amended or
supplemental indenture with the written consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes), and
any existing Default or Event of Default and its consequences or compliance with
any provision of this Indenture or the Notes may be waived with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes). However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
nonconsenting Holder of Notes): (i) reduce the principal amount of the Notes
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any such Note or alter or waive
the provisions with respect to the redemption of the Notes, (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default in the payment of principal of, or premium, if any, interest, Additional
Amounts or Liquidated Damages, if any, on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration with respect to the Notes) or in respect of a covenant or
provision contained in this Indenture which cannot be amended or modified
without the consent of all Holders, (v) make any Note payable in money other
than that stated in the Notes, (vi) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights of Holders of the
Notes to receive payments of principal of, premium, interest, Additional
Amounts, if any, or Liquidated Damages, if any, on, such Notes, (vii) make any
change in the amendment and waiver provisions contained in this Indenture,
(viii) make any change in paragraph 3 of the Initial Notes or paragraph 2 of the
Exchange Notes that adversely affects the rights of any Holder of the Notes,
(ix) amend the terms of the Notes or
72
<PAGE>
this Indenture in a way that would result in the loss of an exemption from any
Taxes or an exemption from any obligation to withhold or deduct Taxes unless the
Company agrees to pay Additional Amounts, if any, in respect thereof, (x) modify
the provisions of the Collateral Agreement or this Indenture relating to the
Collateral in any manner adverse to the Holders or release the Collateral from
the Lien under the Collateral Agreement or permit any other obligation to be
secured by the Collateral or (xi) impair the right of any Holder of the Notes to
receive payment of principal of, interest and Liquidated Damages, if any, on,
such Holder's Notes on or after the due dates therefor or to institute suit for
the enforcement of any payment on or with respect to such Holder's Notes.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.6, the Trustee shall join with the Company
in the execution of such amended or supplemental indenture unless such amended
or supplemental indenture adversely affects the Trustee's own rights, duties or
immunities hereunder or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 9.3 Compliance with TIA. From the date on which this Indenture
-------------------
is qualified under the TIA, every amendment, waiver or supplement of this
Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents. Until an amendment,
---------------------------------
supplement or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note.
However, any such Holder of a Note or subsequent Holder of a Note may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or
73
<PAGE>
the date of the most recent list of Holders of Notes furnished to the Trustee
prior to such solicitation pursuant to Section 2.5 or (ii) such other date as
the Company shall designate.
SECTION 9.5 Notation on or Exchange of Notes. The Trustee may place an
--------------------------------
appropriate notation about an amendment, supplement or waiver on any Note
thereafter authenticated. The Company in exchange for all Notes may issue and
the Trustee shall authenticate new Notes that reflect the amendment, supplement
or waiver.
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 9.6 Trustee to Sign Amendments, etc. The Trustee shall execute
-------------------------------
any amendment, supplement or waiver authorized pursuant to this Article IX;
provided, however, that the Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which adversely affects the Trustee's
own rights, duties or immunities under this Indenture. The Trustee shall be
entitled to receive indemnity reasonably satisfactory to it, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article IX is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
not be an expense of the Trustee.
ARTICLE X
COLLATERAL AND SECURITY
-----------------------
SECTION 10.1 Collateral Agreement. The due and punctual payment of the
--------------------
principal of and interest on the Notes when and as the same shall be due and
payable, whether on an Interest Payment Date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on such Notes and
performance of all other obligations of the Company to the Holders of such Notes
or the Trustee under this Indenture with respect to such Notes, and each of the
Notes, according to the terms hereunder or thereunder, shall be secured as
provided in the Collateral Agreement which the Company, the Collateral Agent and
the Trustee have entered into simultaneously with the execution of this
Indenture. Each Holder of each Note, by its acceptance thereof, consents and
agrees to the terms of the Collateral Agreement (including, without limitation,
the provisions providing for foreclosure and disbursement of Collateral) as the
same may be in effect or may be amended from time to time in accordance with its
terms and authorizes and directs the Collateral Agent and the Trustee to enter
into the Collateral Agreement and to perform its obligations and exercise its
rights thereunder in accordance therewith. The Company shall deliver to the
Trustee copies of the Collateral Agreement, and shall do or cause to be done all
such acts and things as may be necessary or proper, or as may be required by the
provisions of the Collateral Agreement, to assure and confirm to the Trustee
(acting on behalf of the Holders of the Notes) the security interest in the
Collateral with respect to the Notes contemplated by the Collateral Agreement or
any part thereof, as from time to time constituted, so as to render the same
available for the security and benefit of this Indenture with respect to, and
of, such Notes, according to the intent
74
<PAGE>
and purposes expressed in the Collateral Agreement. The Company shall take any
and all actions reasonably required to cause the Collateral Agreement to create
and maintain (to the extent possible under applicable law), as security for the
obligations of the Company hereunder, a valid and enforceable perfected first
priority Lien in and on all the Collateral with respect to the Notes, in favor
of the Trustee (acting on behalf of the Holders of the Notes) for the benefit of
the Holders of such Notes, superior to and prior to the rights of all third
Persons and subject to no other Liens.
SECTION 10.2 Recording and Opinions. (a) The Company shall furnish to
----------------------
the Trustee simultaneously with the execution and delivery of this Indenture an
Opinion of Counsel stating that, in the opinion of such counsel, either (i) all
action has been taken with respect to the recording, registering and filing of
this Indenture, financing statements or other instruments necessary to make
effective the Lien intended to be created by the Collateral Agreement, and
reciting with respect to the security interests in the Collateral, the details
of such action, or (ii) no such action is necessary to make such Lien effective.
(b) The Company shall furnish to the Collateral Agent and the Trustee
within 90 days of, and of each anniversary of, July 8, 1999, until the date upon
which the balance of Available Funds (as defined in the Collateral Agreement)
shall have been reduced to zero, an Opinion of Counsel, dated as of such date,
either (i) stating that (A) in the opinion of such counsel, action has been
taken with respect to the recording, registering, filing, re-recording, re-
registering and refiling of all supplemental indentures, financing statements,
continuation statements or other instruments of further assurance as is
necessary, if any, to maintain the Lien of the Collateral Agreement and reciting
with respect to the security interests in the Collateral the details of such
action or referring to prior Opinions of Counsel in which such details are given
and (B) based on relevant laws as in effect on the date of such Opinion of
Counsel, all financing statements and continuation statements have been executed
and filed that are necessary as of such date and during the succeeding 12 months
fully to preserve and protect, to the extent such protection and preservation
are possible by filing, the rights of the Holders of the Notes and the Trustee
hereunder and under the Collateral Agreement with respect to the security
interests in the Collateral with respect to such Notes or (ii) stating that, in
the opinion of such counsel, no such action is necessary to maintain such Lien
and assignment.
SECTION 10.3 Release of Collateral. (a) Subject to subsections (b), (c)
---------------------
and (d) of this Section 10.3, Collateral may be released from the Lien and
security interest created by the Collateral Agreement only in accordance with
the provisions of the Collateral Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform Commercial
Code or other similar law, no Collateral shall be released from the Lien and
security interest created by the Collateral Agreement pursuant to the provisions
of the Collateral Agreement, other than pursuant to the terms thereof, unless
there shall have been delivered to the Trustee the certificate required by
Section 10.3(d) and Section 10.4.
(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Notes issued on the Issuance Date shall have
been accelerated (whether by
75
<PAGE>
declaration or otherwise), no Collateral shall be released pursuant to the
provisions of the Collateral Agreement, and no release of Collateral in
contravention of this Section 10.3(c) shall be effective as against the Holders
of Notes, except for the disbursement of all Available Funds (as defined in the
Collateral Agreement) to the Trustee pursuant to Section 6(c) of the Collateral
Agreement.
(d) The release of any Collateral from the Liens and security interests
created by the Collateral Agreement shall not be deemed to impair the security
under the Collateral Agreement in contravention of the provisions hereof if and
to the extent the Collateral is released pursuant to the terms hereof or,
subject to complying with the requirements of this Section 10.3, and Section
10.4 pursuant to the terms of the Collateral Agreement. To the extent
applicable, the Company shall cause Section 314(d) of the TIA relating to the
release of property or securities from the Lien and security interest of the
Collateral Agreement to be complied with. Any certificate or opinion required
by Section 314(d) of the TIA may be made by an Officer of the Company except in
cases where Section 314(d) of the TIA requires that such certificate or opinion
be made by an independent Person, which Person shall be an independent engineer,
appraiser or other expert selected by the Company.
SECTION 10.4 Certificates of the Company. The Company shall furnish to
---------------------------
the Trustee, prior to any proposed release of the Collateral other than pursuant
to the express terms of the Collateral Agreement, (i) all documents required by
Section 314(d) of the TIA and (ii) an Opinion of Counsel, which may be rendered
by internal counsel to the Company, to the effect that such accompanying
documents constitute all documents required by Section 314(d) of the TIA. The
Trustee may, to the extent permitted by Sections 7.1 and 7.2, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such documents and such Opinion of Counsel.
SECTION 10.5 Authorization of Actions to Be Taken by the Trustee Under
---------------------------------------------------------
the Collateral Agreement. Subject to the provisions of Sections 7.1 and 7.2,
- ------------------------
the Trustee upon the written direction of the Holders of majority in principal
amount of the Notes then outstanding may in the name and on behalf of the
Holders of such Notes, take all actions as so directed in order to (a) enforce
any of the terms of the Collateral Agreement and (b) collect and receive any and
all amounts payable in respect of the obligations of the Company hereunder. The
Trustee shall have power to institute and maintain such suits and proceedings as
directed to prevent any impairment of the Collateral by any acts that may be
unlawful or in violation of the Collateral Agreement or this Indenture, and to
preserve or protect its interests and the interests of the Holders of the Notes
in the Collateral with respect to such Notes (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders of such Notes or of the Trustee).
SECTION 10.6 Authorization of Receipt of Funds by the Trustee Under the
----------------------------------------------------------
Collateral Agreement. The Trustee is authorized to receive any funds for the
- --------------------
benefit of the
76
<PAGE>
Holders of Notes disbursed under the Collateral Agreement, and to make further
distributions of such funds to the Holders of Notes according to the provisions
of this Indenture.
SECTION 10.7 Termination of Security Interest. Upon the earliest to
--------------------------------
occur of (i) the date upon which the balance of Available Funds shall have been
reduced to zero, (ii) the payment in full of all obligations of the Company
under this Indenture and the Notes, (iii) Legal Defeasance pursuant to Section
8.2 and (iv) Covenant Defeasance pursuant to Section 8.3, the Trustee shall, at
the written request of the Company, release the Liens pursuant to the Collateral
Agreement upon the Company's compliance with the provisions of the TIA
pertaining to release of collateral.
The Trustee shall not be responsible for filing any financing or
continuation statements or recording any documents or instruments in any public
office at any time or times or otherwise perfecting or maintaining the
perfection of any security interest in the Collateral.
The Trustee shall not be responsible for the existence, genuineness or
value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Liens in any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its part
hereunder, except to the extent such action or omission constitutes gross
negligence, bad faith or willful misconduct on the part of the Trustee, for the
validity or sufficiency of the Collateral or any agreement or assignment
contained therein, for the validity of the title of the Company to the
Collateral, for insuring the Collateral or for the payment of taxes, charges,
assessments or Liens upon the Collateral or otherwise as to the maintenance of
the Collateral.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 TIA Controls. If any provision of this Indenture limits,
------------
qualifies, or conflicts with the duties imposed by operation of Section 3.18(c)
of the TIA, the imposed duties shall control.
SECTION 11.2 Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or first-class mail, postage prepaid, addressed
as follows:
if to the Company:
Cybernet Internet Services
International, Inc.
Stefan-George-Ring 19-23
D-81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
77
<PAGE>
with a copy to:
Powell, Goldstein, Frazer
& Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +202-624-7222
Attention: Joseph M. Berl, Esq.
if to the Trustee:
The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Each of the Company and the Trustee by written notice to each other such
Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, must be in
writing and shall be deemed to have been given or made as of the date so
delivered if personally delivered; when receipt is acknowledged, if telecopied;
and upon actual receipt if sent by first class mail, postage prepaid (except
that a notice of change of address and a Notice to the Trustee shall not be
deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Person by first-class mail or other equivalent means at such Person's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Notices regarding the Notes in global form will be published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and, if and so long as the Notes in global form are listed
on the Luxembourg Stock Exchange and the rules of such stock exchange shall so
require, a leading daily newspaper having a general circulation in Luxembourg
(which is expected to be the Luxemburger Wort). Notices regarding the
Definitive Notes will be mailed to Holders by first-class mail at their
respective addresses as they appear on the registration books of the Registrar
and, if and so long as the Definitive Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, will be
published in a leading daily newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort). Notices given by
publication will be deemed given on the
78
<PAGE>
first date on which publication is made and notices given by first-class mail,
postage prepaid, will be deemed given five calendar days after mailing.
SECTION 11.3 Communications by Holders with Other Holders. Holders may
--------------------------------------------
communicate pursuant to Section 312(b) of the TIA with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other person shall have the protection of Section
312(c) of the TIA.
SECTION 11.4 Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Company to the Trustee or an Agent to take any
action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5), stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied or complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee or such Agent (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied or complied with.
SECTION 11.5 Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of 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.
79
<PAGE>
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar. The Trustee,
-----------------------------------------
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7 Legal Holidays. If a payment date is not a Business Day,
--------------
payment may be made on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
SECTION 11.8 Governing Law. This Indenture and the Notes shall be
-------------
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
SECTION 11.9 Submission to Jurisdiction; Appointment of Agent for
----------------------------------------------------
Service; Waiver. To the fullest extent permitted by applicable law, the Company
- ---------------
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in The City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Indenture and the Notes, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints CSC (the "Authorized Agent"), for a period of ten years from the date
----------------
hereof or until such time as no Notes are outstanding, as its authorized agent
upon whom process may be served in any such suit or proceeding. The Company
represents that it has notified the Authorized Agent of such designation and
appointment and that the Authorized Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs its Authorized Agent to accept
such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of said service to the Company mailed by
first class mail or delivered to its Authorized Agent shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any person to serve
process in any other manner permitted by law. The Company agrees that a final
action in any such suit or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Indenture, the Notes or the transactions contemplated hereby may
also be instituted in any competent court in Germany, and the Company expressly
accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law, any
immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Indenture, the Notes or the transactions
contemplated hereby.
To the extent permitted by applicable law, the Company and the Trustee
each waive any right to have a jury participate in resolving any dispute,
whether sounding in contract, tort, or otherwise arising out of, connected with,
related to or incidental to the relationship established between them in
connection with this agreement. Instead, any disputes resolved in court will be
resolved in a bench trial without a jury.
80
<PAGE>
The provisions of this Section 11.9 are intended to be effective upon the
execution of this Indenture and the Notes without any further action by the
Company or the Trustee and the introduction of a true copy of this Indenture
into evidence shall be conclusive and final evidence as to such matters.
SECTION 11.10 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of any of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.11 No Personal Liability of Directors, Officers, Employees,
--------------------------------------------------------
Stockholders or Incorporators. No director, officer, employee, incorporator or
- -----------------------------
stockholder of the Company shall have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 11.12 Currency Indemnity. U.S. dollars are the sole currency of
------------------
account and payment for all sums payable by the Company under or in connection
with the Notes, including damages. Any amount received or recovered in a
currency other than U.S. dollars (whether as a result of, or the enforcement of,
a judgment or order of a court of any jurisdiction, in the winding-up or
dissolution of the Company or otherwise) by any Holder of a Note, the Trustee or
the Agents in respect of any sum expressed to be due to it from the Company
shall only constitute a discharge to the Company to the extent of the U.S.
dollar amount which the recipient is able to purchase with the amount so
received or recovered in that other currency on the date of that receipt or
recovery (or, if it is not practicable to make that purchase on that date, on
the first date on which it is practicable to do so). If that U.S. dollar amount
is less than the U.S. dollar amount expressed to be due to the recipient, the
Company shall indemnify it against any loss sustained by it as a result. If the
dollar amount is greater than the dollar amount expressed to be due to the
recipient under this Agreement, the Company shall be entitled to the amount of
such excess. In any event, the Company shall indemnify the recipient against
the cost of making any such purchase. For the purposes of this subsection, it
will be sufficient for the Trustee or any Holder of a Note to certify in a
satisfactory manner (indicating the sources of information used) that it would
have suffered a loss had an actual purchase of U.S. dollars been made with the
amount so received in that other currency on the date of receipt or recovery
(or, if a purchase of dollars on such date had not been practicable, on the
first date on which it would have been practicable, it being required that the
need for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the Company's
other obligations, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by the Trustee or any
Holder of a Note and shall continue in full force and effect despite any other
judgment, order, claim or proof for a liquidated amount in respect of any sum
due under any Note.
SECTION 11.13 Successors. All agreements of the Company in this
----------
Indenture and the Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.
81
<PAGE>
SECTION 11.14 Counterpart Originals All parties hereto may sign any
---------------------
number of copies of this Indenture. Each signed copy or counterpart shall be an
original, but all of them together shall represent one and the same agreement.
SECTION 11.15 Severability. In case any one or more of the provisions
------------
in this Indenture or in the Notes shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 11.16 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 of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
82
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, as of the date first written above.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By: /s/ Authorized Signatory
-------------------------------------
By: /s/ Authorized Signatory
-------------------------------------
83
<PAGE>
THE BANK OF NEW YORK, as Trustee,
Registrar and Paying Agent
By: /s/ Authorized Signatory
-------------------------------------
Name:
Title:
84
<PAGE>
EXHIBIT A
TO THE INDENTURE
[FORM OF FACE OF INITIAL GLOBAL NOTE]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
--------------
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
------------------------------
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
- ----
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (D) WITH THE CONSENT OF THE COMPANY PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT,
--------
IN CONSENTING TO ANY SALE OR OFFER PURSUANT TO CLAUSE (D) ABOVE, THE COMPANY
SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS PART
OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR INDIRECTLY,
OTHER THAN TO (INVESTMENT) BANKS, PENSION FUNDS, INSURANCE COMPANIES, SECURITIES
FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, LARGE INTERNATIONAL AND
SUPRA-NATIONAL ORGANIZATIONS AND OTHER COMPARABLE ENTITIES, INCLUDING, AMONG
OTHERS, TREASURIES AND FINANCE COMPANIES OF LARGE ENTERPRISES, WHICH ARE ACTIVE
ON A REGULAR AND PROFESSIONAL BASIS IN THE FINANCIAL MARKETS FOR THEIR OWN
ACCOUNT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
---
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.6 OF THE INDENTURE PURSUANT TO WHICH THEY WERE ISSUED.
A-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
CUSIP No.: 232503AA0
No.1 $150,000,000
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay Cede & Co. or registered assigns upon surrender hereof the
principal sum indicated on Schedule A hereof, on July 1, 2009.
Interest Payment Dates: January 1 and July 1, commencing January 1, 2000
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-4
<PAGE>
Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:
-----------------------------------------
Name:
Title:
Dated: July 8, 1999
A-5
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below. Interest on the Notes
will accrue at 14.0% per annum on the principal amount then outstanding, and be
payable semi-annually in arrears on each January 1 and July 1, or if any such
day is not a Business Day on the next succeeding Business Day, commencing
January 1, 2000, to the Holder hereof. Notwithstanding any exchange of this Note
for a Definitive Note during the period starting on a Record Date relating to
such Definitive Note and ending on the immediately succeeding Interest Payment
Date, the interest due on such Interest Payment Date shall be payable to the
Person in whose name this Global Note is registered at the close of business on
the Record Date for such interest. 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 8, 1999. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein.
2. Liquidated Damages. Pursuant to a Registration Rights Agreement
------------------
between the Company and the Initial Purchasers on behalf of Holders of the
Initial Notes, the Company has agreed to use its reasonable best efforts to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 14.0% Senior Notes due
2009 (the "Exchange Notes"), which have then been registered under the
Securities Act, in like principal amount and having substantially identical
terms in all material respects as the Initial Notes. The Holders shall be
entitled to receive payment of additional interest ("Liquidated Damages") in the
event such exchange offer is not consummated and in certain other events,
subject, in each case, to certain conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Liquidated Damages which
may be payable pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated interest. The
provisions of the Registration Rights Agreement relating to such Liquidated
Damages are incorporated herein by reference and made a part hereof as if set
forth herein in full. The Company shall provide written notice to the Trustee
of the accrual and amount of Liquidated Damages, if any, not less than ten (10)
Business Days prior to each Interest Payment Date. Absent such notice, the
Trustee shall be conclusively entitled to presume that no Liquidated Damages
have accrued and are owing.
3. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever
A-6
<PAGE>
nature (collectively, "Taxes") imposed or levied by or on behalf of Germany or
any jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
4. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Person in whose name this Note is registered
at the close of business on the Record Date for such interest. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in dollars or in such other coin or currency of
the United States of America that at the time of payment which is legal tender
for payment of public and private debts. Immediately available funds for the
payment of the principal of (and
A-7
<PAGE>
premium, if any), interest, Additional Amounts, if any, and Liquidated Damages,
if any, on this Note due on any Interest Payment Date, Maturity Date, Redemption
Date or other repurchase date will be made available to the Paying Agent to
permit the Paying Agent to pay such funds to the Holders on such respective
dates.
5. Paying Agent and Registrar. Initially, The Bank of New York will
--------------------------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of July 8, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] Notes (as defined in the Indenture) of the Company designated as
its 14.0% Senior Notes due 2009 (together with the [Original] [Additional]
Notes, the "Initial Notes"). The Notes include the Initial Notes and the
Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. 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 of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the Notes are subject
to all such terms, and Holders of Notes are referred to the Indenture and the
TIA for a statement of them. The Notes are not secured by any of the assets of
the Company except to the limited extent provided for by the Collateral
Agreement, and will become general unsecured obligations of the Company upon
disbursement in full of the funds in the Collateral Account. The Notes are
limited in aggregate principal amount to $350 million subject to the terms of
the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time.
7. Ranking. The Notes will be general unsecured (except to the
-------
extent provided for by the Collateral Agreement) obligations of the Company and
will rank senior in right of payment to all future Indebtedness of the Company
that is, by its terms or by the terms of the agreement or instrument governing
such Indebtedness, expressly subordinated in right of payment to the Notes and
pari passu in right of payment with all existing and future unsecured
liabilities of the Company that are not so subordinated.
8. Optional Redemption. The Notes will be redeemable, at the
--------------------
Company's option, in whole or in part, on and after July 1, 2004 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and if, and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) at the redemption prices (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of each of the years indicated below:
A-8
<PAGE>
Redemption
Year Price
- ---- ----------
2004................................................... 110.000%
2005................................................... 106.667%
2006................................................... 103.333%
2007 and thereafter.................................... 100.000%
9. Special Tax Redemption. The Notes may be redeemed, at the option
----------------------
of the Company in whole but not in part, at any time upon giving not less than
30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest and Liquidated Damages, if any, to
the date fixed by the Company for redemption (a "Tax Redemption Date"), and, all
Additional Amounts, if any, then due and which will become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Company
determines that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations or rulings promulgated thereunder) of The Federal
Republic of Germany (or any political subdivision or taxing authority thereof)
affecting taxation which becomes effective on or after the Issue Date, or (ii)
any change in or new or different position regarding the application,
administration or interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent jurisdiction),
which change, amendment, application or interpretation becomes effective on or
after the Issue Date, the Company is, or on the next Interest Payment Date would
be, required to pay Additional Amounts, and the Company determines that such
payment obligation cannot be avoided by the Company taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to make such payment or withholding if a payment in respect of the
Notes were then due. Prior to the publication or, where relevant, mailing of any
notice of redemption of the Notes pursuant to the foregoing, the Company will
deliver to the Trustee an opinion of an independent tax counsel of recognized
international standing to the effect that the circumstances referred to above
exist. The Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at
--------------------
least 30 days but not more than 60 days before the redemption date by publishing
in a leading newspaper having a general circulation in New York (which is
expected to be The Wall Street Journal) and in Frankfurt (which is expected to
be the Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)). Notes in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of Notes
that have denominations larger than $1,000.
Except as set forth in the Indenture, from and after any redemption
date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent for redemption on such redemption date,
then, unless the Company defaults in the payment of such Redemption Price, the
Notes called for redemption will cease to bear interest, Additional
A-9
<PAGE>
Amounts, if any, or Liquidated Damages, if any, and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price.
11. Change of Control Offer. Upon the occurrence of a Change of
-----------------------
Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 in principal amount and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase. Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
12. Limitation on Disposition of Assets. When the aggregate amount
-----------------------------------
of Excess Proceeds from Asset Sales exceeds C5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to purchase the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, plus Additional Amounts, if any, and Liquidated
Damages, if any, to the date fixed for the closing of such offer. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, subject to applicable law, the Trustee shall select
the Notes to be redeemed in accordance with the Indenture; provided, however,
that no Notes of $1,000 or less shall be purchased in part. Holders of Notes
that are the subject of an offer to purchase will receive an Asset Sale Offer
from the Company prior to any related purchase date and may elect to have such
Notes purchased by completing the form entitled "Option of Holders to Elect
Purchase" appearing below.
13. Denominations; Form. The Global Notes are in registered global
-------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000.
14. Persons Deemed Owners. The registered Holder of this Note shall
---------------------
be treated as the owner of it for all purposes, subject to the terms of the
Indenture.
15. Unclaimed Funds. If funds for the payment of principal,
---------------
interest, Additional Amounts or Liquidated Damages remain unclaimed for two
years, the Trustee and the Paying Agents will repay the funds to the Company at
its written request. After that, all liability of the Trustee and such Paying
Agents with respect to such funds shall cease.
16. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
17. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing
A-10
<PAGE>
Default or Event of Default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding.
18. Restrictive Covenants. The Indenture imposes certain covenants
---------------------
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
19. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
20. Defaults and Remedies. If an Event of Default (other than an
---------------------
Event of Default specified in subsections 6.1(h) or (i) of the Indenture) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Notes then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal, premium, interest, Additional Amounts, if any,
and Liquidated Damages, if any, including an accelerated payment) if it
determines that withholding notice is in their interest.
21. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
22. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
23. Authentication. This Note shall not be valid until the Trustee
--------------
or authenticating agent signs the certificate of authentication on this Note.
24. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
A-11
<PAGE>
25. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
26. Governing Law. The Indenture and the Notes shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York.
A-12
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$150,000,000. The following decreases/increases in the principal amount at
maturity of this Note have been made:
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- --------- ----------- ----------- --------------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
----------
Date:
-------------
Your Signature:
--------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------------
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
A-14
<PAGE>
EXHIBIT B
TO THE INDENTURE
[FORM OF FACE OF INITIAL DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
--------------
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
------------------------------
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
- ----
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (D), WITH THE CONSENT OF THE COMPANY, PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT,
--------
IN CONSENTING TO ANY SALE OR OFFER PURSUANT TO CLAUSE (D) ABOVE, THE COMPANY
SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE
B-1
<PAGE>
TRUSTEE, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS
PART OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR
INDIRECTLY, OTHER THAN TO (INVESTMENT) BANKS, PENSION FUNDS, INSURANCE
COMPANIES, SECURITIES FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, LARGE
INTERNATIONAL AND SUPRA-NATIONAL ORGANIZATIONS AND OTHER COMPARABLE ENTITIES,
INCLUDING, AMONG OTHERS, TREASURIES AND FINANCE COMPANIES OF LARGE ENTERPRISES,
WHICH ARE ACTIVE ON A REGULAR AND PROFESSIONAL BASIS IN THE FINANCIAL MARKETS
FOR THEIR OWN ACCOUNT.
B-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
CUSIP No.:
------------
No. $
---- ---------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation
(the "Company", which term includes any successor corporation), for value
received promises to pay ______________________, or registered assigns, upon
surrender hereof the principal sum of U.S.$________, on July 1, 2009.
Interest Payment Dates: January 1 and July 1, commencing January 1,
2000
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee
By:
------------------------------------------
Name:
Title:
Dated:
B-4
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a
--------
Delaware corporation (the "Company"), promises to pay interest on the principal
amount of this Note at the rate and in the manner specified below. Interest on
the Notes will accrue at 14.0% per annum on the principal amount then
outstanding, and be payable semi-annually in arrears on each January 1 and
July 1, or if any such day is not a Business Day on the next succeeding Business
Day, commencing January 1, 2000, to the Holder hereof. 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 8, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein.
2. Liquidated Damages. Pursuant to a Registration Rights Agreement
------------------
between the Company and the Initial Purchasers on behalf of Holders of the
Initial Notes, the Company has agreed to use its reasonable best efforts to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 14.0% Senior Notes due
2009 (the "Exchange Notes"), which have then been registered under the
Securities Act, in like principal amount and having substantially identical
terms in all material respects as the Initial Notes. The Holders shall be
entitled to receive payment of additional interest ("Liquidated Damages") in the
event such exchange offer is not consummated and in certain other events,
subject, in each case, to certain conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Liquidated Damages which
may be payable pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated interest. The
provisions of the Registration Rights Agreement relating to such Liquidated
Damages are incorporated herein by reference and made a part hereof as if set
forth herein in full. The Company shall provide written notice to the Trustee
of the accrual and amount of Liquidated Damages, if any, not less than ten (10)
Business Days prior to each Interest Payment Date. Absent such notice, the
Trustee shall be conclusively entitled to presume that no Liquidated Damages
have accrued and are owing.
3. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments, or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of Germany or any
B-5
<PAGE>
jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
4. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date for such interest. Holders must surrender Notes to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
dollars or in such other coin or currency of the United States of America at the
time of payment which is legal tender for payment of public and private debts;
provided, however, that with respect to any payment of principal, interest,
Additional Amounts, if any, and
B-6
<PAGE>
Liquidated Damages, if any, in excess of C100,000 to any payee or group of
related payees, such payment will be made, at the option of the Holder hereof,
by wire transfer of same day funds to the Paying Agent, who in turn will wire
such funds to the Holder hereof or to such individuals as the Holder hereof may
in writing to the Paying Agent direct; provided that the Paying Agent has
received written wire transfer instructions at least fifteen days prior to the
date of any such payment.
5. Paying Agent and Registrar. Initially, The Bank of New York will
--------------------------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of July 8, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] Notes (as defined in the Indenture) of the Company designated as
its 14.0% Senior Notes due 2009 (together with the [Original] [Additional]
Notes, the "Initial Notes"). The Notes include the Initial Notes and the
Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. 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 of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture until such time as the Indenture is qualified under the TIA, and
thereafter as in effect on the date on which the Indenture is qualified under
the TIA. Notwith standing anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of them. The Notes are not secured by any of the
assets of the Company except to the limited extent provided for by the
Collateral Agreement, and will become general unsecured obligations of the
Company upon disbursement in full of the funds in the Collateral Account. The
Notes are limited in aggregate principal amount to $350 million subject to the
terms of the Indenture. Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
7. Ranking. The Notes will be general unsecured (except to the
-------
extent provided for by the Collateral Agreement) obligations of the Company and
will rank senior in right of payment to all future Indebtedness of the Company
that is, by its terms or by the terms of the agreement or instrument governing
such Indebtedness, expressly subordinated in right of payment to the Notes and
pari passu in right of payment with all existing and future unsecured
liabilities of the Company that are not so subordinated.
8. Optional Redemption. The Notes will be redeemable, at the
--------------------
Company's option, in whole or in part, on and after July 1, 2004 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and if, and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) and mailed by first-class mail to each
Holder's registered address, at the redemption prices (expressed as a percentage
of principal amount) set forth below, plus accrued and unpaid interest,
B-7
<PAGE>
Additional Amounts, if any, and Liquidated Damages, if any, to the applicable
redemption date (and, subject to the rights of Holders of record on the relevant
record date to receive interest and Additional Amounts, if any, and Liquidated
Damages, if any, due on the relevant interest payment date in respect thereof),
if redeemed during the twelve-month period beginning on July 1 of each of the
years indicated below:
Redemption
Year Price
- ---- ----------
2004................................................. 110.000%
2005................................................. 106.667%
2006................................................. 103.333%
2007 and thereafter.................................. 100.000%
9. Special Tax Redemption. The Notes may be redeemed, at the option
----------------------
of the Company in whole but not in part, at any time upon giving not less than
30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
date fixed by the Company for redemption (a "Tax Redemption Date"), and, all
Additional Amounts, if any, then due and which will become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Company
determines that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations or rulings promulgated thereunder) of The Federal
Republic of Germany (or any political subdivision or taxing authority thereof)
affecting taxation which becomes effective on or after the Issue Date, or (ii)
any change in or new or different position regarding the application,
administration or interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent jurisdiction),
which change, amendment, application or interpretation becomes effective on or
after the Issue Date, the Company is, or on the next Interest Payment Date would
be, required to pay Additional Amounts, and the Company determines that such
payment obligation cannot be avoided by the Company taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to make such payment or withholding if a payment in respect of the
Notes were then due. Prior to the publication or, where relevant, mailing of any
notice of redemption of the Notes pursuant to the foregoing, the Company will
deliver to the Trustee an opinion of an independent tax counsel of recognized
international standing to the effect that the circumstances referred to above
exist. The Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at
--------------------
least 30 days but not more than 60 days before the redemption date by publishing
in a leading newspaper having a general circulation in New York (which is
expected to be The Wall Street Journal) and in Frankfurt (which is expected to
be the Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) and mailed to Holders by first-class
mail at their respective addresses as they appear on the registration books of
the Registrar. Notes in denominations of $1,000 may
B-8
<PAGE>
be redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000.
Except as set forth in the Indenture, from and after any redemption
date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent for redemption on such redemption date,
then, unless the Company defaults in the payment of such Redemption Price, the
Notes called for redemption will cease to bear interest, Additional Amounts, if
any, or Liquidated Damages, if any, and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price.
11. Change of Control Offer. Upon the occurrence of a Change of
-----------------------
Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 in principal amount and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase (and subject to the right
of Holders of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
12. Limitation on Disposition of Assets. When the aggregate amount
-----------------------------------
of Excess Proceeds from Asset Sales exceeds C5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to purchase the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, plus Additional Amounts, if any, and Liquidated
Damages, if any, to the date fixed for the closing of such offer (and subject to
the right of Holders of record on the relevant record date to receive interest
and Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, subject to applicable law, the Trustee shall select the Notes to be
redeemed in accordance with the Indenture; provided, however, that no Notes of
$1,000 or less shall be purchased in part. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holders to Elect Purchase"
appearing below.
13. Denominations; Form. The Definitive Notes are in bearer form,
-------------------
without coupons, in denominations of $1,000 and integral multiples of $1,000.
14. Persons Deemed Owners. The registered Holder of this Note shall
---------------------
be treated as the owner of it for all purposes, subject to the terms of the
Indenture.
B-9
<PAGE>
15. Unclaimed Funds. If funds for the payment of principal,
---------------
interest, Additional Amounts or Liquidated Damages remain unclaimed for two
years, the Trustee and the Paying Agents will repay the funds to the Company at
its written request. After that, all liability of the Trustee and such Paying
Agents with respect to such funds shall cease.
16. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
17. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
18. Restrictive Covenants. The Indenture imposes certain covenants
---------------------
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
19. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
20. Defaults and Remedies. If an Event of Default (other than an
---------------------
Event of Default specified in subsections 6.1(h) or (i) of the Indenture) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Notes then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal, premium, interest, Additional Amounts, if any,
and Liquidated Damages, if any, including an accelerated payment) if it
determines that withholding notice is in their interest.
B-10
<PAGE>
21. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
22. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
23. Authentication. This Note shall not be valid until the Trustee
--------------
or authenticating agent signs the certificate of authentication on this Note.
24. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
25. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
26. Governing Law. The Indenture and the Notes shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York.
B-11
<PAGE>
--------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Note fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of
the Company.
The agent may substitute another to act for him.
--------------------------------------------------------------------
Date: Your Signature:
-------------- ------------------------
--------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
B-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
-----------------
Date:
-------------
Your Signature:
--------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------------------
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
B-13
<PAGE>
EXHIBIT C
TO THE INDENTURE
[FORM OF FACE OF EXCHANGE GLOBAL NOTE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
---
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.6 OF THE INDENTURE PURSUANT TO WHICH THEY WERE ISSUED.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
C-1
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
CUSIP No:
--------
No. $
----- --------------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation
(the "Company", which term includes any successor corporation), for value
received promises to pay to Cede & Co. or registered assigns upon surrender
hereof the principal sum indicated on Schedule A hereof on July 1, 2009.
Interest Payment Dates: January 1 and July 1, commencing January 1,
2000
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
C-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:
------------------------------------
Name:
Title:
Dated:
C-3
<PAGE>
[Form of REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a
--------
Delaware corporation (the "Company"), promises to pay interest on the principal
amount of this Note at the rate and in the manner specified below. Interest on
the Notes will accrue at 14.0% per annum on the principal amount then
outstanding, and be payable semi-annually in arrears on each January 1 and
July 1, or if any such day is not a Business Day on the next succeeding Business
Day, commencing July 1, 2000, to the Holder hereof. Notwithstanding any exchange
of this Note for a Definitive Note during the period starting on a Record Date
relating to such Definitive Note and ending on the immediately succeeding
Interest Payment Date, the interest due on such Interest Payment Date shall be
payable to the Person in whose name this Global Note is registered at the close
of business on the Record Date for such interest. 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 8, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein.
2. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively
"Taxes") imposed or levied by or on behalf of Germany or any jurisdiction in
which the Company or any Surviving Entity is organized or is otherwise resident
for tax purposes or any political subdivision thereof or any authority having
power to tax therein or any jurisdiction from or through which payment is made
(each a "Relevant Taxing Jurisdiction"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any payments made by the Company with respect to the Notes,
including payments of principal, redemption price, interest or premium, the
Company will pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Notes or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being
C-4
<PAGE>
a citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in,
the Relevant Taxing Jurisdiction) other than by the mere holding of such
Note or enforcement of rights thereunder or the receipt of payments in
respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
3. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Person in whose name this Note is registered
at the close of business on the Record Date for such interest. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in s or in such other coin or currency of the
United States of America at the time of payment which is legal tender for
payment of public and private debts. Immediately available funds for the
payment of the principal of (and premium, if any), interest, Additional Amounts,
if any, on this Note due on any Interest Payment Date, Maturity Date, Redemption
Date or other repurchase date will be made available to the Paying Agent to
permit the Paying Agent to pay such funds to the Holders on such respective
dates.
4. Paying Agent and Registrar. Initially, The Bank of New York will
--------------------------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
5. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of July 8, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of Exchange
Notes of the Company designated as its 14.0% Senior Notes due 2009. 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 of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such
time as the Indenture is qualified under the TIA, and thereafter as in effect on
the date on which the
C-5
<PAGE>
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are not
secured by any of the assets of the Company except to the limited extent
provided for by the Collateral Agreement, and will become general unsecured
obligations of the Company upon disbursement in full of the funds in the
Collateral Account. The Notes are limited in aggregate principal amount to $350
million subject to the terms of the Indenture. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the Indenture, as the
same may be amended from time to time.
6. Ranking. The Notes will be general unsecured (except to the
-------
extent provided for by the Collateral Agreement) obligations of the Company and
will rank senior in right of payment to all future Indebtedness of the Company
that is, by its terms or by the terms of the agreement or instrument governing
such Indebtedness, expressly subordinated in right of payment to the Notes and
pari passu in right of payment with all existing and future unsecured
liabilities of the Company that are not so subordinated.
7. Optional Redemption. The Notes will be redeemable, at the
--------------------
Company's option, in whole or in part, on and after July 1, 2004 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung ) (and if, and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) at the redemption prices (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid
interest and Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on July 1 of each of the years indicated below:
Redemption
Year Price
- ---- ----------
2004....................................................... 110.000%
2005....................................................... 106.667%
2006....................................................... 103.333%
2007 and thereafter........................................ 100.000%
8. Special Tax Redemption. The Notes may be redeemed, at the option
----------------------
of the Company in whole but not in part, at any time upon giving not less than
30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest to the date fixed by the Company for
redemption (a "Tax Redemption Date") and all Additional Amounts, if any, then
due and which will become due on the Tax Redemption Date as a result of the
redemption or otherwise, if the Company determines that, as a result of (i) any
change in, or amendment to, the laws or treaties (or any regulations or rulings
promulgated thereunder) of The Federal Republic of Germany (or any political
subdivision or taxing authority thereof) affecting taxation which becomes
effective on or after the Issue Date, or (ii) any change in or new or different
position regarding the application, administration or interpretation of such
laws, treaties, regulations or
C-6
<PAGE>
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized international standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
9. Notice of Redemption. Notice of redemption will be given at least
--------------------
30 days but not more than 60 days before the redemption date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed on
the Luxembourg Stock Exchange and the rules of such stock exchange shall so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)). Notes in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000.
Except as set forth in the Indenture, from and after any redemption
date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent for redemption on such redemption date,
then, unless the Company defaults in the payment of such Redemption Price, the
Notes called for redemption will cease to bear interest, Additional Amounts, if
any, and the only right of the Holders of such Notes will be to receive payment
of the Redemption Price.
10. Change of Control Offer. Upon the occurrence of a Change of
-----------------------
Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 in principal amount and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
thereon to the date of repurchase plus Additional Amounts, if any, to the date
of repurchase. Holders of Notes that are subject to an offer to purchase will
receive a Change of Control Offer from the Company prior to any related Change
of Control Payment Date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below.
11. Limitation on Disposition of Assets. When the aggregate amount
-----------------------------------
of Excess Proceeds from Asset Sales exceeds C5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to purchase the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, plus Additional Amounts, if any, to the date fixed for
the
C-7
<PAGE>
closing of such offer. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, subject to applicable
law, the Trustee shall select the Notes to be redeemed in accordance with the
Indenture; provided, however, that no Notes of $1,000 or less shall be purchased
in part. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holders to Elect Purchase" appearing below.
12. Denominations; Form. The Global Notes are in registered global
-------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000.
13. Persons Deemed Owners. The registered Holder of this Note shall
---------------------
be treated as the owner of it for all purposes, subject to the terms of the
Indenture.
14. Unclaimed Funds. If funds for the payment of principal, interest
---------------
or Additional Amounts remain unclaimed for two years, the Trustee and the Paying
Agents will repay the funds to the Company at its written request. After that,
all liability of the Trustee and such Paying Agents with respect to such funds
shall cease.
15. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
16. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
17. Restrictive Covenants. The Indenture imposes certain covenants
---------------------
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
18. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
19. Defaults and Remedies. If an Event of Default (other than an
---------------------
Event of Default specified in subsections 6.1(h) or (i) of the Indenture) occurs
and is continuing, the
C-8
<PAGE>
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Notes may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of
principal, premium, interest, Additional Amounts, if any, and Liquidated
Damages, if any, including an accelerated payment) if it determines that
withholding notice is in their interest.
20. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
21. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
22. Authentication. This Note shall not be valid until the Trustee
--------------
or authenticating agent signs the certificate of authentication on this Note.
23. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
25. Governing Law. The Indenture and the Notes shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York.
C-9
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be $_____.
The following decreases/increases in the principal amount at maturity of this
Note have been made:
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- --------- ----------- ----------- --------------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
- --------- --------- --------- --------- ---------
C-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount: $
Date:
-------------
Your Signature:
------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------------------
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
C-11
<PAGE>
EXHIBIT D
TO THE INDENTURE
[FORM OF FACE OF EXCHANGE DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
CUSIP No.:
---------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
No. $
----- ----------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation
(the "Company", which term includes any successor corporation), for value
received promises to pay to ____________, or registered assigns, upon surrender
hereof the principal sum of $___________, on July 1, 2009.
Interest Payment Dates: January 1 and July 1 commencing January 1,
2000
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
D-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:
-------------------------------
Name:
Title:
Dated:
D-2
<PAGE>
[Form of REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
14.0% Senior Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a
--------
Delaware corporation (the "Company"), promises to pay interest on the principal
amount of this Note at the rate and in the manner specified below. Interest on
the Notes will accrue at 14.0% per annum on the principal amount then
outstanding, and be payable semi-annually in arrears on each January 1 and
July 1, or if any such day is not a Business Day on the next succeeding Business
Day, commencing January 1, 2000, to the Holder hereof. 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 8, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), and
on any Additional Amounts, from time to time on demand at the rate borne by the
Notes plus 1.5% per annum to the extent lawful. Any interest paid on this Note
shall be increased to the extent necessary to pay Additional Amounts as set
forth herein.
2. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of Germany or any jurisdiction in
which the Company or any Surviving Entity is organized or is otherwise resident
for tax purposes or any political subdivision thereof or any authority having
power to tax therein or any jurisdiction from or through which payment is made
(each a "Relevant Taxing Jurisdiction"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any payments made by the Company with respect to the Notes,
including payments of principal, redemption price, interest or premium, the
Company will pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Notes or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
D-3
<PAGE>
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason of
the failure of the Holder or beneficial owner of the Note to comply with any
request by the Company to provide information concerning the nationality,
residence or identity of such Holder or beneficial owner or to make any
declaration or similar claim or satisfy any information or reporting
requirement, which is required or imposed by a statute, treaty, regulation or
administrative practice of the Relevant Taxing Jurisdiction as a precondition
to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant Taxing
Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
3. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date for such interest. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in s or in such other coin or currency of the United
States of America at the time of payment which is legal tender for payment of
public and private debts. Immediately available funds for the payment of the
principal of (and premium, if any), interest and Additional Amounts, if any, in
excess of $100,000 to any payee or group of related payees, such payment will be
made, at the option of the Holder hereof, by wire transfer of same day funds to
the Paying Agent, who in turn will wire such funds to the Holder hereof or to
such individuals as the Holder hereof may in writing to the Paying Agent direct;
provided that the Paying Agent has received written wire transfer instructions
at least fifteen days prior to the date of any such payment.
4. Paying Agent and Registrar. Initially, The Bank of New York will
--------------------------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
5. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of July 8, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of Exchange
Notes (as defined in the Indenture) of the Company designated as its 14.0%
Senior Notes due 2009. 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 of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of
D-4
<PAGE>
the Company except to the limited extent provided for by the Collateral
Agreement, and will become general unsecured obligations of the Company upon
disbursement in full of the funds in the Collateral Account. The Notes are
limited in aggregate principal amount to $350 million subject to the terms of
the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time.
6. Ranking. The Notes will be general unsecured (except to the
-------
extent provided for by the Collateral Agreement) obligations of the Company and
will rank senior in right of payment to all future Indebtedness of the Company
that is, by its terms or by the terms of the agreement or instrument governing
such Indebtedness, expressly subordinated in right of payment to the Notes and
pari passu in right of payment with all existing and future unsecured
liabilities of the Company that are not so subordinated.
7. Optional Redemption. The Notes will be redeemable, at the
--------------------
Company's option, in whole or in part, on and after July 1, 2004 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung ) (and if, and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) and mailed by first-class mail to each
Holder's registered address, at the redemption prices (expressed as a percentage
of principal amount) set forth below, plus accrued and unpaid interest and
Additional Amounts, if any, to the applicable redemption date (and subject to
the right of Holders of record on the relevant record date to receive interest
and Additional Amounts, if any, and Liquidated Damages, if any, due on the
relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on July 1 of each of the years indicated below:
Redemption
Year Price
- ---- ----------
2004....................................................... 110.000%
2005....................................................... 106.667%
2006....................................................... 103.333%
2007 and thereafter........................................ 100.000%
8. Special Tax Redemption. The Notes may be redeemed, at the option
----------------------
of the Company in whole but not in part, at any time upon giving not less than
30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest to the date fixed by the Company for
redemption (a "Tax Redemption Date"), and all Additional Amounts, if any, then
due and which will become due on the Tax Redemption Date as a result of the
redemption or otherwise, if the Company determines that, as a result of (i) any
change in, or amendment to, the laws or treaties (or any regulations or rulings
promulgated thereunder) of The Federal Republic of Germany (or any political
subdivision or taxing authority thereof) affecting taxation which becomes
effective on or after the Issue Date, or (ii) any change in or new or different
position regarding the application, administration or interpretation of such
laws, treaties, regulations or
D-5
<PAGE>
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized international standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
9. Notice of Redemption. Notice of redemption will be given at least
--------------------
30 days but not more than 60 days before the Redemption Date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed on
the Luxembourg Stock Exchange and the rules of such stock exchange shall so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) and mailed to Holders by first-class mail
at their respective addresses as they appear on the registration books of the
Registrar. Notes in denominations of $1,000 may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000.
Except as set forth in the Indenture, from and after any redemption
date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent for redemption on such redemption date,
then, unless the Company defaults in the payment of such Redemption Price, the
Notes called for redemption will cease to bear interest and Additional Amounts,
if any, and the only right of the Holders of such Notes will be to receive
payment of the Redemption Price.
10. Change of Control Offer. Upon the occurrence of a Change of
-----------------------
Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 in principal amount and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase (and subject to the right
of Holders of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
D-6
<PAGE>
11. Limitation on Disposition of Assets. When the aggregate amount
-----------------------------------
of Excess Proceeds from Asset Sales exceeds C5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to purchase the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, plus Additional Amounts, if any, and Liquidated
Damages, if any, to the date fixed for the closing of such offer (and subject to
the right of Holders of record on the relevant record date to receive interest
and Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, subject to applicable law, the Trustee shall select the Notes to be
redeemed in accordance with the Indenture; provided, however, that no Notes of
$1,000 or less shall be purchased in part. Holders of Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holders to Elect Purchase"
appearing below.
12. Denominations; Form. The Definitive Notes are in bearer form,
-------------------
without coupons, in denominations of $1,000 and integral multiples of $1,000.
13. Persons Deemed Owners. The Holder of this Note shall be treated
---------------------
as the owner of it for all purposes, subject to the terms of the Indenture.
14. Unclaimed Funds. If funds for the payment of principal, interest
---------------
or Additional Amounts remain unclaimed for two years, the Trustee and the Paying
Agents will repay the funds to the Company at its written request. After that,
all liability of the Trustee and such Paying Agents with respect to such funds
shall cease.
15. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
16. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
17. Restrictive Covenants. The Indenture imposes certain covenants
---------------------
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number
D-7
<PAGE>
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
18. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
19. Defaults and Remedies. If an Event of Default (other than an
---------------------
Event of Default specified in subsections 6.1(h) or (i) of the Indenture) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Notes then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal, premium, interest, Additional Amounts, if any,
and Liquidated Damages, if any, including an accelerated payment) if it
determines that withholding notice is in their interest.
20. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
21. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
22. Authentication. This Note shall not be valid until the Trustee
--------------
or authenticating agent signs the certificate of authentication on this Note.
23. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the
D-8
<PAGE>
accuracy of such numbers as printed on the Notes and reliance may be placed only
on the other identification numbers printed hereon.
25. Governing Law. The Indenture and the Notes shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York.
D-9
<PAGE>
----------------------------------------------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of
the Company.
The agent may substitute another to act for him.
----------------------------------------------------------------
Date: Your Signature:
-------------- ------------------------
----------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
D-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$
----------
Date:
-------------
Your Signature:
----------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------------
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
D-11
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
================================================================================
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
AND
THE BANK OF NEW YORK,
as Collateral Agent,
Securities Intermediary
and Trustee
------------------
COLLATERAL AGREEMENT
Dated as of
July 8, 1999
------------------
150,000 Units Consisting of $150,000,000 in Aggregate
Principal Amount of 14.0% Senior Notes due 2009
and Warrants to Purchase 4,534,604 shares of Common Stock
================================================================================
<PAGE>
COLLATERAL AGREEMENT (this "Agreement"), dated as of July 8, 1999,
---------
between The Bank of New York, a New York banking corporation, as collateral
agent and securities intermediary (in such capacities, the "Collateral Agent")
----------------
and as Trustee (in such capacity, the "Trustee") under the Indenture (as defined
-------
herein), and Cybernet Internet Services International, Inc., a Delaware
corporation (the "Company").
-------
W I T N E S S E T H :
-------------------
WHEREAS, pursuant to the Unit Agreement, dated as of July 8, 1999,
between the Company and The Bank of New York, as Unit Agent, as Warrant Agent
and as Trustee, (the "Unit Agreement") the Company is issuing 150,000 Units (the
--------------
"Units"), each consisting of $1,000 aggregate principal amount of its 14% Senior
-----
Notes due 2009 (the "Initial Notes"; and together with any Exchange Notes, the
-------------
"Notes") and one warrant to purchase 4,534,604 shares of common stock, par value
- ------
$.001, of the Company (the "Common Stock"). The Notes are to be issued under an
Indenture, dated as of July 8, 1999 (the "Indenture"), between the Company and
---------
the Trustee. The warrants are to be issued under a Warrant Agreement, dated as
of July 8, 1999, between the Company and The Bank of New York, as Warrant Agent;
WHEREAS, as security for its obligations under the Notes and the
Indenture, the Company has agreed to grant to the Trustee and any predecessor
Trustee under the Indenture (any such Trustee acting in the name and on behalf
of the Beneficiaries (as defined herein)) for the benefit of the Beneficiaries,
a security interest in and lien upon the Collateral Account (as defined herein);
and
WHEREAS, the parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Collateral Account (as defined herein) and released from the
security interest and lien described above;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. All terms used but not defined herein shall have
--------------
the meanings ascribed to them in the Indenture. All terms defined in the UCC
(as defined herein) and not otherwise defined herein shall have the respective
meanings given to those terms in the UCC, except where the context otherwise
requires. In addition to any other defined terms used herein, the following
terms shall constitute defined terms for purposes of this Agreement and shall
have the meanings set forth below:
"Agent" means, with respect to the Collateral Account at any date, any
-----
investment advisor or advisors appointed by the Company from time to time,
with notice in writing to the Collateral Agent and the Trustee. Only those
persons identified in an Officers' Certificate of the Agent delivered to
the Collateral Agent at the time of notice of appointment as Agent, or any
such persons identified in a further certificate delivered by an authorized
person of the Agent to the Collateral Agent, shall be authorized to
instruct the Collateral Agent pursuant to the terms of this Agreement.
<PAGE>
"Applied" means that disbursed funds have been applied (i) to the
-------
payment of interest on the Notes, (ii) pursuant to Section 3(c) hereof or
(iii) pursuant to Section 6(b)(iii) hereof.
"Available Funds" mean, with respect to each Collateral Account at any
---------------
date, (A) the sum of (i) the Pledged Securities and any funds or Cash
Equivalents and (ii) interest earned or dividends paid on the Pledged
Securities and any funds or Cash Equivalents, less (B) the aggregate
disbursements made prior to such date in accordance with the terms of this
Agreement.
"Beneficiaries" shall have the meaning set forth in Section 2(b)(ii).
-------------
"Cash Equivalents" mean, with respect to the Collateral Account, (i)
----------------
U.S. dollars and (ii) U.S. Government Securities having maturities of not
later than July 1, 2002 or (iii) money market funds having a rating in the
highest investment category granted thereby by a recognized credit rating
agency at the time of acquisition, including any fund for which the
Collateral Agent or an affiliate of the Collateral Agent serves as an
investment advisor, administrator, shareholder servicing agent, custodian
or subcustodian, notwithstanding that (A) the Collateral Agent or an
affiliate of the Collateral Agent charges and collects fees and expenses
from such funds for services rendered (provided that such charges, fees and
expenses are on terms consistent with terms negotiated at arm's length) and
(B) the Collateral Agent charges and collects fees and expenses for
services rendered, pursuant to this Agreement.
"Collateral" shall have the meaning set forth in Section 6(a).
----------
"Collateral Account" means the escrow account (and any successor
------------------
account) established for the benefit of the Trustee, any predecessor
Trustee under the Indenture and the holders of the Notes pursuant to
Section 2(b)(i).
"Collateral Funds" shall have the meaning set forth in Section 6(c).
----------------
"entitlement holder" means a Person which is both an "entitlement
------------------
holder" (as defined in UCC Section 8-102(a)(7)) and an "entitlement holder"
(as defined in 31 C.F.R. (S) 357.2 or, as applicable, the corresponding
Federal Book-Entry Regulations).
"Federal Book-Entry Regulations" means (a) the federal regulations
------------------------------
contained in Subpart B ("Treasury/Revenue Automated Debt Entry System
(TRADES)" governing Book-Entry Securities consisting of U.S. Treasury
bonds, notes and bills) and Subpart D ("Additional Provisions") of 31
C.F.R. Part 357, 31 C.F.R. (S) 357.10 through (S) 357.14 and (S) 357.41
through (S)357.44 (including related defined terms in 31 C.F.R. (S) 357.2);
and (b) to the extent substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time to time), the
federal regulations governing other U.S. Government Securities.
2
<PAGE>
"Initial Collateral Amount" means $_________.
-------------------------
"Interest Payment Date" means January 1 and July 1 of each year,
---------------------
commencing on January 1, 2000 until the Notes are paid in full.
"Issue Date" means the date on which the Notes are originally issued
----------
under the Indenture.
"Payment Notice and Disbursement Request" means a notice signed by an
---------------------------------------
Officer of the Company sent by the Company to the Collateral Agent
requesting a disbursement of funds from the Collateral Account, in
substantially the form of Exhibit A hereto.
"Pledged Securities" mean, the U.S. Government Securities purchased by
------------------
the Company and deposited in the Collateral Account.
"Secured Obligations" shall have the meaning set forth in Section
-------------------
6(a).
"securities intermediary" means a Person that is both a "securities
-----------------------
intermediary" (as defined in UCC Section 8-102(a)(14)) and a "securities
intermediary" (as defined in 31 C.F.R. (S) 357.2 or, as applicable, the
corresponding Federal Book-Entry Regulations).
"UCC" shall mean the Uniform Commercial Code as in effect from time to
---
time in the State of New York.
"U.S. Government Securities" mean direct obligations of, or
--------------------------
obligations guaranteed by, the United States of America for the payment of
which obligations or guarantee the full faith and credit of the United
States is pledged and are not callable or redeemable at the option of the
issuer thereof, which obligations in each case, are governed by the Federal
Book-Entry Regulations.
2. Collateral Account; Collateral Agent.
-------------------------------------
(a) Appointment of Collateral Agent. The Company and the Trustee
--------------------------------
hereby appoint The Bank of New York as the Collateral Agent, and The Bank of New
York hereby accepts such appointment under the terms and conditions of this
Agreement.
(b) Establishment of the Collateral Account.
----------------------------------------
(i) On the Issue Date, the Collateral Agent shall establish an escrow
account in the name of the Trustee entitled the "Collateral Account pledged
by Cybernet Internet Services International, Inc. to The Bank of New York,
as Trustee, acting in the name and on behalf of the Beneficiaries" at its
office located at The Bank of New York, 101 Barclay Street, New York, New
York 10286. The Collateral Account shall be a "securities account" as such
term is defined in the UCC.
3
<PAGE>
(ii) All U.S. dollar funds, including the Initial Collateral Amount,
Pledged Securities and any Cash Equivalents accepted by the Collateral
Agent pursuant to this Agreement shall be held by the Collateral Agent for
the Trustee for the exclusive benefit of the holders of the Notes, as
secured parties hereunder (collectively, the "Beneficiaries"). All such
-------------
funds shall be held in the Collateral Account until disbursed or paid in
accordance with the terms hereof.
(iii) On the Issue Date, the Company shall deliver, or cause the
delivery of, either (x) the Initial Collateral Amount to the Collateral
Agent for deposit into the Collateral Account against the Collateral
Agent's written acknowledgement and receipt of the Initial Collateral
Amount, and the Collateral Agent shall purchase pursuant to written
instructions of the Company or its Agent, Pledged Securities or Cash
Equivalents, with all or a portion of the Initial Collateral Amount, or (y)
the Pledged Securities and deliver or cause to be delivered such Pledged
Securities to the Collateral Agent for deposit into the Collateral Account
against the Collateral Agent's written acknowledgement and receipt of such
Pledged Securities. Such Pledged Securities shall be held by the
Collateral Agent acting in the name and on behalf of the Beneficiaries and
deposited into the Collateral Account for the exclusive benefit of the
Beneficiaries. All payments of interest and principal on the Pledged
Securities or Cash Equivalents shall be deposited into the Collateral
Account to be paid or disbursed in accordance with the terms hereof or, to
the extent permitted by Section 2(d)(i) hereof, reinvested in Cash
Equivalents.
(c) Collateral Agent Compensation. The Company shall pay to the
------------------------------
Collateral Agent such compensation for services to be performed by it under this
Agreement as the Company and the Collateral Agent may agree in writing from time
to time. The Collateral Agent shall be paid any compensation owed to it
directly by the Company and shall not disburse from the Collateral Account any
such amounts nor shall the Collateral Agent have any interest in the Collateral
Account with respect to such amounts.
The Company shall reimburse the Collateral Agent upon request for all
reasonable expenses, disbursements and advances incurred or made by the
Collateral Agent in connection with this Agreement, including compensation and
the reasonable expenses and disbursements of its counsel. The Collateral Agent
shall be paid any such expenses owed to it directly by the Company and shall not
disburse from the Collateral Account any such amounts nor shall the Collateral
Agent have any interest in the Collateral Account with respect to such amounts.
(d) Investment of Funds in the Collateral Account. Any funds on
----------------------------------------------
deposit in the Collateral Account which are not invested may be invested or
reinvested, at the Company's option, only upon the following terms and
conditions:
(i) Acceptable Investments with respect to the Collateral Account.
--------------------------------------------------------------
All funds deposited or held in the Collateral Account at any time shall be
invested by the Collateral Agent in Cash Equivalents in accordance with the
written instructions of the Company or its Agent from time to time to the
Collateral Agent; provided, however, that (A) the Company or its Agent
-------- -------
shall only designate investment of funds in Cash Equivalents
4
<PAGE>
maturing in an amount sufficient to and/or generating interest income
sufficient to, when added to the balance of funds held in the Collateral
Account, provide for the payment of interest on the outstanding Notes on
each Interest Payment Date beginning on and including January 1, 2000, and
through and including the Interest Payment Date on July 1, 2002, and the
Company or its Agent shall designate, and hereby designates, that all cash
which may from time to time be placed or deposited in or credited,
transferred or delivered to such Collateral Account, be invested as
promptly and to the fullest extent practicable in Cash Equivalents; and (B)
any such written instructions shall specify the particular investment to be
made, shall state that such investment is authorized to be made hereby and
in particular satisfies the requirements of the preceding clause (A) of
this proviso, shall contain the certification referred to in Section
2(d)(ii), if required, and shall be executed by an Officer of the Company
or an authorized officer of the Agent. The Collateral Agent shall have no
responsibility for determining whether funds held in the Collateral Account
shall have been invested in such a manner so as to comply with the
requirements of this clause (i). All such Cash Equivalents shall be
assigned to and held in the possession of, or, in the case of Cash
Equivalents maintained in book entry form with the Federal Reserve Bank,
transferred to a book entry account in the name of the Collateral Agent for
the benefit of the Beneficiaries, except that Cash Equivalents maintained
in book entry form with the Federal Reserve Bank shall be transferred to a
book entry account in the name of the Collateral Agent at the Federal
Reserve Bank that includes only Cash Equivalents held by the Collateral
Agent for its customers and segregated by separate recordation in the books
and records of the Collateral Agent. The Collateral Agent shall not be
liable for losses on any investments made by it pursuant to and in
compliance with such written instructions. In the absence of instructions
from the Company that meet the requirements of this Section 2(d)(i), the
Collateral Agent shall have no obligation to invest funds held in the
Collateral Account.
(ii) Security Interest in Investments. No investment of funds in the
---------------------------------
Collateral Account shall be made unless the Company has certified to the
Collateral Agent and the Trustee that, upon such investment, the Trustee
(acting in the name and on behalf of the Beneficiaries as appropriate) will
have a first priority perfected security interest in the applicable
investment. On the date of this Agreement, and on each anniversary thereof
(upon receipt of written notice from the Collateral Agent), until the date
upon which the balance of the Available Funds with respect to each
Collateral Account shall have been reduced to zero, each of the Trustee and
the Collateral Agent shall receive an Opinion of Counsel to the Company,
dated such date as applicable, which opinion shall confirm the foregoing,
shall meet the requirements of Section 314(b) of the United States Trust
Indenture Act of 1939, as amended (the "TIA") and shall comply with
---
Sections 11.4 and 11.5 of the Indenture. If a certificate as to a class of
investments has been provided to the Collateral Agent, a certificate need
not be issued with respect to individual investments in securities in that
class if the certificate applicable to the class remains accurate with
respect to such individual investments, which continued accuracy the
Collateral Agent may conclusively assume.
5
<PAGE>
(iii) Interest and Dividends. All interest earned and dividends paid
----------------------
on the Pledged Securities in the Collateral Account or any funds invested
in Cash Equivalents in the Collateral Account shall be deposited in the
Collateral Account as additional Collateral for the exclusive benefit of
the Beneficiaries and, if not required to be disbursed in accordance with
the terms hereof, subject to subsections 6(b)(iii), 6(e) and 6(f), shall be
reinvested in accordance with paragraph 2(d)(i) above in accordance with
the terms hereof unless the Trustee has provided written notice to the
Collateral Agent that a Default or Event of Default under the Indenture has
occurred or the Trustee has notified the Collateral Agent that it should
only take direction from the Trustee or should no longer take direction
from the Company in which case the Collateral Agent shall take directions
from the Trustee.
(iv) Limitation on the Collateral Agent's Responsibilities. In
-----------------------------------------------------
addition to the duties of a "securities intermediary" under Article 8 of
the UCC, the Collateral Agent's sole additional responsibilities under this
Section 2 shall be (A) to retain possession of certificated Cash
Equivalents and to be the registered or designated owner of the Pledged
Securities and any Cash Equivalents which are not certificated, (B) to
follow written instructions of the Company or its Agent given in accordance
with Section 2(d)(i), (C) to invest and reinvest funds pursuant to this
Section 2(d) and (D) to use reasonable efforts to reduce to cash such Cash
Equivalents as may be required to fund any disbursement or payment in
accordance with Section 3. In connection with clause (d)(iv)(A) above, the
Collateral Agent will maintain continuous possession in the jurisdiction of
its principal place of business of certificated Cash Equivalents and funds
included in the Collateral and will cause the Pledged Securities and any
uncertificated dollar Cash Equivalents to be registered in the book-entry
system of, and transferred to an account of the Collateral Agent or a sub-
agent of the Collateral Agent at, any Federal Reserve Bank. Except as
provided in Section 6, the Collateral Agent shall have no other
responsibilities with respect to perfecting or maintaining the perfection
of the security interest in the Collateral and shall not be required to
file any instrument, document or notice in any public office at any time or
times. In connection with clause (d)(iv)(A) above and subject to the
following sentence, the Collateral Agent shall not be required to reduce to
cash any Cash Equivalents to fund any disbursement or payment in accordance
with Section 3 in the absence of written instructions signed by an Officer
of the Company specifying the particular investment to liquidate. If no
such written instructions are received, the Collateral Agent may liquidate
those Cash Equivalents having the lowest interest rate per annum or if none
such exist, those having the nearest maturity.
(e) Substitution of the Collateral Agent. The Collateral Agent may
------------------------------------
resign by giving no less than 20 Business Days prior written notice to the
Company and the Trustee. Such resignation shall take effect upon the later to
occur of (i) delivery of all funds, the Pledged Securities and any Cash
Equivalents maintained by the Collateral Agent hereunder and copies of all
books, records, plans and other documents in the Collateral Agent's possession
relating to such funds, the Pledged Securities or any Cash Equivalents or this
Agreement to a successor escrow agent mutually approved by the Company and the
Trustee (which approvals shall not be unreasonably withheld or delayed) and (ii)
the Company, the Trustee and such successor escrow
6
<PAGE>
agent entering into this Agreement or any written successor agreement no less
favorable to the interests of the holders of the Notes and the Trustee than this
Agreement and the taking of such other steps as may be necessary to give the
successor escrow agent a first priority security interest in the Pledged
Securities, and the Collateral Agent shall thereupon be discharged of all
obligations under this Agreement and shall have no further duties, obligations
or responsibilities in connection herewith, except as set forth in Section 4. If
a successor escrow agent has not been appointed or has not accepted such
appointment within 30 Business Days after notice of resignation is given to the
Company, the Collateral Agent may apply to a court of competent jurisdiction for
the appointment of a successor escrow agent.
(f) Collateral Account Statement. At least 30 days prior to each
-----------------------------
Interest Payment Date, the Collateral Agent shall deliver to the Company and the
Trustee a statement setting forth with reasonable particularity the balance of
funds then in the Collateral Account and the manner in which such funds are
invested. The parties hereto irrevocably instruct the Collateral Agent that on
the first date upon which the balance in the Collateral Account (including the
holdings of all Cash Equivalents) is reduced to zero, the Collateral Agent shall
deliver to the Company and to the Trustee a notice that the balance in the
Collateral Account has been reduced to zero.
3. Disbursements
-------------
(a) Payment Notice and Disbursement Request, Disbursements. No later
-------------------------------------------------------
than five Business Days prior to an Interest Payment Date, the Company shall
submit to the Collateral Agent with respect to the Notes, acknowledged by the
Trustee, a completed Payment Notice and Disbursement Request substantially in
the form of Exhibit A hereto.
The Collateral Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b). Provided such Payment Notice and
Disbursement Request is not rejected by it, the Collateral Agent, as soon as
reasonably practicable on the Interest Payment Date, but in no event later than
10:00 a.m. (New York City time) on the Interest Payment Date, shall disburse the
funds requested in such Payment Notice and Disbursement Request by wire or book-
entry transfer of immediately available funds to the account of the Trustee for
the benefit of the Beneficiaries. The Collateral Agent shall notify the Trustee
as soon as reasonably practicable (but not later than two (2) Business Days from
the date of receipt of the Payment Notice and Disbursement Request) if any
Payment Notice and Disbursement Request is rejected and the reasons(s) therefor.
In the event such rejection is based upon nonsatisfaction of the condition in
Section 3(b)(I), the Company shall thereupon resubmit the Payment Notice and
Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Collateral Agent's
-------------------------------------
payment of any disbursement shall be made only if: (I) the Company shall have
submitted, in accordance with the provisions of Section 3(a), a completed
Payment Notice and Disbursement Request to the Collateral Agent substantially in
the form of Exhibit A with blanks appropriately filled in, and (II) the
Collateral Agent shall not have received any written notice from the Trustee
that as a
7
<PAGE>
result of an Event of Default under the Indenture the indebtedness represented
by the Notes has been accelerated and has become due and payable (in which event
the Collateral Agent shall apply all Available Funds as required by Section
6(b)(iii)).
(c) Company Payments. If the Company makes any interest payment or
-----------------
portion of an interest payment on the Notes from a source of funds other than
the Collateral Account ("Company Funds"), the Company may, after payment in full
-------------
of such interest payment, direct the Collateral Agent to release to the Company
or at the direction of the Company an amount of funds from the Collateral
Account less than or equal to the amount of Company Funds so expended. Upon
receipt of a request from the Company (including the certificate described in
the following sentence), the Collateral Agent will pay over to the Company the
requested amount. Concurrently with any release of funds to the Company
pursuant to this Section 3(c), the Company will deliver to the Collateral Agent
an Officers' Certificate stating that such release has been duly authorized by
all necessary corporate action, and does not contravene, or constitute a default
under, any provision of applicable law or regulation or of the Certificate of
Incorporation or By-laws of the Company or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or result
in the creation or imposition of any Lien on any assets of the Company.
(d) If at any time the principal of and interest on the Collateral
exceeds 101% of the amount sufficient, in the written opinion of an
internationally recognized firm of independent accountants selected by the
Company and delivered to the Collateral Agent and the Trustee, to provide for
payment in full of the interest on the outstanding Notes on each Interest
Payment Date beginning on and including January 1, 2000 and through and
including the Interest Payment Date on July 1, 2002 (or, in the event one or
more interest payments have been made thereon, an amount sufficient to provide
for the payment in full of any and all interest payments on the Notes then
remaining, up to and including the sixth scheduled interest payment), the
Company may direct the Collateral Agent and the Trustee to release any such
overfunded amount to the Company or to such other party as the Company may
direct. Upon receipt of written instructions executed by the Company in the
form of an Officers' Certificate, the Collateral Agent shall pay, or shall cause
the payment, over to the Company or the Company's designee, as the case may be,
any such overfunded amount.
(e) It is understood that the Collateral Agent and the Beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto in accordance
with the provisions of this Agreement to identify (i) the Beneficiary, (ii) the
Beneficiary's bank, or (iii) an intermediary bank. The Collateral Agent may
apply any of the Collateral under its control for any payment order it executes
using any such identifying number, even where its use may result in a Person
other than the Beneficiary being paid, or the transfer of funds to a bank other
than the Beneficiary's bank or a designated intermediary bank.
4. Collateral Agent; Trustee.
--------------------------
8
<PAGE>
(a) Limitation of the Collateral Agent's Liability; Responsibilities
----------------------------------------------------------------
of the Collateral Agent. Except as otherwise provided herein (and in any event,
- ------------------------
without prejudice to the Collateral Agent's representations, warranties,
covenants and agreements in its capacity as securities intermediary contained
herein), the Collateral Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Collateral Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time the
performance of the Company or the Trustee; (ii) the Collateral Agent shall have
no responsibility or liability to the Company or holders of the Notes, the
Trustee or any other person from time to time as a consequence of performance or
non-performance by the Collateral Agent hereunder, except for any gross
negligence or wilful misconduct of the Collateral Agent; (iii) the Company shall
remain solely responsible for all aspects of the Company's business and conduct;
(iv) the Collateral Agent is not obligated to supervise, inspect or inform the
Company or any third party of any matter referred to above; and (v) the
Collateral Agent does not represent, warrant or guaranty to the holders of the
Notes the sufficiency, validity, perfection or priority of the Trustee's or the
holders' of the Notes interest in the Collateral. In no event shall the
Collateral Agent be liable (w) for acting in accordance with or relying upon any
instruction, notice, demand, certificate or document from the Company or any
entity acting on behalf of the Company delivered in accordance with the terms
hereof, (x) for any incidental, consequential, punitive or special damages, (y)
for an amount in excess of the value of the Collateral Account valued as of the
date of deposit or (z) for the acts or omissions of its nominees,
correspondents, designees, agents, subagents or subcustodians, or the Federal
Reserve Treasury Book-Entry System for United States and federal agency
securities, The Depository Trust Company, any depositary or any clearing agency.
The Collateral Agent shall have no duties or responsibilities
whatsoever, except those duties and responsibilities as are specifically set
forth herein and no implied covenants or obligations shall be inferred from this
Agreement against the Collateral Agent, nor shall the Collateral Agent be bound
by the provisions of any agreement beyond the specific terms hereof.
Specifically and without limiting the foregoing, the Collateral Agent shall in
no event have any liability in connection with its investment, reinvestment or
liquidation, in good faith and in accordance with the terms hereof, of any
funds, the Pledged Securities or Cash Equivalents held by it hereunder,
including without limitation any liability for any delay not resulting from bad
faith, negligence or wilful misconduct in such investment, reinvestment or
liquidation, or for any loss of principal or income incident to any such delay.
The Collateral Agent shall be entitled to conclusively rely upon any
judicial or administrative order or judgment, upon any opinion of counsel or
upon any certification, instruction, notice or other writing delivered to it by
the Company, any agent of the Company or the Trustee in compliance with the
provisions of this Agreement without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of service thereof. The Collateral Agent may act or refrain from
acting in reliance upon any instrument complying with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
Person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
9
<PAGE>
At any time the Collateral Agent may request in writing an instruction
in writing from the Company (other than with respect to any disbursement
pursuant to Section 6(b)(iii)), and may at its own option but in no case is
obliged to, include in such request the course of action it proposes to take and
the date on which it proposes to act, regarding any matter arising in connection
with its duties and obligations hereunder; provided, however, that the
-------- -------
Collateral Agent shall state in such request that it believes in good faith that
such proposed course of action is consistent with another identified provision
of this Agreement. The Collateral Agent shall not be liable to the Company for
acting without the Company's consent in accordance with such a proposal on or
after the date specified therein if (i) the specified date is at least two
Business Days after the Company received the Collateral Agent's request for
instructions and its proposed course of action, and (ii) prior to so acting, the
Collateral Agent has not received the written instruction requested from the
Company.
At the expense of the Company, the Collateral Agent may act pursuant
to the advice of counsel chosen by it with respect to any matter relating to
this Agreement and shall not be liable for any action taken or omitted in good
faith and without gross negligence or wilful misconduct in accordance with such
advice.
The Collateral Agent shall not be called upon to advise any party as
to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds, securities or property deposited hereunder, the Collateral
Agent shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds, securities or property, and the
Collateral Agent shall not be or become liable for its failure or refusal to
comply with conflicting claims, demands or instructions. The Collateral Agent
shall be entitled to refuse to act until either any conflicting or adverse
claims or demands shall have been finally determined by a court of competent
jurisdiction or settled by agreement between the conflicting claimants as
evidenced in a writing, satisfactory to the Collateral Agent, or the Collateral
Agent shall have received security or an indemnity satisfactory to the
Collateral Agent sufficient to hold the Collateral Agent harmless from and
against any and all loss, liability or expense which the Collateral Agent may
incur by reason of its acting. The Collateral Agent may in addition elect in
its sole option to commence an interpleader action or seek other judicial relief
or orders as the Collateral Agent may deem necessary. The costs and expenses
(including reasonable attorney's fees and expenses) incurred in connection with
such proceedings shall be paid by, and shall be deemed an obligation of, the
Company.
No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
The Collateral Agent shall not incur any liability for not performing
any act or fulfilling any duty, obligation or responsibility hereunder by reason
of any occurrence beyond the control of the Collateral Agent (including but not
limited to any act or provision of any present or
10
<PAGE>
future law or regulation or governmental authority, any act of God or war, or
the unavailability of the Federal Reserve Bank wire).
(b) Limitation of the Trustee's Liability. Except as otherwise
--------------------------------------
provided herein, the Trustee's responsibility and liability under this Agreement
shall be limited as follows: (i) the Trustee does not represent, warrant or
guaranty to the holders of the Notes from time to time the performance of the
Company; (ii) the Company shall remain solely responsible for all aspects of the
Company's business and conduct; (iii) the Trustee is not obligated to supervise,
inspect or inform the Company or any third party of any matter referred to
above. In no event shall the Trustee be liable for acting in accordance with or
relying upon any instruction, notice, demand, certificate or document from the
Company or any entity acting on behalf of the Company delivered in accordance
with the terms hereof.
5. Indemnity. The Company shall indemnify, hold harmless and, if
----------
required or requested by the Trustee or the Collateral Agent, defend the Trustee
and the Collateral Agent, as the case may be, and their respective directors,
officers, agents, employees and controlling Persons, from and against any and
all claims, actions, obligations, liabilities and expenses, including reasonable
defense costs, reasonable investigative fees and costs, reasonable legal fees,
and claims for damages, arising from the Trustee's or the Collateral Agent's
performance or non-performance, or in connection with the Collateral Agent's
acceptance of appointment as Collateral Agent under this Agreement, except that
the Collateral Agent (including in its capacity as securities intermediary)
shall not be indemnified to the extent such liability, expense or claim is
solely and directly attributable to its gross negligence and willful misconduct,
nor shall the Trustee be so indemnified to the extent that such liability,
expense or claim is solely and directly attributable to its gross negligence or
wilful misconduct. The provisions of Section 2(c) and this Section 5 shall
survive any termination, satisfaction or discharge of this Agreement as well as
the resignation or removal of the Collateral Agent.
6. Grant of Security Interest; Instructions to the Collateral Agent.
-----------------------------------------------------------------
(a) The Company hereby irrevocably grants a first priority security
interest in and lien on, and pledges, assigns, transfers and sets over to the
Trustee for the ratable benefit of the Beneficiaries, all of the Company's
right, title and interest in the Collateral Account, all securities entitlements
with respect thereto and all property now or hereafter placed or deposited in,
or credited to, or transferred or delivered to the Collateral Agent for
placement or deposit in, or credit to the Collateral Account, including, without
limitation, all of the following (whether consisting of certificated or
uncertificated securities, accounts, chattel paper, documents, financial assets,
security entitlements, other investment property, general intangibles,
instruments, deposit accounts, bank accounts, securities accounts or other
collateral accounts, money, proceeds or other items comprising such property),
whether now owned by the Company or hereafter acquired and whether now existing
or hereafter coming into existence: the Pledged Securities, all funds held
therein, all Cash Equivalents held by (or otherwise maintained in the name of)
the Collateral Agent pursuant to Section 2, all rights of the Company under this
Agreement and all proceeds of the Collateral (including, without limitation, all
interest, dividends or other earnings, income, collections and distributions
from or in respect of
11
<PAGE>
investments or reinvestments, of the Collateral) (collectively, the
"Collateral"), in order to secure all obligations and indebtedness of the
- ------------
Company under the Indenture, the Notes and any other obligation, now or
hereafter arising, of every kind and nature, owed by the Company under the
Indenture or the Notes to the holders of the Notes or to the Trustee or any
predecessor Trustee (the "Secured Obligations"). The Collateral Agent hereby
-------------------
acknowledges the Trustee's security interest and lien as set forth above. The
Company shall take all actions necessary on its part to insure the continuance
of a first priority security interest in the Collateral in favor of the Trustee
in order to secure all such obligations and indebtedness.
(b) The Company and the Trustee hereby irrevocably instruct the
Collateral Agent to, and the Collateral Agent shall:
(i) in respect of the Collateral, (A) maintain the Collateral Account
for the sole dominion and control (including, without limitation, "control"
within the meaning of UCC Section 8-106) of the Trustee, in the name and on
behalf of the Beneficiaries, over the Pledged Securities, any Cash
Equivalents and any and all other property in the Collateral Account for
the benefit of the Trustee and (B) maintain, or cause its agent within the
jurisdiction of its principal place of business to maintain, possession of
all certificated Cash Equivalents purchased hereunder that are physically
possessed by the Collateral Agent (the Company hereby agreeing that in the
event any certificated Cash Equivalents are in the possession of the
Company or a third party, the Company shall use its best efforts to deliver
all such certificates to the Collateral Agent).
(ii) promptly notify the Trustee if an officer of the Collateral
Agent responsible for administering this Agreement receives written notice
that any Person has a lien or security interest upon any portion of the
Collateral other than the liens created hereby;
(iii) in addition to disbursing amounts held in escrow pursuant to
any Payment Notice and Disbursement Requests given to it pursuant to
Section 3, upon receipt of written notice from the Trustee of the
acceleration of maturity of the Notes, and direction from the Trustee to
disburse all Available Funds to the Trustee, as promptly as is practicable,
disburse all funds held in the Collateral Account to the Trustee and
transfer title to all Cash Equivalents held by the Collateral Agent
hereunder to the Trustee. In addition, upon an Event of Default under the
Indenture and for so long as such Event of Default continues, the Trustee
may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the UCC or other applicable law, and
the Trustee may also upon obtaining possession of the Collateral as set
forth herein, without notice to the Company except as specified below, sell
or cause to be sold, at a price reasonably obtainable by it, the Collateral
or any part thereof in one or more parcels at public or private sale, at
any exchange, broker's board or at any of the Trustee's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Trustee may deem commercially reasonable. The Company
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller
12
<PAGE>
than if such sale were a public sale. The Company agrees that, to the
extent notice of sale shall be required by law, at least ten (10) days'
notice to the Company of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale
regardless of notice of sale having been given. The Trustee may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned; and
(iv) comply in all respects with its covenants and agreements
contained in Section 8.
The lien and security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
the Trustee and the Collateral Agent shall have no security interest in, any
funds disbursed by the Collateral Agent whether for payment of interest on the
Notes or to the Company pursuant to this Agreement to the extent not
inconsistent with the terms hereof. Notwithstanding any other provision
contained in this Agreement, the Collateral Agent shall act solely as the
Trustee's agent in connection with its duties herein relating to the Collateral
Account or the Pledged Securities or any funds or Cash Equivalents held
thereunder. The Collateral Agent shall not have any right to receive
compensation from the Trustee and shall have no authority to obligate the
Trustee or to compromise or pledge its security interest hereunder.
Accordingly, the Collateral Agent is hereby directed to cooperate with the
Trustee in the exercise of its rights in the Collateral provided for herein.
(c) Any money and Cash Equivalents collected by the Trustee pursuant
to Section 6(b)(iii) shall be applied as provided in Section 6.13 of the
Indenture. Any surplus of such cash or cash proceeds held by the Trustee and
remaining after indefeasible payment in full of all the obligations under the
Indenture (the "Collateral Funds") shall be paid over to the Company subject to
----------------
Section 7.7 of the Indenture or as a court of competent jurisdiction may direct.
(d) The Company will execute and deliver or cause to be executed and
delivered, or use its best efforts to procure, all stock powers, proxies,
assignments, instruments and other documents, deliver any instruments to the
Trustee and take any other actions that are necessary or desirable to perfect,
continue the perfection of, or protect the first priority of the Trustee's
security interest in and to the Collateral, to protect the Collateral against
the rights, claims, or interests of third parties or to effect the purposes of
this Agreement. The Company also hereby authorizes the Trustee to file any
financing or continuation statements with respect to the Collateral without the
signature of the Company (to extent permitted by applicable law). The Company
will pay all reasonable costs incurred in connection with any of the foregoing.
It being understood that the Trustee has no duty to file or record any document
or instrument relating to Collateral.
13
<PAGE>
(e) The Company hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which the Company is obligated
hereby to do, and the Trustee may, but shall not be obligated to, exercise such
rights as the Company might exercise with respect to the Collateral and take any
action in the Company's name to protect the Trustee's security interest
hereunder.
(f) Notwithstanding anything to the contrary contained herein or in
any other agreement to which the Collateral Agent is a party, if at any time the
Collateral Agent shall receive an "entitlement order" (within the meaning of
Section 8-102(a)(8) of the UCC) issued by the Trustee and relating to the
Collateral Account, the Collateral Agent shall comply with such entitlement
order without further consent by the Company or any other Person.
7. Termination. This Agreement and the security interest in the
------------
Collateral evidenced by this Agreement shall terminate automatically and be of
no further force or effect upon the payment in full in cash of all interest
(including any Additional Amounts, if any and Liquidated Damages, if any) due
through the Interest Payment Date occurring on July 1, 2002, and the remaining
Collateral, if any, shall promptly be paid over and transferred to the Company
less Collateral Agent's fees, expenses or other obligations owed to the
Collateral Agent, and the Collateral Agent may hold such Collateral property (or
any portion thereof), pending distribution until such fees, costs and expenses
or other obligations are paid; provided, however, that the obligations of the
-------- -------
Company under Section 2(c), Section 5 and Section 13 (and any existing claims
thereunder) shall survive termination of this Agreement and the resignation of
the Collateral Agent. At such time, the Collateral Agent shall, pursuant to an
Officer's Certificate stating that no Default or Event of Default is then
continuing and that all required payments have been made delivered by the
Company, reassign and redeliver to the Company all of the Collateral hereunder
that has not been sold, disposed of, retained or applied by the Collateral Agent
in accordance with the terms of this Agreement. Such reassignment and delivery
shall be without warranty by or recourse to the Collateral Agent in its capacity
as such, except as to the absence of any Liens on the Collateral created by the
Collateral Agent, and shall be at the sole expense of the Company.
8. Representations and Warranties.
-------------------------------
(a) The Company hereby represents and warrants that:
(i) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of any applicable law or
regulation or the Certificate of Incorporation and By-Laws of the Company
or any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any
Lien on any assets of the Company, except for the security interests
granted under this Agreement.
14
<PAGE>
(ii) Prior to delivering the same pursuant hereto, the Company is the
beneficial owner of the Collateral, free and clear of any Lien or claims of
any Person or entity (except for the security interest, granted under this
Agreement). No financing statement covering the Collateral is on file in
any public office other than the financing statements, if any, filed
pursuant to this Agreement.
(iii) This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization and valid execution and
delivery of this Agreement by the Trustee and the Collateral Agent and the
enforceability of this Agreement against the Collateral Agent and the
Trustee in accordance with its terms, this Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement hereof may be
limited by (w) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, (x) general principles of equity (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing, (y) U.S. federal and state securities laws and public policy
considerations (with respect to the exculpation provisions and rights to
indemnification hereunder) and (z) the waiver of rights and defenses
contained in Section 15 (j) hereof.
(iv) The Company will deliver, or cause to be delivered, such Pledged
Securities to the Collateral Agent in such amount as shall be sufficient
upon scheduled interest and principal payments of such Pledged Securities
to provide for the payment in full of the first six scheduled interest
payments on the Notes (excluding any Additional Amounts or Liquidated
Damages).
(v) Upon the delivery to the Collateral Agent of the certificates or
instruments, if any, representing the Collateral and the filing of
financing statements, if any, required by the UCC and the transfer and
pledge to the Collateral Agent of the Collateral and the acquisition by the
Collateral Agent of a security entitlement thereto in accordance with
Section 6, the pledge of the Collateral pursuant to this Agreement creates
a valid and perfected first priority security interest in and to the
Collateral, securing the payment of the Company's Secured Obligations for
the benefit of the Beneficiaries, enforceable as such against all creditors
of the Company and any Persons purporting to purchase any of the Collateral
from the Company other than as permitted by the Indenture.
(vi) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (x) for the
pledge by the Company of the Collateral pursuant to this Agreement or for
the execution, delivery or performance of this Agreement by the Company
(except for any filings necessary to perfect Liens on the Collateral) or
(y) for the exercise by the Trustee of the rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, except, in each case, as may be required in connection with such
disposition by laws affecting the offering and sale of securities.
15
<PAGE>
(vii) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Company, threatened by or against the Company with respect to this
Agreement or any of the transactions contemplated hereby, other than as
described in the Offering Memorandum, dated July 1, 1999.
(viii) The pledge of the Collateral pursuant to this Agreement is not
prohibited by any applicable law or governmental regulation, release,
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System) or any comparable or other laws, regulations or rules of any other
government or governmental agency or body in Germany.
(b) The Collateral Agent represents, warrants, covenants and agrees:
(i) the Collateral Agent is a securities intermediary and it shall act
as such with respect to the Collateral Account, the Collateral and the
Trustee, and the Collateral Agent as securities intermediary shall treat
the Trustee as the entitlement holder;
(ii) all Collateral, except cash, shall be treated as "financial
assets" (as defined in UCC Section 8-102(a)(9);
(iii) the Collateral Agent, as securities intermediary, agrees to
credit to the Collateral Account any and all assets and properties (but
only the assets and properties) received by it which are required to be
transferred, placed, delivered or credited therein or thereto;
(iv) (a) that it is and will remain a "Participant", and (b) that it
maintains and will continue to be eligible to maintain a "Participant's
Securities Account" (as such terms are defined in 31 C.F.R. (S) 357.2 or,
as applicable, the corresponding Federal Book-Entry Regulations) with the
Federal Reserve Bank of New York;
(v) the Collateral Agent will maintain the Collateral Account in the
State of New York;
(vi) the Collateral Agent has established account number _________ in
the name "Collateral Account pledged by Cybernet Internet Services
International, Inc. to The Bank of New York, as Trustee, acting in the name
and on behalf of the Beneficiaries" as the Collateral Account and the
Collateral Agent shall not change the name or the account number of the
Collateral Account without the prior written consent of the Trustee;
(vii) in the event that the Collateral Agent has or subsequently
obtains by agreement, by operation of law or otherwise, a security interest
in the Collateral Account or any security entitlement credited to the
Collateral Account, the Collateral Agent hereby
16
<PAGE>
agrees that such security interest shall be subordinated to the security
interest of the Trustee; and the financial assets and other items deposited
to the Collateral Account will not be subject to deduction, set-off,
banker's lien, or any other right in favor of any person other than the
Trustee;
9. Covenants.
----------
(a) The Company covenants and agrees with the Beneficiaries that, from
and after the date of this Agreement until the earlier of payment in full in
cash of (1) all interest due through the Interest Payment Date occurring on July
1, 2002 or (2) all obligations due and owing under the Indenture and the Notes
in the event such obligations become due and payable prior to the payment of the
first six scheduled interest payments on the Notes:
(A) It will not (i) sell or otherwise dispose of, or grant any option
or warrant with respect to, any of the Collateral or (ii) create or permit
to exist any Lien upon or with respect to any of the Collateral (except for
the Lien created pursuant to this Agreement) and at all times will be the
sole beneficial owner of the Collateral.
(B) It will not (i) enter into any agreement or understanding that
purports to or may restrict or inhibit the Trustee's rights or remedies
hereunder, including, without limitation, the Trustee's right to sell or
otherwise dispose of the Collateral or (ii) fail to pay or discharge any
tax, assessment or levy of any nature not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of attachment
with regard to the Collateral.
(b) The Company covenants and agrees with the Beneficiaries that it
will promptly make all filings which may be necessary or appropriate in the
United States which are or may be required to create a valid and perfected first
priority security interest in and to the Collateral.
10. Power of Attorney.
------------------
In addition to all of the powers granted to the Trustee pursuant to
Article 7 of the Indenture, the Company hereby appoints and constitutes the
Trustee as the Company's attorney-in-fact to exercise to the fullest extent
permitted by law all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default: (i) collection of
proceeds of any Collateral; (ii) conveyance of any item of Collateral to any
purchaser thereof; (iii) giving of any notices or recording of any Liens under
Section 6; and (iv) taking any acts under Section 11. The Trustee's authority
hereunder shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Collateral in the
name of the Company, to execute and give receipt for any certificate of
ownership or any document constituting Collateral, to transfer title to any item
of Collateral, to sign the Company's name on all financing statements (to the
extent permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee to preserve, to protect or perfect this security
interest in the Collateral and to file the same, prepare, file and sign the
Company's name
17
<PAGE>
of any notice of Lien, to take any other actions arising from or incident to the
powers granted to the Trustee in this Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Company.
11. Trustee May Perform.
--------------------
If the Company fails to perform any agreement contained herein, the
Trustee may itself (but shall not be obligated to) perform or cause performance
of, such agreement, and the reasonable expenses of the Trustee incurred in
connection therewith shall be payable by the Company under Section 13 hereof.
12. No Assumption of Duties; Reasonable Care.
-----------------------------------------
The rights and powers granted to the Trustee and Collateral Agent
hereunder are being granted in order to preserve and protect the Trustee's and
the holders' of Notes security interest in and to the Collateral granted hereby
and shall not be interpreted to, and shall not, impose any duties on the Trustee
and Collateral Agent in connection therewith other than those specifically
imposed hereunder. The Trustee and Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee and the Collateral Agent accord similar property in
similar situations, it being understood that the Trustee and Collateral Agent
shall not have any responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not the Trustee or Collateral Agent has
or is deemed to have knowledge of such matters, (ii) taking any necessary steps
to preserve rights against any parties with respect to any Collateral or (iii)
filing any financing or continuation statements or recording any documents or
instruments in any public office at any time or times or otherwise perfecting or
maintaining the perfection of any security interest in the Collateral.
13. Expenses.
---------
The Company will upon demand pay to the Trustee the amount of any and
all reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents retained by the
Trustee that the Trustee may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Beneficiaries hereunder or (iv) the
failure by the Company to perform or observe any of the provisions hereof.
14. Security Interest Absolute.
---------------------------
To the extent permitted by applicable law, all rights of the
Beneficiaries and security interests hereunder, and all obligations of the
Company hereunder, shall be absolute and unconditional irrespective of:
18
<PAGE>
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or nonperfection of any Liens on
any other collateral for all or any of the Secured Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the Company in respect of the Secured Obligations or of this Agreement.
15. Miscellaneous.
--------------
(a) Waiver. Any party hereto may specifically waive any breach of
-------
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of or for similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
-----------
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effect, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto, and
-----------
the rights and duties of any party hereunder shall not be assignable except with
the prior written consent of the other parties. Notwithstanding the foregoing,
this Agreement shall inure to and be binding upon the parties and their
successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
--------
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the Beneficiaries (including holders of the
-------- -------
Notes) and their assigns shall be entitled to the benefits hereof and to enforce
this Agreement.
(e) Time. Time is of the essence with respect to each provision of
-----
this Agreement.
(f) Entire Agreement; Amendments. This Agreement and, with respect to
-----------------------------
the Trustee and the Company, the Indenture, contain the entire agreement among
the parties with respect to the subject matter hereof and supersede any and all
prior agreements, understandings
19
<PAGE>
and commitments, whether oral or written. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Company from
any provision of this Agreement shall be effective only if made or duly given in
compliance with all of the terms and provisions of the Indenture, and none of
the Collateral Agent, the Trustee or any holder of Notes shall be deemed, by any
act, delay, indulgence, omission or otherwise, to have waived any right to
remedy hereunder or to have acquiesced in any Default or Event of Default under
the Indenture or in any breach of any of the terms and conditions hereof.
Failure of the Collateral Agent, the Trustee or any holder of Notes to exercise,
or delay in exercising, any right, power or privilege hereunder shall not
operate as a waiver thereof. Written notice of any amendment shall be promptly
provided by the Company to its Agent. No single or partial exercise of any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any right, power or
privilege. A waiver by the Collateral Agent, the Trustee or any holder of Notes
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that the Collateral Agent, the Trustee or such holder
of Notes would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law. In the event of any
conflict between this Agreement (or any portion thereof) and any other agreement
now existing or hereafter entered into, the terms of this Agreement shall
prevail; and no amendment or modifications of this Agreement or waiver of any
right hereunder shall be binding on any party hereto unless it is in writing and
is signed by all of the parties hereto.
(g) Notices. Any notices or other communications required or
--------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or first-class mail, postage prepaid, addressed
as follows:
if to the Company:
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
D-81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennyslvania Avenue, N.W.
Washington, D.C. 20004
Attention: Joseph M. Berl, Esq.
Facsimile: (202) 624-7222
20
<PAGE>
if to the Collateral Agent or Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee Administration
Each of the Company, the Collateral Agent and the Trustee by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Company, the
Collateral Agent and the Trustee, shall be deemed to have been given or made:
(i) as of the date so delivered if personally delivered; (ii) when receipt is
acknowledged, if telecopied; and (iii) five (5) calendar days after mailing if
sent by first class mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee). Notwithstanding the foregoing, all notices with respect to the
Collateral Agent or the Trustee will be deemed to have been given on the date
received by the Collateral Agent.
(h) Counterparts. This Agreement may be executed in one or more
-------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
---------
shall not be considered or referred to in resolving questions of interpretation
of this Agreement.
(j) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
----------------------------------------------------------------
WAIVER OF DAMAGES.
- ------------------
(i) EACH PARTY HERETO AGREES THAT, FOR ALL PURPOSES OF THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, FOR PURPOSES OF AND WITHIN THE MEANING OF
UCC SECTION 8-110, UCC SECTIONS 9-103(6) AND 31 C.F.R. (S) 357.11 (OR, AS
APPLICABLE, THE CORRESPONDING FEDERAL BOOK-ENTRY REGULATIONS), THIS
AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE CREATION, PERFECTION, EFFECTS
OF PERFECTION AND PRIORITY OF THE LIENS AND SECURITY INTERESTS OF THE
TRUSTEE ON AND IN THE COLLATERAL ACCOUNT AND THE COLLATERAL AND THE
ESTABLISHMENT AND MAINTENANCE OF THE COLLATERAL AGENT'S SECURITIES ACCOUNT)
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK. EACH PARTY HERETO IRREVOCABLY WAIVES ANY
OBJECTION ON THE GROUNDS OF VENUE, FORUM NON-CONVENIENS OR ANY SIMILAR
GROUNDS. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR
STATE COURT IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, COUNTY AND
STATE OF NEW
21
<PAGE>
YORK, UNITED STATES OF AMERICA, IN ANY SUIT OR PROCEEDING BASED ON OR
ARISING UNDER THIS COLLATERAL AGREEMENT, AND IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN ANY SUCH
COURT.
(ii) THE COMPANY AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS THE
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE
RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
COMPANY OR ITS PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE COMPANY OR
ITS PROPERTY, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE COMPANY AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE
ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH,
IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR
ASSERTED. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE TRUSTEE HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AND THE
TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(iv) THE COMPANY AGREES THAT NONE OF THE COLLATERAL AGENT, THE TRUSTEE
OR ANY HOLDER OF NOTES SHALL HAVE ANY LIABILITY TO THE COMPANY (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE COMPANY
IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT
THAT IS BINDING ON THE COLLATERAL AGENT, THE TRUSTEE OR SUCH HOLDER OF
NOTES, AS THE
22
<PAGE>
CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
PART OF THE COLLATERAL AGENT, THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE
CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILFUL MISCONDUCT.
(v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, THE COMPANY WAIVES ALL RIGHTS OF
NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE TRUSTEE OR ANY
HOLDER OF NOTES OF ITS RIGHTS DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
TO REPOSSESS THE COLLATERAL WITH JUDICIAL PROCESSOR TO REPLEVY, ATTACH OR
LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES THE POSTING OF
ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT, THE TRUSTEE OR ANY
HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO
OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE SECURED OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT, THE TRUSTEE OR ANY
HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR
ANY OTHER AGREEMENT OR DOCUMENT BETWEEN THE COMPANY ON THE ONE HAND AND THE
COLLATERAL AGENT, THE TRUSTEE AND/OR THE HOLDERS OF NOTES ON THE OTHER
HAND.
(vi) IN FURTHERANCE OF THE FOREGOING, EACH PARTY HERETO AGREES THAT
REGARDLESS OF ANY PROVISION IN ANY OTHER AGREEMENT, THE "SECURITIES
INTERMEDIARY'S JURISDICTION" (WITHIN THE MEANING OF UCC SECTIONS 8-110 AND
9-103(b) AND 31 C.F.R. (S)357.11 (OR, AS APPLICABLE, THE CORRESPONDING
FEDERAL BOOK-ENTRY REGULATIONS) OF THE COLLATERAL AGENT WITH RESPECT TO THE
COLLATERAL ACCOUNT AND THE COLLATERAL IS THE STATE OF NEW YORK.
(vii) THE PROVISIONS OF THIS SECTION 15(J) ARE INTENDED TO BE
EFFECTIVE UPON THE EXECUTION OF THIS COLLATERAL AGREEMENT WITHOUT ANY
FURTHER ACTION BY THE COMPANY, THE COLLATERAL AGENT OR THE TRUSTEE AND THE
INTRODUCTION OF A TRUE COPY OF THIS COLLATERAL AGREEMENT INTO EVIDENCE
SHALL BE CONCLUSIVE AND FINAL EVIDENCE AS TO SUCH MATTERS.
(k) No Adverse Interpretation of Other Agreements. This Agreement may
----------------------------------------------
not be used to interpret another pledge, security or debt agreement of the
Company or any subsidiary thereof. No such pledge, security or debt agreement
may be used to interpret this Agreement.
23
<PAGE>
(l) Benefits of Agreement. Nothing in this Agreement, express or
----------------------
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the holders of Notes, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
(m) Interpretation of Agreement. All terms not defined herein or in
----------------------------
the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Indenture, the Indenture shall control with respect to the
subject matter of such term or provision. Acceptance of or acquiescence in a
course of performance rendered under this Agreement shall not be relevant to
determine the meaning of this Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
(n) Survival of Provisions. All representations, warranties and
-----------------------
covenants of the Company contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the termination of
this Agreement.
(o) Waivers. The Company waives presentment and demand for payment of
--------
any of the Company's Secured Obligations, protest and notice of dishonor or
default with respect to any of the Company's Secured Obligations, and all other
notices to which the Company might otherwise be entitled, except as otherwise
expressly provided herein or in the Indenture.
(p) Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities. By the execution and delivery of this Agreement, the Company (i)
- -----------
acknowledges that it has, by separate written instruments, designated and
appointed Corporation Services Company ("CSC"), Two World Trade Center, Suite
8746, New York, NY 10048 (the "Authorized Agent") (and any successor entity),
----------------
for a period of ten years or until such time as no Units, Notes, or Warrants
remain outstanding, as its authorized agent upon which process may be served in
any suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the Borough of Manhattan, The City
of New York, State of New York or brought under federal or state securities
laws, and (ii) irrevocably authorizes and directs its Authorized Agent to accept
such service, (ii) represents and warrants that the Authorized Agent has
accepted such designation, (iv) submits to the jurisdiction of any such court in
any such suit or proceeding and (v) agree that service of process upon the
Authorized Agent and written notice of said service to the Company by first
class mail in accordance with the provisions of this Agreement shall be deemed
in every respect to be effective service of process upon the Company in any such
suit or proceeding. Nothing herein shall affect the right of any person to
serve process in any other manner permitted by law. The Company further agrees
to take any and all action, including the execution and filing of any and all
such documents and instruments, as may be necessary to continue such designation
and appointment of CSC in full force and effect for as long as any of the Notes
remain outstanding (subject to the limitation set forth in clause (i));
provided, however, that the Company may, and to the extent CSC ceases to be able
- -------- -------
to be served on the basis contemplated herein shall, by written notice to the
Collateral Agent and the Trustee, designate such additional or alternative agent
for service of process that (i) maintains an office located in the Borough of
Manhattan, The City of New York, State of New York, and (ii) is either (x)
24
<PAGE>
United States counsel for the Company or (y) a corporate service company which
acts as agent for service of process for other Persons in the ordinary course of
its business. Such written notice shall identify the name of such agent for
service of process and the address of the office of such agent for service of
process in the Borough of Manhattan, The City of New York, State of New York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court of (i) any jurisdiction in which the
Company owns or leases property or assets, (ii) the United States or the State
of New York or (iii) Germany, or from any legal process (whether through service
of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property and assets or
this Agreement or the Collateral Account or actions to enforce judgments in
respect of any thereof, the Company hereby irrevocably waives such immunity in
respect of its obligations under the above-referenced documents, to the extent
permitted by law.
(q) U.S. Dollar Judgment Currency. U.S. dollars are the sole currency
------------------------------
of account and payment for all sums payable by the Company under or in
connection with the Collateral Account including damages. Any amount received or
recovered in a currency other than dollars (whether as a result of, or the
enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of the Company or otherwise) by the Collateral Agent
or the Trustee in respect of any sum expressed to be due to it from the Company
shall only constitute a discharge to the Company to the extent of the dollar
amount which the recipient is able to purchase with the amount so received or
recovered in that other currency on the date of that receipt or recovery (or, if
it is not practicable to make that purchase on that date, on the first date on
which it is practicable to do so). If that dollar amount is less than the dollar
amount expressed to be due to the recipient under this Agreement, the Company
shall indemnify it against any loss sustained by it as a result. If that dollar
amount is greater than the dollar amount expressed to be due to the recipient
under this Agreement, the Company shall be entitled to the amount of such
excess. In any event, the Company shall indemnify the recipient against the
cost of making any such purchase. For the purposes of this paragraph, it will be
sufficient for the Collateral Agent or Trustee to certify in a satisfactory
manner (indicating the sources of information used) that it would have suffered
a loss had an actual purchase of dollars been made with the amount so received
in that other currency on the date of receipt or recovery (or, if a purchase of
dollars on such date had not been practicable, on the first date on which it
would have been practicable, it being required that the need for a change of
date be certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from the Company's other obligations, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Collateral Agent and Trustee, and
shall continue in full force and effect despite any other judgment, order, claim
or proof for a liquidated amount in respect of any sum due under the Collateral
Account.
(r) Notwithstanding any other provision of this Agreement, in no event
shall the Collateral Agent be liable for special, indirect or consequential
losses or damages of any kind whatsoever (including but not limited to lost
profits), even if the Collateral Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
25
<PAGE>
(s) Each party hereto, except the Collateral Agent, shall provide the
Collateral Agent, as soon as practicable, with their Tax Identification Number
as assigned by the Internal Revenue Service. All interest or other income
earned under the Collateral Agreement shall be allocated and paid as provided
herein and reported by the recipient to the Internal Revenue Service as having
been so allocated and paid.
(t) Notwithstanding any other provision of this Agreement, prior to
termination hereof as contemplated by Section 7, any instruction by the Company
to the Collateral Agent with respect to the Collateral Account or the Collateral
shall be effective only to the extent acknowledged or expressly permitted (in
each case, in writing by notice of the Trustee to the Collateral Agent) by the
Trustee.
SECTION 16. Successors. All agreements of the Company in this
-----------
Agreement shall bind its successors. All agreements of the Collateral Agent in
this Agreement shall bind its successors.
26
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Collateral Agreement as of the day first above written.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By: /s/ Authorized Signatory
--------------------------
By: /s/ Authorized Signatory
--------------------------
27
<PAGE>
THE BANK OF NEW YORK, as Collateral Agent
and Securities Intermediary
By: /s/ Authorized Signatory
------------------------------
THE BANK OF NEW YORK, as Trustee
By: /s/ Authorized Signatory
-------------------------------
28
<PAGE>
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Letterhead of the Company]
[Date]
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Re: Disbursement Request No. ____
Ladies and Gentlemen:
We refer to the Collateral Agreement, dated as of July 8, 1999 (the
"Collateral Agreement"), between you as the escrow agent and securities
- ---------------------
intermediary (in such capacities, the "Collateral Agent"), and as the Trustee
----------------
(in such capacity, the "Trustee"), and Cybernet Internet Services International,
-------
Inc., a Delaware corporation (the "Company"). Capitalized terms used herein
-------
shall have the meaning given in the Collateral Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Collateral Agreement.
(choose one or more of the following, as applicable)
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $________ is due and payable on __________, ___ with respect to
the Notes and requests a disbursement of funds contained in the Collateral
Account in such amount to the Trustee.]
[The undersigned hereby notifies you and certifies to you that the
release of [$________ of funds from the Collateral Account] to the Company (to
an account designated by the Company in writing), is currently permitted to be
released in accordance with Section 3(c) of the Collateral Agreement, a duly
executed Officers' Certificate which complies with the requirements of the
applicable Section of the Collateral Agreement and with the Indenture is
attached hereto, and such amount shall be so remitted to the Company.]
[The undersigned hereby notifies you that the Collateral Agreement has
been terminated in accordance with Section 7 thereof, a duly executed Officers'
Certificate which complies with the requirements of the applicable Section of
the Collateral Agreement and with the Indenture is attached hereto, and requests
that you release the remaining Collateral contained in the Collateral Account to
the Company.]
[The undersigned hereby notifies you that there has been an
acceleration of the maturity of the Notes. Accordingly, you are hereby
requested to disburse all remaining funds
29
<PAGE>
contained in the Collateral Account to the Trustee such that the balance in the
Collateral Account is reduced to zero.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. [The Notes have not, as a result of an Event of Default under the
Indenture, been accelerated and become due and payable.]
2. [All prior disbursements from the Collateral Account have been
Applied.]
3. [add wire instructions]
30
<PAGE>
The Collateral Agent is entitled to rely on the foregoing in
disbursing funds relating to this Payment Notice and Disbursement Request.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
ACKNOWLEDGED BY:
THE BANK OF NEW YORK, as Trustee
By:
-------------------------------
Name:
Title:
31
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
================================================================================
Cybernet Internet Services International Inc.
$150,000,000 14% Senior Notes due 2009
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Dated as of July 8, 1999
Among
Cybernet Internet Services International, Inc.,
Lehman Brothers International (Europe)
and
Morgan Stanley & Co. International Limited
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Definitions.......................................................... 1
2. Exchange Offer....................................................... 4
3. Shelf Registration Statement......................................... 8
4. Liquidated Damages................................................... 9
5. Registration Procedures.............................................. 10
6. Registration Expenses................................................ 17
7. Indemnification and Contribution..................................... 18
8. Rule 144A............................................................ 22
9. Underwritten Registrations........................................... 22
10. Miscellaneous ....................................................... 22
(a) No Inconsistent Agreements...................................... 22
(b) Adjustments Affecting Transfer Restricted Securities............ 23
(c) Amendments and Waivers.......................................... 23
(d) Notices......................................................... 23
(e) Successors and Assigns.......................................... 24
(f) Counterparts.................................................... 25
(g) Headings........................................................ 25
(h) Governing Law................................................... 25
(i) Submission to Jurisdiction; Appointment of Agent for
Service; Waiver................................................. 25
(j) Currency Indemnity.............................................. 26
(k) Severability.................................................... 26
(l) Securities Held by the Company or Its Affiliates................ 26
(m) Third Party Beneficiaries....................................... 26
(n) Entire Agreement................................................ 26
<PAGE>
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 8,
---------
1999, among Cybernet Internet Services International, Inc. a Delaware
Corporation (the "Company"), Lehman Brothers International (Europe) and Morgan
-------
Stanley & Co. International Limited (the "Initial Purchasers").
------------------
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 1, 1999, among the Company and the Initial
Purchasers (the "Purchase Agreement") which provides for the sale by the Company
------------------
to the Initial Purchasers of 150,000 Units (the "Units"), each consisting of
-----
$1,000 aggregate principal amount of its 14% Senior Notes due 2009 (the "Notes")
-----
and one warrant (the "Warrants") to purchase 30.2310693 shares of common stock
--------
of the Company, par value $0.001 per share (the "Common Stock"). The Notes are
------------
to be issued under the Indenture, dated the date hereof (the "Indenture"),
---------
between the Company and The Bank of New York, as Trustee thereunder. The
Warrants are to be issued under a Warrant Agreement, dated the date hereof (the
"Warrant Agreement"), between the Company and The Bank of New York, as Warrant
-----------------
Agent thereunder. In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchasers and their
direct and indirect transferees and assigns.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
"Advice": See Section 5 hereof.
------
"Agreement": See the first introductory paragraph hereto.
---------
"Applicable Period": See Section 2(b) hereof.
-----------------
"Authenticating Agent": The Authenticating Agent as defined in the
--------------------
Indenture.
"Business Day": a day other than a Saturday, Sunday or any other day
------------
on which commercial banking institutions are authorized or required by law
to close in New York City or Munich.
"Common Stock": See the second introductory paragraph hereto.
------------
"Company": See the first introductory paragraph hereto.
-------
"DTC": The Depository Trust Company.
---
<PAGE>
"Effectiveness Period": See Section 3(a) hereof.
--------------------
"Effectiveness Target Date": The 150th day after the Issue Date.
-------------------------
"Collateral Agreements": The Collateral Agreement, dated the date
---------------------
hereof, among the Company, the Bank of New York, as Collateral Agent, and
the Trustee.
"Event Date": See Section 4(b) hereof.
----------
"Exchange Act": The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
"Exchange Notes": See Section 2(a) hereof.
--------------
"Exchange Offer": See Section 2(a) hereof.
--------------
"Exchange Offer Registration Statement": See Section 2(a) hereof.
-------------------------------------
"Filing Date": The 90th day after the Issue Date.
-----------
"Holder": Any holder of Transfer Restricted Securities.
------
"Indenture": See the second introductory paragraph hereto.
---------
"Initial Purchasers": See the first introductory paragraph hereto.
------------------
"Inspectors": See Section 5(n) hereof.
----------
"Issue Date": The date of the issuance of the Notes under the
----------
Indenture.
"Liquidated Damages": See Section 4(a) hereof.
------------------
"NASD": See Section 5(s) hereof.
----
"Notes": See the second introductory paragraph hereto.
-----
"Participant": See Section 7(a) hereof.
-----------
"Participating Broker-Dealer": See Section 2(b) hereof.
---------------------------
"Person": An individual, trustee, corporation, partnership, limited
------
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
"Private Exchange": See Section 2(b) hereof.
----------------
"Private Exchange Notes": See Section 2(b) hereof.
----------------------
2
<PAGE>
"Prospectus": The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Purchase Agreement": See the second introductory paragraph hereto.
------------------
"Records": See Section 5(n) hereof.
-------
"Registration Statement": Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Offer Registration Statement or
the Shelf Registration Statement, filed with the SEC pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"Rule 144": Rule 144 promulgated under the Securities Act, as such
--------
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and
sales by subsequent holders that are not affiliates of an issuer of such
securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"Rule 144A": Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
"Rule 415": Rule 415 promulgated under the Securities Act, as such
--------
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"SEC": The U.S. Securities and Exchange Commission.
---
"Securities Act": The U.S. Securities Act of 1933, as amended, and
--------------
the rules and regulations of the SEC promulgated thereunder.
"Shelf Notice": See Section 2(c) hereof.
------------
"Shelf Registration Statement": See Section 3(a) hereof.
----------------------------
"Transfer Restricted Securities": Each Note until the earliest to
------------------------------
occur of (i) the date on which such Note has been exchanged by a Person
(other than a Participating Broker-Dealer) for Exchange Notes in the
Exchange Offer, (ii) following the exchange by
3
<PAGE>
a Participating Broker-Dealer in the Exchange Offer of such Note for one or
more Exchange Notes, the date on which such Exchange Notes are sold to a
purchaser who receives from such Participating Broker-Dealer on or prior to
the date of such sale a copy of the prospectus contained in the Exchange
Offer Registration Statement, (iii) the date on which such Note has been
effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which
such Note is eligible for distribution to the public pursuant to Rule 144
under the Securities Act.
"Trust Indenture Act": The Trust Indenture Act of 1939, as amended.
-------------------
"Trustee": The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private
Exchange Notes (if any).
"Underwritten Registration or Underwritten Offering": A registration
--------------------------------------------------
in which securities of the Company are sold to an underwriter for
reoffering to the public.
"Units": See the second introductory paragraph hereto.
-----
"Warrant Agreements": See the second introductory paragraph hereto.
------------------
2. Exchange Offer
--------------
(a) The Company agrees to file at its sole cost and expense with the
SEC no later than the Filing Date, unless prohibited by applicable law or SEC
policy, an offer to exchange (the "Exchange Offer") any and all of the Transfer
--------------
Restricted Securities (other than Private Exchange Notes, if any) for a like
aggregate principal amount of the same series of notes of the Company, which are
substantially identical in all material respects to the Notes of such series
(the "Exchange Notes") (and which are entitled to the benefits of the Indenture
--------------
or a trust indenture which is substantially identical in all material respects
to such Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the Trust
Indenture Act) and which, in either case, has been qualified under the Trust
Indenture Act), except that the Exchange Notes (other than Private Exchange
Notes, if any) shall have been registered pursuant to an effective Registration
Statement under the Securities Act and shall contain no restrictive legend
thereon. The Exchange Offer shall be registered under the Securities Act on the
appropriate form (the "Exchange Offer Registration Statement") and shall comply
-------------------------------------
with all applicable tender offer rules and regulations under the Exchange Act.
The Company agrees to: (i) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Target Date; (ii) keep the Exchange Offer open for at
least 20 business days (or longer if required by applicable law) after the date
that notice of the Exchange Offer is mailed to Holders; (iii) (A) file all pre-
effective amendments to such Registration Statement as may be necessary in order
to cause such Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualifications of the Exchange Notes to
4
<PAGE>
be made under the blue sky laws of such jurisdictions as are necessary to permit
consummation of the Exchange Offer; and (iv) use its reasonable best efforts to
consummate the Exchange Offer on or prior to 30 days after the date on which the
Exchange Offer Registration Statement is declared effective by the SEC. Upon the
Exchange Offer Registration Statement being declared effective, the Company will
offer the Exchange Notes in exchange for surrender of the Notes. If, after such
Exchange Offer Registration Statement is declared effective by the SEC, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Exchange Offer Registration
Statement shall be deemed not to have become effective for purposes of this
Agreement. Each Holder who participates in the Exchange Offer will be required
to represent that (i) any Exchange Notes received by it will be acquired in the
ordinary course of its business, (ii) it has no arrangement or understanding
with any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes, (iii) it is not a broker-dealer that
acquired Notes directly from the Company, (iv) it is not an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Company or, if it is such
an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable and (v) it is not
acting on behalf of any Person who could not truthfully make the foregoing
representations. If such Holder is not a broker-dealer, such Holder will be
required to represent that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Notes. If such Holder is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Notes that
were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. Upon consummation of the
Exchange Offer in accordance with this Section 2, the Company shall have no
further obligation to register Transfer Restricted Securities (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No
securities other than the Exchange Notes shall be included in the Exchange Offer
Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
-------------
Broker-Dealer"), whether such positions or policies have been publicly
- -------------
disseminated by the Staff of the SEC or such positions or policies, in the
judgment of the Initial Purchasers, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit the
use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers
(unless such Participating Broker-Dealer will be reselling an unsold allotment
from the original sale of the Notes), and include a statement describing the
means by which Participating Broker-Dealers may resell the Exchange Notes.
5
<PAGE>
Upon written request after the consummation of the Exchange Offer, the
Company shall use its best efforts to keep the Exchange Offer Registration
Statement effective and to amend and supplement the Prospectus contained
therein, in order to permit such Prospectus to be lawfully delivered by any
Participating Broker-Dealer subject to the prospectus delivery requirements of
the Securities Act and other Persons, if any, with similar prospectus delivery
requirements for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes; provided, however, that
-------- -------
such period shall not exceed 180 days after the consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company, upon the written request of the Initial
Purchasers simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, shall issue and deliver to the Initial Purchasers in exchange
(the "Private Exchange") for such Notes held by the Initial Purchasers a like
----------------
principal amount of notes of the same series of the Company, that are
substantially identical in all material respects to the Exchange Notes of such
series (the "Private Exchange Notes") (and which are issued pursuant to the same
----------------------
indenture as the Exchange Notes of such series) except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes of the same series to the
extent permitted by the CUSIP Service Bureau of Standard & Poor's.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or if no interest has been paid on such
Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York, which may be
the Trustee or an affiliate of the Trustee;
(3) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
6
<PAGE>
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee or Authenticating Agent for cancellation
all Notes so accepted for exchange; and
(3) cause the Trustee promptly to authenticate and deliver to each
Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case
may be, in global form equal in principal amount to the Notes so accepted
for exchange, as further set forth in the Indenture.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical in all material
respects to such Indenture, which in either event shall provide that (1) the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture and (2) the Private Exchange Notes shall be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture substantially identical in all material respects to the Indenture
shall provide that the Exchange Notes, Private Exchange Notes and Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, Private Exchange Notes or Notes will have the right to vote or
consent as a separate class on any matter.
(c) If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or SEC policy, (ii) any Holder of
Transfer Restricted Securities that is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) notifies the Company at least 20
Business Days prior to the consummation of the Exchange Offer that (a)
applicable law or SEC policy prohibits the Company from participating in the
Exchange Offer, (b) such Holder may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (c) such Holder is a
broker-dealer and holds Notes acquired directly from the Company or an affiliate
of the Company, (iii) the Exchange Offer is not for any other reason consummated
within 180 days after the Issue Date, (iv) any Holder (other than a
Participating Broker-Dealer) is not eligible to participate in the Exchange
Offer, or in the case of any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the date of the exchange that may
be sold without restriction under federal securities laws (other than due solely
to the status of such Holder as an affiliate of the Company within the meaning
of the Securities Act or due to the requirement that such Holder deliver a
Prospectus in connection with any resale of the Exchange Notes) or (v) the
Exchange Offer has been completed and in the opinion of counsel for the Initial
Purchasers a Registration Statement must be filed and a prospectus must be
delivered by the Initial Purchasers in connection with any offering or sale of
Transfer Restricted Securities, then the Company shall promptly deliver written
notice thereof (the "Shelf Notice") to the Trustee and in the case of clauses
------------
(i) and (iii), all Holders, or in the case of clauses (ii), (iv) and (v) the
affected Holders, and shall at its own cost file a Shelf Registration Statement
pursuant to Section 3 hereof.
7
<PAGE>
3. Shelf Registration Statement
----------------------------
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration Statement. The Company will use its best
----------------------------
efforts to: (A) file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Transfer
Restricted Securities (the "Shelf Registration Statement"), within 90 days of
----------------------------
the earliest to occur of clauses (i) through (v) in Section 2(c) above and (B)
cause the Shelf Registration Statement to be declared effective by the SEC on or
prior to the 150th day after such obligation arises; provided, however, that if
-------- -------
the Company files a Shelf Registration Statement pursuant to this Section 3(a),
it need not abandon the attempt to cause the SEC to declare the Exchange Offer
Registration Statement effective, and it may satisfy its obligations to register
the Notes pursuant to this Agreement either by complying with Section 2 and/or
Section 3. If the Company shall not have yet filed an Exchange Offer
Registration Statement, the Company shall use its best efforts to file with the
SEC the Shelf Registration Statement on or prior to the Filing Date. The Shelf
Registration Statement shall be on Form S-1 or another appropriate form
permitting registration of such Transfer Restricted Securities for resale by
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings), or may be an amendment to the
Exchange Offer Registration Statement. The Company shall not permit any
securities other than the Transfer Restricted Securities to be included in the
Shelf Registration Statement.
The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective, supplemented and amended to ensure that it is
available for resales of Notes by the holders of Transfer Restricted Securities
entitled to this benefit and to ensure that such Shelf Registration Statement
conforms and continues to conform with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the SEC, as announced
from time to time, until the second anniversary of the Issue Date, subject to
extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness
-------------
Period"), or such shorter period ending when all Transfer Restricted Securities
- ------
covered by the Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the Shelf Registration Statement or when the
Transfer Restricted Securities become eligible for resale pursuant to Rule 144
under the Securities Act without volume restrictions, if any.
(b) Withdrawal of Stop Orders. If the Shelf Registration Statement
-------------------------
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company shall promptly supplement
--------------------------
and amend the Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities covered by such Registration Statement or by any
underwriter of such Transfer Restricted Securities based on a reasonable belief
that such supplement or amendment is required by law.
8
<PAGE>
4. Liquidated Damages
------------------
(a) The Company and the Initial Purchasers agree that the Holders of
Notes will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Liquidated Damages")
------------------
under the circumstances and to the extent set forth below (each of which shall
be given independent effect and shall not be duplicative):
(i) if neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been filed on or prior to the Filing
Date, then, commencing on the 91st day after the Issue Date, Liquidated
Damages shall accrue on the Notes over and above the stated interest at a
rate of 0.50% per annum for the first 90 days immediately following the
Filing Date, such Liquidated Damages rate increasing by an additional 0.50%
per annum at the beginning of each subsequent 90-day period, or part
thereof; or
(ii) if neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement is declared effective by the SEC on or
prior to the Effectiveness Target Date, then, commencing on the 151st day
after the Issue Date, Liquidated Damages shall accrue on the Notes included
or which should have been included in such Registration Statement over and
above the stated interest at a rate of 0.50% per annum for the first 90
days immediately following the Effectiveness Target Date, such Liquidated
Damages rate increasing by an additional 0.50% per annum at the beginning
of each subsequent 90-day period, or part thereof; or
(iii) if the Exchange Offer has not been consummated within 30
days after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement, Liquidated Damages shall accrue on the Notes over
and above the stated interest at a rate of 0.50% per annum for the first 90
days commencing on the 31st day after the Effectiveness Target Date, such
Liquidated Damages rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period, or part thereof; provided, that
no Liquidated Damages shall accrue under this Section 4(a)(iii) if the
Company extends the consummation date of the Exchange Offer with the prior
consent of the Initial Purchasers and the Company is otherwise in full
compliance with this Section 4(a); or
(iv) (A) the Exchange Offer Registration Statement is filed and
declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose at any time prior to the time that the
Exchange Offer is consummated and is not declared effective within five
Business Days thereafter or (B) the Shelf Registration Statement is filed
and declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose at any time during the Effectiveness Period
and is not declared effective again within five Business Days thereafter,
Liquidated Damages shall accrue on the Notes over and above the stated
interest rate at a rate of 0.50% per annum for the first 90 days commencing
on the day the applicable Registration Statement ceases to be effective or
usable for its intended purpose without being declared effective again
within five
9
<PAGE>
Business Days, such Liquidated Damages rate increasing by an additional
0.50% per annum at the beginning of each such subsequent 90-day period, or
part thereof (it being understood and agreed that, notwithstanding any
provision to the contrary, so long as any Note which is the subject of a
Shelf Notice is then covered by an effective Shelf Registration Statement,
no Liquidated Damages shall accrue on such Note);
provided, however, that Liquidated Damages may accrue at a maximum rate of 1.50%
- -------- -------
per annum of the principal amount of Notes; and provided, further, that (1) upon
-------- -------
the filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement as required hereunder (in the case of clause (i) of this Section
4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement
or the Shelf Registration Statement as required hereunder (in the case of clause
(ii) of this Section 4(a)), (3) upon the consummation of the Exchange Offer (in
the case of clause (iii) of this Section 4(a)), and (4) upon the effectiveness
or usability of the Exchange Offer Registration Statement which had ceased to
remain effective or be usable (in the case of clause (iv)(A) of this Section
4(a)), or upon the effectiveness or usability of the Shelf Registration
Statement which had ceased to remain effective or be usable (in the case of
clause (iv)(B) of this Section 4(a)), Liquidated Damages on the affected Notes
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Company shall notify the Trustee within five Business Days
after each and every date on which an event occurs in respect of which
Liquidated Damages is required to be paid (an "Event Date"). Any amounts of
----------
Liquidated Damages due pursuant to (a)(i), (a)(ii), (a)(iii) or (a)(iv) of this
Section 4 will be payable to DTC (or, if applicable, a participant in DTC) or
its nominee in its capacity as the registered holder of affected Notes in cash
semi-annually on each June 15 and December 15 (to the holders of record on the
June 1 and December 1 preceding such dates), commencing with the first such date
occurring after any such Liquidated Damages commences to accrue. The amount of
Liquidated Damages will be determined by multiplying the applicable Liquidated
Damages rate by the principal amount of the affected Notes of such Holders,
multiplied by a fraction, the numerator of which is the number of days such
Liquidated Damages rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of which
is 360. The Company shall notify the Trustee within five Business Days of the
cessation of any requirement to pay Liquidated Damages hereunder.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registration(s) to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder the
Company shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided, however,
-------- -------
that, if (1) such filing is pursuant to Section 3 hereof, or (2)
10
<PAGE>
a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto, the Company shall furnish to and afford
the Holders of the Transfer Restricted Securities covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five Business Days prior to such filing).
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period or until consummation of the Exchange Offer, as the case may be; cause
the related Prospectus to be supplemented by any Prospectus supplement required
by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that it is in the best interests of the Company not to disclose the existence of
or facts surrounding any proposed or pending material event or transaction
involving the Company or its subsidiaries, the Company may (i) in the event a
Shelf Registration Statement has been filed, allow the Shelf Registration
Statement to fail to be effective or usable as a result of such nondisclosure
for up to 60 days during the Effectiveness Period, but in no event for any
period in excess of 30 consecutive days, and (ii) in the event the Exchange
Offer is consummated, allow the Exchange Offer Registration Statement to fail to
be effective or usable as a result of such non-disclosure for up to 15 days
during the Applicable Period. The Company shall be deemed not to have used its
best efforts to keep a Registration Statement effective during the Applicable
Period if it voluntarily takes any action that would result in selling Holders
of the Transfer Restricted Securities covered thereby or Participating Broker-
Dealers seeking to sell Exchange Notes not being able to sell such Transfer
Restricted Securities or such Exchange Notes during that period unless such
action is required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of paragraph 5(j) hereof
and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, notify the Holders of Transfer Restricted
Securities, or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, promptly (but in any event within
five Business Days), and, if requested by such Persons, confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with
11
<PAGE>
respect to a Registration Statement or any post-effective amendment, when the
same has become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole expense
of the Company, one conformed copy of such Registration Statement or post-
effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Transfer Restricted Securities or
resales of Exchange Notes by Participating Broker-Dealers the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5(m) hereof cease to be true and
correct, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Transfer Restricted Securities or the
Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the determination by the Company that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Transfer Restricted Securities
or the Exchange Notes for sale in any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain the withdrawal of any such order at
the earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if reasonably requested by the managing underwriter or underwriters (if
any), or the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold in connection with an underwritten offering or
any Participating Broker-Dealer, (i) promptly incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating Broker-
Dealer or counsel for any of them may reasonably request to be included therein,
(ii) make all required filings of such prospectus supplement or such post-
effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
12
<PAGE>
(f) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of Transfer
Restricted Securities and to each such Participating Broker-Dealer who so
requests and to counsel and each managing underwriter, if any, at the sole
expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each Holder of Transfer
Restricted Securities, or each such Participating Broker-Dealer, as the case may
be, their respective counsel, and the underwriters, if any, at the sole expense
of the Company, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the Holders of Transfer Restricted Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Transfer Restricted Securities covered by, or the sale by Participating Broker-
Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Transfer Restricted Securities or
Exchange Notes or any delivery of a Prospectus contained in the Exchange Offer
Registration Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its reasonable best efforts to
register or qualify (and to cooperate with selling Holders of Transfer
Restricted Securities or each such Participating Broker-Dealer, as the case may
be, the managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Transfer Restricted Securities) for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer, or
the managing underwriter or underwriters reasonably request; provided, however,
-------- -------
that where Exchange Notes held by Participating Broker-Dealers or Transfer
Restricted Securities are offered other than through an underwritten offering,
the Company agrees to cause its counsel to perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange Notes held by Participating Broker-Dealers or the Transfer Restricted
Securities covered by the applicable Registration Statement; provided, however,
-------- -------
that the Company shall not be required to (A) qualify generally to do business
in any jurisdiction
13
<PAGE>
where it is not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in any such jurisdiction where it is
not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Transfer Restricted Securities and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with DTC; and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement and the Exchange Notes to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the selling Holders thereof or the underwriter or
underwriters, if any, to dispose of such Transfer Restricted Securities or
Exchange Notes, except as may be required solely as a consequence of the nature
of a selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals.
(k) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(b) hereof) file with the SEC, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Transfer Restricted Securities being sold thereunder or to the purchasers of
the Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, provide a CUSIP number, ISIN
Code and Common Code for the Transfer Restricted Securities or Exchange Notes,
as the case may be.
(m) In connection with any underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Notes and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order to
facilitate the registration or the disposition of such Transfer Restricted
Securities and, in such connection, (i) make such representations and warranties
to, and covenants with, the underwriters with respect to the business of the
Company and its subsidiaries (including any acquired
14
<PAGE>
business, properties or entity, if applicable) and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to the Notes,
and confirm the same in writing if and when requested; (ii) obtain the written
opinion of counsel to the Company and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings of debt similar to the Notes and
such other matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) obtain "cold comfort" letters and updates thereof in form,
scope and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt similar to the Notes and such other matters as
reasonably requested by the managing underwriter or underwriters; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures substantially similar to those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Transfer Restricted Securities covered
by such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said Section,
including, without limitation, the Holders of Transfer Restricted Securities and
the underwriters. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by a
representative of the selling Holders of such Transfer Restricted Securities
being sold, or a representative of the Participating Broker-Dealers, as the case
may be, a representative of the managing underwriter participating in any such
disposition of Transfer Restricted Securities, if any, and one firm each of
attorneys, accountants or other agents retained by any such selling Holders or
the Participating Broker-Dealers, as the case may be, the managing underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
----------
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
-------
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement. Records which the Company determines, in good faith, to be
confidential and any Records which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such
15
<PAGE>
information is, in the opinion of counsel for any Inspector and after
consultation with the Company, necessary in connection with any action,
claim, suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, relating to,
or involving this Agreement, or any transactions contemplated hereby or
arising hereunder, or (iv) the information in such Records has been made
generally available to the public. Each selling Holder of such Transfer
Restricted Securities and each such Participating Broker-Dealer will be required
to agree that information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such information
is generally available to the public. Each selling Holder of such Transfer
Restricted Securities and each such Participating Broker-Dealer or underwriter,
as the case may be, will be required further to agree that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at its sole
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential.
(o) Provide an indenture trustee for the Transfer Restricted
Securities or the Exchange Notes, as the case may be, and cause the Indenture or
the trust indenture provided for in Section 2(a) hereof, as the case may be, to
be qualified under the Trust Indenture Act not later than the effective date of
the first Registration Statement relating to the Transfer Restricted Securities;
and in connection therewith, cooperate with the trustee under any such indenture
and the Holders of the Transfer Restricted Securities, to effect such changes to
such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; furnish the trustee with
an officer's certificate certifying that such indenture has been so qualified
under the Trust Indenture Act and that the Transfer Restricted Securities are
the subject of a Registration Statement; and execute, and use its reasonable
best efforts to cause such trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(q) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Transfer Restricted Securities by Holders to the Company
(or to such other Person as directed by the Company) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Company
shall mark, or cause to be marked, on such Transfer Restricted Securities that
such Transfer Restricted Securities are being canceled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no event
shall such Transfer Restricted Securities be marked as paid or otherwise
satisfied.
16
<PAGE>
(r) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
----
(s) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Exchange Notes and/or Transfer
Restricted Securities covered by a Registration Statement contemplated hereby.
(t) Make an application to list the Exchange Notes on the Luxembourg
Stock Exchange and to use its best efforts to have the Exchange Notes admitted
to trading on the Luxembourg Stock Exchange as promptly as practicable.
The Company may require each seller of Transfer Restricted Securities
as to which any Shelf Registration Statement is being effected to (i) furnish to
the Company such information regarding such seller and the distribution of such
Transfer Restricted Securities and (ii) make such representations, in each case
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Transfer Restricted Securities of any seller
who unreasonably fails to furnish such information or make such representations
within a reasonable time after receiving such request. Each seller as to which
any Shelf Registration Statement is being effected agrees to furnish promptly to
the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such seller not materially
misleading.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, that, upon actual receipt of any notice from the Company of the happening of
any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or
5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Transfer Restricted Securities covered by such Registration Statement or
Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-
Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(k) hereof, or until it is advised in writing (the "Advice") by the
------
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Transfer Restricted Securities covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange
17
<PAGE>
Offer Registration Statement or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering,
(B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Transfer Restricted Securities or
Exchange Notes and determination of the eligibility of the Transfer Restricted
Securities or Exchange Notes for investment under the laws of such jurisdictions
(x) where the holders of Transfer Restricted Securities are located, in the case
of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of
Transfer Restricted Securities or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), and (C) all expenses and fees in
connection with the obtaining of any approval from any relevant authority in
Germany; (ii) printing expenses, including, without limitation, the printing of
prospectuses if the printing of prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities included in any
Registration Statement or by any Participating Broker-Dealer, as the case may
be, (iii) reasonable fees and disbursements of counsel for the Company and
reasonable fees and disbursements of special counsel for the sellers of Transfer
Restricted Securities (subject to the provisions of Section 6(b) hereof), (iv)
reasonable fees and disbursements of all independent certified public
accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (v) rating agency fees, if any,
and any fees associated with making the Exchange Notes eligible for trading
through DTC, (vi) Securities Act liability insurance, if the Company desires
such insurance, (vii) reasonable fees and expenses of all other Persons retained
by the Company, (viii) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the Company
performing legal or accounting duties), (ix) the expense of any annual audit,
(x) the reasonable fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange, if applicable, and
(xi) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) The Company shall reimburse the Holders of the Transfer Restricted
Securities being registered in a Shelf Registration Statement for the reasonable
fees and disbursements of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities to be included in such Registration
Statement. In the case of a Shelf Registration Statement, the Company shall not
be required to pay any underwriting discounts, brokerage commissions, mark-downs
or similar sales charges.
7. Indemnification and Contribution
--------------------------------
(a) The Company shall indemnify and hold harmless each Holder of
Transfer Restricted Securities offered pursuant to a Shelf Registration
Statement, each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period and the Initial Purchasers and the officers and employees and
each Person, if any, who controls any such Person within the meaning
18
<PAGE>
of the Securities Act (each a "Participant") from and against any loss, claim,
-----------
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to the exchange of or sales of the Transfer Restricted Securities), to
which that Participant may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus, (ii) the
omission or alleged omission to state therein any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act, or any alleged act or failure to act, by any
Participant in connection with, or relating in any manner to, the Transfer
Restricted Securities or the registration contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company shall not be liable in the case of any matter covered
--------
by this clause (iii) to the extent that it is determined in a final judgment by
a court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act undertaken or
omitted to be taken by such Participant through its gross negligence or wilful
misconduct), and shall reimburse each Participant promptly upon demand for any
legal or other expenses reasonably incurred by that Participant in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
---------
however, that the Company shall not be liable in any such case to the extent
- -------
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or Prospectus, or in any
such amendment or supplement, in reliance upon and in conformity with the
written information furnished to the Company by or on behalf of any Participant
specifically for inclusion therein; provided, further, that with respect to any
-----------------
such untrue statement in or omission from any preliminary prospectus, the
indemnity agreement contained in this Section 7(a) shall not inure to the
benefit of any such Participant to the extent that the sale to the Person
asserting any such loss, claim, damage, liability or action was an initial
resale by such Participant and any such loss, claim, damage, liability or action
of or with respect to such Participant results from the fact that both (A) a
copy of the Prospectus was not sent or given to such Person at or prior to the
written confirmation of the sale of such securities to such Person and (B) the
untrue statement in or omission from such preliminary prospectus was corrected
in the Prospectus unless, in either case, such failure to deliver the Prospectus
was a result of non-compliance by the Company with Section 5(g) of this
Agreement. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Participant.
(b) Each Holder of Transfer Restricted Securities offered pursuant to
a Shelf Registration Statement, each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period and the Initial Purchasers (each a
"Participant Indemnifying Party") severally and not jointly, shall indemnify and
- -------------------------------
hold harmless the Company, its officers and employees, each of its directors and
each Person, if any, who controls the Company within the meaning of the
Securities Act from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or controlling Person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Registration
19
<PAGE>
Statement or Prospectus, or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein any material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with the written information furnished to the Company by
that Participant Indemnifying Party specifically for inclusion therein, and
shall reimburse the Company and any such director, officer or controlling Person
for any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling Person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is
in addition to any liability which any Participant Indemnifying Party may
otherwise have to the Company or any such director, officer or controlling
Person.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
-------- -------
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by such failure; and provided, further, that the
-------- -------
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
-------- -------
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time (in addition to one
separate firm constituting local counsel, if appropriate) for all such
indemnified parties, which firm shall be designated in writing by the Initial
20
<PAGE>
Purchasers, if the indemnified parties under this Section 7 consist of any
Participants, or by the Company, if the indemnified parties under this Section
consist of the Company or any of the Company's directors, officers, employees or
controlling Persons. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 7(a) and 7(b), shall use its reasonable efforts
to cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss of
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Participants on the other from
the offering of the Notes or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Participants on the
other with respect to the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Participants on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Notes (before deducting
expenses, discounts and commissions) received by the Company bear on the one
hand, and the total discounts and commissions received by the Participants with
respect to the Notes purchased under the Purchase Agreement, on the other hand,
bear to the total gross proceeds from the offering of the Notes under the
Purchase Agreement. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Participants, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Participants agree that it would not
be just and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation (even if the Participants were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof,
21
<PAGE>
referred to above in this Section 7(d) shall be deemed to include, for purposes
of this Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7(d), no Participant
shall be required to contribute any amount in excess of the amount by which the
total price at which the Notes purchased by it were resold exceeds the amount of
any damages which such Participant has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation. The
Participant's obligations to contribute as provided in this Section 7(d) are
several in proportion to their respective purchase obligations and not joint.
8. Rule 144A.
---------
Whether or not required by the rules and regulations of the SEC and
until such time as none of the Notes remain outstanding, the Company covenants
to furnish to the holders of the Notes, (i) all annual and quarterly financial
information required to be contained in a filing with the SEC on Forms 10-K and
10-Q (which financial statements shall be prepared in accordance with U.S.
GAAP), including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual financial
information, a report thereon by the Company's certified independent accountants
and (ii) all current reports required to be filed with the SEC on Form 8-K. Such
quarterly financial information shall be furnished to the holders of the Notes
within 45 days following the end of each fiscal quarter of the Company, and such
annual financial information shall be furnished within 90 days following the end
of each fiscal year of the Company. Such annual financial information shall
include the geographic segment financial information required to be disclosed by
the Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company will also be required (a) to file with the Trustee copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the SEC or the date on which the Company would
be required to file such reports and documents if the Company were so required,
and (b) if filing such reports and documents with the SEC is not accepted by the
SEC or is prohibited under the Exchange Act, to supply at the Company's cost
copies of such reports and documents to any prospective holder promptly upon
request. In addition, the Company covenants to furnish to the holders of the
Notes and to prospective investors, upon the request of such holder, any
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act so long as the Notes are not freely transferable under the
Securities Act.
9. Underwritten Registrations.
--------------------------
If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities included in such
offering and shall be reasonably acceptable to the Company.
22
<PAGE>
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. The Company has not entered into, as
--------------------------
of the date hereof, nor will it, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company will
not enter into any agreement with respect to any of its securities which will
grant to any Person piggyback registration rights with respect to the Exchange
Offer Registration Statement or the Shelf Registration Statement, other than in
connection with any issuance of Additional Notes (as defined in the Indenture).
(b) Adjustments Affecting Transfer Restricted Securities. The Company
----------------------------------------------------
shall not, directly or indirectly, take any action with respect to the Transfer
Restricted Securities as a class that would adversely affect the ability of the
Holders of Transfer Restricted Securities to include such Transfer Restricted
Securities in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities and (B) in
circumstances that would adversely affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers
with respect to the Exchange Notes; provided, however, that Section 7 and this
-------- -------
Section 10(c) may not be amended, modified or supplemented without the prior
written consent of each Holder and each Participating Broker-Dealer (including
any Person who was a Holder or Participating Broker-Dealer of Transfer
Restricted Securities or Exchange Notes, as the case may be, disposed of
pursuant to any Registration Statement). Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Transfer Restricted Securities may be given by
Holders of at least a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
-------- -------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
23
<PAGE>
(d) Notices. All notices and other communications (including, without
-------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
(1) if to a Holder of the Transfer Restricted Securities or any
Participating Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the records
of the registrar under the Indenture, with a copy in like manner to the
Initial Purchasers as follows:
Lehman Brothers Inc.
Three World Financial Center
New York, NY 10285
Facsimile No: 1-212-528-8822
Attention: Syndicate Department
Morgan Stanley & Co. International Limited
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile No.: 1-212-761-0192
Attention: Syndicate Department
and a copy to:
Simpson Thacher & Bartlett
99 Bishopsgate
21st Floor
London EC2M 3YH
England
Facsimile No: 44-171-422-4022
Attention: William R. Dougherty, Esq.
(2) if to the Initial Purchasers, to the addresses specified in
Section 10(d)(1), with a copy to Simpson Thacher & Bartlett, at the address
specified in such section;
(3) if to the Company, as follows:
Cybernet Internet Services International Inc.,
Stefan-George-Ring 19-23
81929 Munich
Germany
Facsimile No: +49-89-993-15199
Attention: Robert Eckert, Chief Financial Officer and
Treasurer
24
<PAGE>
with a copy to:
Powell Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +1-202-624-7222
Attention: Joseph M. Berl, Esq.
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the
Initial Purchasers.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto
and the Holders; provided, however, that this Agreement shall not inure to the
-------- -------
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Transfer Restricted Securities.
(f) Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
-------------
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK
(i) Submission to Jurisdiction; Appointment of Agent for Service;
-------------------------------------------------------------
Waiver. To the fullest extent permitted by applicable law, the Company
- ------
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement, and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in any such court. The Company, to
the fullest extent permitted by applicable law, irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
and hereby irrevocably designates and appoints CT Corporation System (the
"Authorized Agent"), for a period of ten years or until such time as no Notes
- -----------------
are outstanding, as its authorized agent upon whom process may be served in any
such suit or proceeding. The Company represents that it has notified the
Authorized Agent of such designation and appointment and that the Authorized
Agent has accepted the same in writing.
25
<PAGE>
The Company hereby irrevocably authorizes and directs its Authorized Agent to
accept such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of said service to the Company mailed by
first class mail or delivered to its Authorized Agent shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any person to serve process
in any other manner permitted by law. The Company agrees that a final action in
any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Agreement or the transactions contemplated hereby may also be
instituted by any of the Initial Purchasers, their officers and employees or any
person who controls any of the Initial Purchasers within the meaning of the
Securities Act in any competent court in Germany, and the Company expressly
accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 10(i) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchasers and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(j) Currency Indemnity. The Company shall indemnify each Participant
------------------
against any loss incurred by it as a result of any judgment or order being given
or made and expressed and paid in a currency (the "Judgment Currency") other
-----------------
than U.S. dollars and as a result of any variation as between (i) the rate of
exchange at which the U.S. dollar amount is converted into the Judgment Currency
for the purpose of such judgment or order and (ii) the spot rate of exchange in
New York, New York at which such Participant on the date of payment of such
judgment or order is able to purchase U.S. dollars with the amount of the
Judgment Currency actually received by such Participant. If the U.S. dollars so
purchased are greater than the amount originally due to such Participant
hereunder, such Participant agrees to pay to the Company an amount equal to the
excess of the U.S. dollars so purchased over the amount originally due to such
Participant hereunder. The foregoing shall constitute a separate and
independent obligation of the Company and the Participant, as the case may be,
and shall continue in full force and effect notwithstanding any such judgment or
order as aforesaid. The term "spot rate of exchange" shall include any premiums
and costs of exchange payable in connection with the purchase of, or conversion
into, U.S. dollars.
(k) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve
26
<PAGE>
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(l) Securities Held by the Company or Its Affiliates. Whenever the
------------------------------------------------
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by the
Company or its "affiliates" (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(m) Third Party Beneficiaries. Holders of Transfer Restricted
-------------------------
Securities and Participating Broker-Dealers are intended third party
beneficiaries of this Agreement, and this Agreement may be enforced by such
Persons.
(n) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, the Unit Agreement, the Warrant Agreement, the Collateral Agreement
and the Indenture, is intended by the parties as a final and exclusive statement
of the agreement and understanding of the parties hereto in respect of the
subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchasers on
the one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CYBERNET INTERNET SERVICES
INTERNATIONAL INC.
By: /s/ Authorized Signatory
----------------------------
By: /s/ Authorized Signatory
----------------------------
28
<PAGE>
LEHMAN BROTHERS INTERNATIONAL
(EUROPE)
By: /s/ Authorized Signatory
------------------------------------
29
<PAGE>
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
By: /s/ Authorized Signatory
------------------------------------
30
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
================================================================================
WARRANT AGREEMENT
Dated as of July 8, 1999
between
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
and
THE BANK OF NEW YORK
as Warrant Agent
================================================================================
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Defined Terms............................................................. 2
1.1 Certain Definitions........................................................... 2
1.2 Rules of Construction......................................................... 5
SECTION 2. Issuance, Form, Execution, Delivery and Registration of Warrant
Certificates.......................................................................... 6
2.1 Issuance of Warrants.......................................................... 6
2.2 Execution of Warrant Certificates............................................. 6
2.3 Countersignature and Delivery................................................. 6
2.4 Form of Warrant Certificates.................................................. 7
2.5 Restrictive Legends........................................................... 8
2.6 Temporary Warrant Certificates................................................ 9
2.7 Separation of Warrants and Notes.............................................. 10
2.8 Registration, Registration of Transfers and Exchanges......................... 10
2.9 Book-Entry Provisions for Global Warrants..................................... 11
2.10 Special Transfer Provisions.................................................. 13
2.11 Offices for Exercise, etc.................................................... 14
2.12 Cancellation................................................................. 14
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates........... 15
SECTION 3. Terms of Warrants; Exercise of Warrants.................................... 15
3.1 Exercise Period............................................................... 15
3.2 Manner of Exercise............................................................ 16
3.3 Issuance of Warrant Shares.................................................... 17
3.4 Fractional Warrant Shares..................................................... 17
3.5 Sufficient Authorized Share Capital: Listing.................................. 17
3.6 Payment of Taxes.............................................................. 18
SECTION 4. Adjustment of Exercise Price and Number of Warrant Shares Issuable......... 18
4.1 Adjustments................................................................... 18
4.2 Superseding Adjustment........................................................ 22
4.3 Minimum Adjustment............................................................ 23
4.4 Notice of Adjustment.......................................................... 23
4.5 Notice of Certain Transactions................................................ 23
4.6 Adjustment to Warrant Certificate............................................. 24
4.7 Challenge to Good Faith Determination......................................... 24
4.8 Treasury Stock................................................................ 24
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5. Holders' Rights............................................................ 24
5.1 Registration Rights.......................................................... 24
5.2 Piggyback Registration Right.................................................. 26
SECTION 6. Warrant Agent.............................................................. 27
6.1 Appointment of Warrant Agent.................................................. 28
6.2 Rights and Duties of Warrant Agent............................................ 28
6.3 Individual Rights of Warrant Agent............................................ 30
6.4 Warrant Agent's Disclaimer.................................................... 30
6.5 Compensation and Indemnity.................................................... 30
6.6 Successor Warrant Agent....................................................... 31
SECTION 7. Miscellaneous.............................................................. 32
7.1 Reports....................................................................... 32
7.2 Notices to the Company and Warrant Agent...................................... 33
7.3 Supplements and Amendments.................................................... 34
7.4 Severability.................................................................. 34
7.5 Successors.................................................................... 35
7.6 Termination................................................................... 35
7.7 Governing Law................................................................. 35
7.8 Submission to Jurisdiction; Appointment of Agent for Service; Waiver.......... 35
7.9 Benefits of this Agreement.................................................... 36
7.10 Counterparts................................................................. 36
7.11 Table of Contents............................................................ 36
7.12 Survival of Provisions....................................................... 36
</TABLE>
Exhibits
EXHIBIT A - Form of Face of Global Warrant Certificate
EXHIBIT B - Form of Face of Definitive Warrant Certificate
-ii-
<PAGE>
WARRANT AGREEMENT dated as of July 8, 1999 (the "Agreement") between
-----------
Cybernet Internet Services International, Inc. a Delaware corporation (the
"Company"), and The Bank of New York, as warrant agent (in such capacity, the
- ---------
"Warrant Agent").
-------------
W I T N E S S E T H :
-------------------
WHEREAS, the Company entered into a purchase agreement dated July 1,
1999 (the "Purchase Agreement") with Lehman Brothers International (Europe) and
------------------
Morgan Stanley & Co. International Limited (the "Initial Purchasers") pursuant
------------------
to which the Company has agreed to sell to the Initial Purchasers 150,000 units
(the "Units") consisting of $1,000 principal amount of its 14% Senior Notes due
-----
2009 (the "Notes") to be issued under an indenture dated as of July 8, 1999 (the
-----
"Indenture") by and between the Company and the The Bank of New York, as Trustee
---------
(in such capacity, the "Trustee"), and one warrant (the "Warrants") to purchase
------- --------
30.2310693 shares of the Company, par value $0.001 per share (the "Shares"); and
------
WHEREAS, prior to the separation of the Notes from the Warrants issued
as part of the Units as described herein, the Units shall be issued pursuant to
the Unit Agreement, dated as of June 8, 1999 (the "Unit Agreement"), by and
--------------
among the Company, the Warrant Agent, the Trustee and The Bank of New York, as
unit agent (the "Unit Agent"); and
----------
WHEREAS, the Warrants and the Notes shall not be separately
transferable until on or after the Separation Date (as defined below); and
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
<PAGE>
SECTION 1. Defined Terms.
-------------
1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Affiliate" means, as applied to any Person, any other Person directly
---------
or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
is defined to mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Bankruptcy Law" means Title 11, U.S. Code or any similar United
--------------
States Federal, state or foreign law for the relief of creditors.
"Board" means the Board of Directors of the Company.
-----
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks in New York City and Munich, Germany are
authorized or required by law to close.
"Cashless Exercise" has the meaning specified in Section 3.2 hereof.
-----------------
"Cashless Exercise Ratio" means a fraction, the numerator of which is
-----------------------
the excess of the Current Market Value (as defined below) per Share on the
Exercise Date over the Exercise Price per Share as of the Exercise Date and
the denominator of which is the Current Market Value per Share on the
Exercise Date.
"Cedel" means Cedel Bank, societe anonyme.
-----
"Combination" has the meaning specified in Section 4.1(e) hereof.
-----------
"Commission" means the Securities and Exchange Commission.
----------
"Current Market Value" per Share or any other security at any date,
--------------------
means (i) if the security is not registered under the Exchange Act, the
fair market value of the security (without any discount for lack of
liquidity, the amount of such security offered to be purchased or the fact
that such securities may represent a minority interest in a private company
or a company under the control of another Person) as determined in good
faith by the Board and certified in a board resolution that is delivered to
the Warrant Agent, and determined to be fair, from a financial point of
view, to the holders of such security or another security exercisable for
such security, by an Independent Financial Expert (as set forth in such
Independent Financial Expert's written fairness opinion); or (ii) if the
security is registered under the Exchange Act, the average of the last
reported sale price
2
<PAGE>
of the security on the principal exchange on which it trades (or the
equivalent in an over-the-counter market) for each Business Day (as defined
herein) during the period commencing 15 Business Days before such date and
ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 15 consecutive Business
Days before such date, the average of the daily closing bid prices (or such
equivalent) for all of the Business Days before such date for which daily
closing bid prices are available (provided, however, that if the closing
bid price is not determinable for at least 10 Business Days in such period,
the "Current Market Value" of the security shall be determined as if the
security were not registered under the Exchange Act). The Company shall pay
the fees and expenses of any Independent Financial Expert in the
determination of Current Market Value.
"Definitive Warrants" means Warrants in definitive registered form
-------------------
substantially in the form of Exhibit B.
"Definitive Warrant Certificates" has the meaning specified in Section
-------------------------------
2.6.
"DTC" or "Depositary" means The Depository Trust Company or its
--- ----------
successors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
(or any successor act), and the rules and regulations promulgated
thereunder.
"Exercise Date" means the date on which a Warrant is exercised by the
-------------
Holder thereof.
"Exercisability Date" means the earlier to occur of (i) the six month
-------------------
anniversary of the Issue Date, provided that if the Company conducts a
Public Offering prior to such date, such date shall be extended to the date
which is 90 days after the date of such Public Offering and (ii) any
Exercise Event.
"Exercise Event" means the date of the earliest of (i) the closing of
--------------
a Public Offering by the Company but only in respect of Warrants required
to be exercised in order to permit the holder thereof to sell Warrant
Shares in a Public Offering as permitted pursuant to the Registration
Rights Agreement, (b) a consolidation, merger or purchase of assets
involving the Company, or (c) the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company.
"Exercise Price" means the purchase price per Warrant Share to be paid
--------------
upon the exercise of each Warrant, which price shall be $22.278 per Warrant
Share as adjusted in accordance with the terms hereof.
"Expiration Date" means July 1, 2009.
---------------
"Holder" means the registered holder of a Warrant.
------
3
<PAGE>
"Independent Financial Expert" means an internationally recognized
----------------------------
investment bank that does not (and the directors, executive officers and 5%
stockholders of which do not) have a direct or indirect financial interest
in the Company or any of its subsidiaries or Affiliates, which has not been
for at least five years, and at the time it is called upon to give
independent financial advice to the Company is not (and none of its
directors, executive officers or 5% stockholders is), a promoter, director,
or officer of the Company or any of its subsidiaries or Affiliates. The
Independent Financial Expert may be compensated and indemnified by the
Company for opinions or services it provides as an Independent Financial
Expert.
"Issue Date" means July 8, 1999, the date on which the Warrants are
----------
first issued.
"Majority Holders" means the Holders of a majority of the then
----------------
outstanding Warrants.
"Offering" means the offering of the Units, the Notes and the
--------
Warrants.
"Officer" means the principal executive officer, the principal
-------
financial officer, the treasurer or the principal accounting officer of the
Company.
"Officers' Certificate" means a certificate signed on behalf of the
---------------------
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company.
"Person" means any individual, corporation, partnership, joint
------
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Public Offering" means an underwritten primary public offering of
---------------
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
----------------------------- ---
specified in Rule 144A under the Securities Act.
"Registration Rights Agreement " means that certain Registration
-----------------------------
Rights Agreement, dated as of July 8, 1999, among the Company and the
Initial Purchasers.
"Resale Restriction Termination Date" has the meaning specified in
-----------------------------------
Section 2.5 hereof.
"Right" has the meaning specified in Section 4.1(h) hereof.
-----
4
<PAGE>
"Rule 144A" means Rule 144A (including any successor regulation
---------
thereto) under the Securities Act, as it may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Separation Date" has the meaning specified in Section 2.7 hereof.
---------------
"Shares" has the meaning specified in the Preamble hereto.
------
"Successor Company" has the meaning specified in Section 4.1(e)
-----------------
hereof.
"Unit" means the $1,000 principal amount of Notes and one Warrant that
----
comprise each Unit.
"Unit Certificates" means the certificates evidencing the Units to be
-----------------
delivered pursuant to the Purchase Agreement.
"Warrant Agent" means The Bank of New York, or the successor or
-------------
successors of such Warrant Agent appointed in accordance with the terms
hereof.
"Warrant Certificates" means the certificates evidencing the Warrants
--------------------
to be delivered pursuant to this Agreement, substantially in the form of
Exhibits A and B hereto.
"Warrant Register" has the meaning specified in Section 2.8 hereof.
----------------
"Warrant Registrar" has the meaning specified in Section 2.8 hereof.
-----------------
"Warrant Shares" has the meaning specified in Section 2.1 hereof.
--------------
"Warrants" shall mean the Warrants issued hereunder and all warrants
--------
issued upon transfer, division or combination of, or in substitution for,
any thereof. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of Shares for which they may
be exercised.
1.2 Rules of Construction. Unless the text otherwise required.
---------------------
(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 United States generally accepted
accounting principles ("U.S. GAAP") as in effect from time to time;
---------
(iii) "or" is not exclusive;
5
<PAGE>
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
SECTION 2. Issuance, Form, Execution, Delivery and Registration of
-------------------------------------------------------
Warrant Certificates.
- --------------------
2.1 Issuance of Warrants. Warrants comprising part of the Units
--------------------
shall be originally issued in connection with the issuance of the Units and such
Warrants shall not be separately transferable from the Notes until on or after
the Separation Date as provided in Section 2.7 hereof.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such Holder of the Warrant)
30.2310693 Shares of the Company (the shares purchasable upon exercise of a
Warrant being hereinafter referred to as the "Warrant Shares," subject to
--------------
adjustment as provided in Section 4 hereof).
2.2 Execution of Warrant Certificates. The Warrant Certificates
---------------------------------
shall be executed on behalf of the Company by two Officers of the Company. Such
signatures may be the manual or facsimile signatures of the present or any
future such officers. Typographical and other minor errors or defects in any
such reproduction of any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the Person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such Persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such Person was not such an officer.
2.3 Countersignature and Delivery. Subject to the immediately
-----------------------------
following paragraph, Warrant Certificates shall be countersigned by manual
signature and dated the date of countersignature by the Warrant Agent and shall
not be valid for any purpose unless so countersigned and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register.
Upon the receipt by the Warrant Agent of a written order of the
Company set forth in an Officers' Certificate, specifying the amount of Warrants
to be countersigned, whether the
6
<PAGE>
Warrants are to be Global Warrants or Definitive Warrants, whether the Warrants
are to bear the Private Placement Legend set forth in Section 2.5, the date of
such Warrants and such other information as the Warrant Agent may reasonably
request, the Warrant Agent is authorized to countersign the Warrant Certificates
upon receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 2.2 hereof, and deliver them,
without any further action by the Company. Such countersignature shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
countersigned any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the Person who countersigned such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
countersigned on behalf of the Warrant Agent by such Persons as, at the actual
time of countersignature of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such Person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A and B hereto.
2.4 Form of Warrant Certificates. Warrants offered and sold to
----------------------------
Qualified Institutional Buyers in reliance upon Rule 144A in the United States
of America ("Rule 144A Warrants") shall be issued on the Issue Date in the form
------------------
of one or more global Warrants in registered global form ("Global Warrants").
---------------
The Company may also elect, in its sole discretion, to create additional forms
of global Warrants containing transfer and other restrictions which comply with
applicable U.S. securities and other laws from time to time, although the
Company is not obligated to do so.
Global Warrants shall be deposited with the Warrant Agent, as
custodian for, and registered in the name of DTC or its nominee, duly executed
by the Company and countersigned by the Warrant Agent as provided herein;
provided that, until such time as the Warrants Separate from the Notes, the
Global Warrants shall be registered in the name of DTC or its nominee and shall
be represented by a Global Unit deposited with the Unit Agent as custodian for
and registered in the name of DTC or its nominee.
The Warrant Certificates evidencing Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit B attached hereto. The Warrant Certificates evidencing the
Global Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
decreased or increased, as appropriate. Any endorsement of a Global
7
<PAGE>
Warrant to reflect the amount of any increase or decrease in the amount of
outstanding Warrants represented thereby shall be made by the Warrant Agent and
DTC in accordance with instructions given by the Holder thereof. Except as
provided in Section 2.9(b), owners of beneficial interests in a Global Warrant
will not be entitled to receive delivery of Definitive Warrants.
2.5 Restrictive Legends.
-------------------
Warrants shall bear the following legend (the "Private Placement
-----------------
Legend") on the face thereof:
- ------
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR
THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A OR (D) WITH THE CONSENT OF THE COMPANY, PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED
THAT (I) IN CONSENTING TO ANY SUCH OFFER, SALE
8
<PAGE>
OR TRANSFER PURSUANT TO CLAUSE (D), THE COMPANY SHALL HAVE THE RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER, TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT, AND
(II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
The Global Warrants shall also bear the following legend on the face
thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
---
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.9 AND 2.10 OF THE WARRANT AGREEMENT DATED AS OF JULY 8,
1999.
2.6 Temporary Warrant Certificates. Pending the preparation of
------------------------------
definitive warrant certificates ("Definitive Warrant Certificates"), the Company
may execute, and the Warrant Agent shall countersign and deliver, temporary
Warrant Certificates, which are printed, lithographed, typewritten or otherwise
produced, substantially of the tenor of the Definitive Warrant Certificates in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Warrant
Certificates may determine, as evidenced by their execution of such Warrant
Certificates.
If temporary Warrant Certificates are issued, the Company will cause
Definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of Definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for Definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any
9
<PAGE>
office or agency maintained by the Company for that purpose pursuant to Section
2.11 hereof. Subject to the provisions of Section 3.6 hereof, such exchange
shall be without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Warrant Certificates, the Company shall execute, and the
Warrant Agent shall countersign and deliver in exchange therefor, one or more
Definitive Warrant Certificates representing in the aggregate a like number of
Warrants. Until so exchanged, the Holder of a temporary Warrant Certificate
shall in all respects be entitled to the same benefits under this Agreement as a
Holder of a Definitive Warrant Certificate.
2.7 Separation of Warrants and Notes. The Notes and Warrants will
--------------------------------
not be separately transferable until the Separation Date. The "Separation Date"
---------------
will be the earliest to occur of (1) the commencement of an exchange offer or
the effectiveness of a shelf registration statement, each relating to the Notes,
and (2) such other date as the Initial Purchasers shall jointly determine in
their sole discretion (such earliest date, the "Separation Date"). The
---------------
surrender of a Unit Certificate for separate Warrant and Note certificates is
herein referred to as a "Separation" and the related Warrants being referred to
----------
as "Separated." Upon Separation of the Warrants and the Notes, (i) with respect
---------
to any Global Warrants, such Global Warrants shall be transferred to and
deposited with the Warrant Agent, as custodian for, and registered in the name
of DTC or its nominee, duly executed by the Company and countersigned by the
Warrant Agent as provided herein and (ii) with respect to any Definitive
Warrants, the Company shall cause Definitive Warrant Certificates to be prepared
and issued to registered holders of Units upon surrender of Unit Certificates.
2.8 Registration, Registration of Transfers and Exchanges. The
-----------------------------------------------------
Company will keep, at the office or agency maintained by the Company for such
purpose, a register or registers in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of, and registration of transfer and exchange of, Warrants as provided herein.
Each person designated by the Company from time to time as a Person authorized
to register the transfer and exchange of the Warrants is hereinafter called,
individually and collectively, the "Warrant Registrar." The Company hereby
-----------------
initially appoints the Warrant Agent as Warrant Registrar. Upon written notice
to the Warrant Agent and any acting Warrant Registrar, the Company may appoint a
successor Warrant Registrar for such purposes.
The Company will at all times designate one Person (who may be the
Company and who need not be a Warrant Registrar) to act as repository of a
master list of names and addresses of the Holders of Warrants (the "Warrant
-------
Register"). The Warrant Agent will act as such repository unless and until some
- --------
other Person is, by written notice from the Company to the Warrant Agent and the
Warrant Registrar, designated by the Company to act as such. In the event the
Warrant Registrar is not the repository, the Company shall cause the Warrant
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by the Warrant
Registrar, as may be necessary to enable such repository to maintain the Warrant
Register on as current a basis as is practicable.
When Warrants are presented to the Warrant Agent with a request to
register the transfer of the Warrants or exchange Warrants for an equal number
of Warrants of other
10
<PAGE>
authorized denominations, the Warrant Agent shall register the transfer or make
the exchange as requested if the requirements under this Warrant Agreement as
set forth herein for such transactions are met; provided, however, that the
-------- -------
Warrants presented or surrendered for registration of transfer or exchange shall
be duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Company and the Warrant Agent, duly executed by the Holder
thereof or by his attorney, duly authorized in writing.
Furthermore, any Holder of a Global Warrant shall, by acceptance of
such Global Warrant, agree that transfers of beneficial interests in such Global
Warrant may be effected only through a book-entry system maintained by the
Holder of such Global Warrant (or its agent), and that ownership of a beneficial
interest in the Warrant shall be required to be reflected in a book entry.
All Warrants issued upon any registration of transfer or exchange of
Warrants shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrants surrendered upon such registration of transfer or exchange.
2.9 Book-Entry Provisions for Global Warrants.
-----------------------------------------
(a) Registered Owner of Global Warrants. Each Global Warrant
-----------------------------------
initially shall (i) be registered in the name of DTC for such global Warrant or
the nominee of the Depositary, (ii) be delivered to the Warrant Agent as
custodian for such Depositary and (iii) bear legends as set forth in Section
2.5.
Members of, or participants in, DTC ("Agent Members") shall have no
-------------
rights under this Agreement with respect to any Global Warrant held on their
behalf by DTC, or the Warrant Agent as its custodian, or under the Global
Warrant, and DTC may be treated by the Company, the Warrant Agent and any agent
of the Company or the Warrant Agent as the absolute owner of such Global Warrant
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or shall impair, as between DTC and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Warrant.
(b) Transfers of Global Warrants. Transfers of a Global Warrant
----------------------------
shall be limited to transfers of such Global Warrant in whole, but not in part,
to DTC, its successors or their respective nominees. Interests of beneficial
owners in a Global Warrant may be transferred in accordance with the rules and
procedures of DTC and the provisions of Section 2.9. If required to do so
pursuant to any applicable law or regulation, beneficial owners may obtain
Warrants in definitive form, in exchange for their beneficial interests in a
Global Warrant upon written request in accordance with DTC's and the Warrant
Registrar's procedures. In addition, Definitive Warrants shall be transferred
to all beneficial owners in exchange for their beneficial interests in a Global
Warrant if (i) DTC (A) notifies the Company that it is unwilling or unable to
continue as depository for the Global Warrant and the Company thereupon fails to
appoint a successor
11
<PAGE>
depository upon 90 days or (B) has ceased to be a clearing agency registered
under the Exchange Act and the Company thereupon fails to appoint a successor
depository upon 90 days notice, (ii) upon the continuance of an Event of Default
under the Indenture or (iii) the Company, at its option, notifies the Warrant
Agent in writing that it elects to cause issuance of Definitive Warrants. In
addition, beneficial interests in a Global Warrant may be exchanged for
Definitive Warrants upon request but only upon at least 20 days' prior written
notice given to the Company by or on behalf of DTC in accordance with customary
procedures. In all cases, Definitive Warrants delivered in exchange for any
Global Warrants or beneficial interest therein will be registered in names, and
issued in any approved denominations, requested by or on behalf of DTC (in
accordance with its customary procedures) and will bear the Private Placement
Legend set forth in Section 2.5, if applicable, unless the Company determines
otherwise in compliance with applicable law.
(c) In connection with any transfer of a portion of the beneficial
interest in a Global Warrant pursuant to subsection (b) of this Section 2.9 to
beneficial owners who are required to hold Definitive Warrants, the Warrant
Registrar shall reflect on its books and records the date and a decrease in the
amount of such Global Warrant in an amount equal to the amount of the beneficial
interest in the Global Warrant to be transferred, and the Company shall execute,
and the Warrant Agent shall countersign and deliver to each beneficial owner
identified in writing by DTC, one or more Definitive Warrants of like tenor and
amount.
(d) In connection with the transfer of an entire Global Warrant to
beneficial owners pursuant to subsection (b) of this Section 2.9, such Global
Warrant shall be deemed to be surrendered to the Warrant Agent for cancellation,
and the Company shall execute, and the Warrant Agent shall countersign and
deliver, to each beneficial owner identified in writing by DTC in exchange for
its beneficial interest in such Global Warrant, an equal aggregate amount of
Definitive Warrants of authorized denominations.
(e) Any Definitive Warrant delivered in exchange for an interest in a
Global Warrant pursuant to subsection (c) or subsection (d) of this Section
shall, except as otherwise provided herein, bear the Private Placement Legend
set forth in Section 2.5, if applicable.
(f) The Holder of a Global Warrant may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Agreement or the Warrants.
The Warrant Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Section 2.9. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Warrant Registrar.
12
<PAGE>
2.10 Special Transfer Provisions.
---------------------------
(a) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Warrants not bearing the Private Placement Legend, the Warrant
Registrar shall deliver Warrants that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Warrants bearing the Private
Placement Legend, the Warrant Registrar shall deliver only Warrants that bear
the Private Placement Legend unless there is delivered to the Warrant Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Warrant
Agent to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
(b) General. The provisions hereof shall be qualified in their
-------
entirety by any applicable securities laws of the United States and any other
applicable jurisdiction and by the procedures of any applicable clearing agency,
in each case as in effect from time to time, and all such laws and clearing
procedures shall be deemed to be incorporated herein by reference. By its
acceptance of any Warrant bearing the Private Placement Legend, each Holder of
such a Warrant acknowledges the restrictions on transfer of such Warrant set
forth in this Agreement and in the Private Placement Legend and agrees that it
will transfer such Warrant only as provided in this Agreement. The Warrant
Agent shall not register a transfer of any Warrant Certificate unless such
transfer complies with the restrictions on transfer of such Warrant Certificate
set forth in this Warrant Agreement.
(c) Resale Restriction Termination Date. The Company shall deliver
-----------------------------------
to the Warrant Agent an Officers' Certificate setting forth the dates on which
the Resale Restriction Termination Date terminates.
(d) No Obligation of the Warrant Agent. (i) The Warrant Agent shall
----------------------------------
have no responsibility or obligation to any beneficial owner of a Global
Warrant, a member of, or a participant in DTC or other Person with respect to
any ownership interest in the Warrants, with respect to the accuracy of the
records of DTC or its nominee or of any participant or member thereof or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than DTC) of any notice (including any notice of redemption) or
the payment of any amount, under or with respect to such Warrants. All notices
and communications with respect to the Warrants shall be given to the Holders
and all payments in respect of the Warrants represented by the Global Warrant
shall be made by wire transfer of immediately available funds to the accounts
specified by the Holder of the Global Warrant. With respect to Definitive
Warrants, the Company will make all payments by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The rights of beneficial owners in any Global Warrant shall be
exercised only through DTC subject to the applicable rules and procedures of
DTC. The Warrant Agent may rely and shall be fully protected and indemnified
pursuant to Section 6.5 in relying upon information furnished by DTC with
respect to any beneficial owners, its members and participants.
(ii) The Warrant Agent shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Agreement or under applicable law with respect to any transfer of any
interest in any Warrant (including without
13
<PAGE>
limitation any transfers between or among DTC participants, members or
beneficial owners in any Global Warrant) other than to require delivery of such
certificates and other documentation of evidence as are expressly required by,
and to do so if and when expressly required by, the terms of this Agreement, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.11 Offices for Exercise, etc. So long as any of the Warrants remain
--------------------------
outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of transfer and for
exchange (including the exchange of temporary Warrant Certificates for
Definitive Warrant Certificates pursuant to Section 2.6 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
- -------- -------
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent and the Warrant Registrar written notice of the
location of any such office or agency and of any change of location thereof.
The Company hereby designates the Warrant Agent at its principal corporate trust
office in the Borough of Manhattan, The City of New York (the "Warrant Agent
-------------
Office"), as the initial agency maintained for each such purpose. In case the
- ------
Company shall fail to maintain any such office or agency or shall fail to give
such notice of the location or of any change in the location thereof,
presentations and demands may be made and notice may be served at the Warrant
Agent Office and the Company appoints the Warrant Agent as its agent to receive
all such presentations, surrenders, notices and demands.
2.12 Cancellation. All Warrant Certificates surrendered for the
------------
purpose of exercise (in whole or in part), exchange, substitution or transfer
shall, if surrendered to the Company or to any of its agents, be delivered to
the Warrant Agent for cancellation or in canceled form, or if surrendered to the
Warrant Agent shall be canceled by it, and no Warrant Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions of
this Agreement. If the Company purchases or acquires Warrants and if the
Company so chooses, the Company may deliver to the Warrant Agent for
cancellation and retirement, and the Warrant Agent shall so cancel and retire
(subject to the record retention provisions of the Exchange Act), the Warrant
Certificates evidencing said Warrants. The Warrant Agent shall dispose of such
canceled Warrant Certificates in accordance with its customary procedures, and
in such case shall upon the written request of the Company deliver a certificate
of disposition thereof to the Company. The Warrant Agent shall account promptly
to the Company with respect to Warrants exercised and concurrently pay to the
Company all monies received by the Warrant Agent for the purchase of the Warrant
Shares through the exercise of such Warrants.
14
<PAGE>
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
-----------------------------------------------------
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent of
- ------------
the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them (which may
include posting a bond) and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
---- ----
shall execute, and an authorized signatory of the Warrant Agent shall manually
countersign and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section, the Company may require the payment from the
Holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Warrant Agent and the
Warrant Registrar) in connection therewith. Every substitute Warrant
Certificate executed and delivered pursuant to this Section in lieu of any lost,
stolen or destroyed Warrant Certificate shall constitute an additional
contractual obligation of the Company, whether or not the lost, stolen or
destroyed Warrant Certificate shall be at any time enforceable by anyone, and
shall be entitled to the benefits of (but shall be subject to all the
limitations of rights set forth in) this Agreement equally and proportionately
with any and all other Warrant Certificates duly executed and delivered
hereunder. The provisions of this Section 2.13 are exclusive with respect to
the replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates and shall preclude (to the extent lawful) any and all other rights
or remedies notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement of lost, stolen, destroyed, defaced
or mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to countersign in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 3. Terms of Warrants; Exercise of Warrants.
---------------------------------------
3.1 Exercise Period. Subject to the terms of this Agreement, each
---------------
Warrant Holder shall have the right, which may be exercised commencing at the
opening of business on the Exercisability Date and until 5:00 p.m., New York
City time on the Expiration Date, to receive from the Company the number of
fully paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to 5:00 p.m., New York City time, on the Expiration Date shall become void and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of such time.
Until the Separation Date, each $1,000 principal amount of Notes, and
Warrants which comprise each Unit, may not be separately transferred or
exchanged. The Warrant Agent shall coordinate its activities hereunder with the
Trustee under the Indenture and the Unit Agent
15
<PAGE>
under the Unit Agreement, and may rely upon information provided by such Trustee
regarding ownership or transfer of the Notes and/or by the Unit Agent regarding
ownership or transfer of the Units.
The Company shall give notice not less than 90, and not more than 120,
days prior to the Expiration Date to the Holders of the outstanding Warrants to
the effect that the Warrants will terminate and become void as of 5:00 p.m., New
York City time, on the Expiration Date; provided, however, that the failure by
-------- -------
the Company to give such notice as provided in this Section shall not affect
such termination and becoming void of the Warrants as of 5:00 p.m., New York
City time, on the Expiration Date.
3.2 Manner of Exercise. A Warrant may be exercised at any time on or
------------------
after the Exercisability Date and prior to the Expiration Date upon (i)
surrender to the Warrant Agent of the Warrant Certificates, together with the
form of election to purchase properly completed and executed by the Holder
thereof and (ii) payment to the Warrant Agent, for the account of the Company,
of the Exercise Price for each Share or other securities issuable upon exercise
of such Warrants. The Exercise Price may be paid (i) in cash or by certified or
official bank check or by wire transfer to an account designated by the Company
for such purpose (a "Cash Exercise") or (ii) without the payment of cash, by
-------------
reducing the number of Shares that would be obtainable upon the exercise of a
Warrant and payment of the Exercise Price in cash so as to yield a number of
Shares upon the exercise of such Warrant equal to the product of (a) the number
of Shares for which such Warrant is exercisable as of the date of exercise (if
the Exercise Price were being paid in cash) and (b) the Cashless Exercise Ratio.
An exercise of a Warrant in accordance with clause (ii) of the immediately
preceding sentence is herein called a "Cashless Exercise." In the event of a
-----------------
Cashless Exercise of Warrants, the Company will purchase from the Holder thereof
such number of Warrants as would have entitled the Holder thereof to receive the
excess of the number of Shares deliverable upon a Cash Exercise over the number
of Shares deliverable upon a Cashless Exercise, for a purchase price equal to
the Exercise Price multiplied by the excess of the number of Shares purchasable
upon a Cash Exercise over the number of Shares purchasable upon a Cashless
Exercise. The Company agrees to offset the purchase price referred to in the
immediately preceding sentence with the obligation to pay the Exercise Price in
respect of the Shares deliverable upon a Cashless Exercise. Upon surrender of
a Warrant Certificate representing more than one Warrant in connection with the
Holder's option to elect a Cashless Exercise, the number of Shares deliverable
upon a Cashless Exercise shall be equal to the number of Shares issuable upon
the exercise of Warrants that the Holder specifies are to be exercised pursuant
to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All
provisions of this Agreement shall be applicable with respect to a surrender of
a Warrant Certificate pursuant to a Cashless Exercise for less than the full
number of Warrants represented thereby. Upon surrender of the Warrant
Certificate and payment of the Exercise Price in accordance with this Agreement,
the Company will issue Shares of the Company for each Warrant evidenced by such
Warrant Certificate, subject to adjustment as described herein. Whenever there
occurs a Cashless Exercise, the Company shall deliver to the Warrant Agent a
certificate setting forth the Cashless Exercise Ratio. The Warrant Agent shall
be entitled to conclusively rely on such certificate and shall be under no duty
or responsibility with respect to any such certificate, except to exhibit the
same from time to time, to any Holder desiring an inspection thereof during
reasonable business hours or to provide a copy to any Holder upon
16
<PAGE>
written request and at the expense of such Holder. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holder to determine
whether the Cashless Exercise Ratio is correct or with respect to the method
employed in determining the Cashless Exercise Ratio or the validity or value of
any Shares.
Notwithstanding the foregoing, Holders will be able to exercise their
Warrants only if a registration statement under the Securities Act relating to
the Warrant Shares is then effective and available or the exercise of such
Warrants is exempt from the registration requirements of the Securities Act, and
such securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states or other jurisdictions in which the
various Holders reside. Holders of the Warrants may be required, if a
registration statement under the Securities Act relating to the Shares
underlying the Warrants is not then effective and available, to effect the
exercise of Warrants solely pursuant to the Cashless Exercise Option.
3.3 Issuance of Warrant Shares. Subject to Section 2.13, upon the
--------------------------
surrender of Warrant Certificates and payment of the Exercise Price, as set
forth above, the Company shall issue Shares in such name or names as the Holder
may designate, for the number of full Warrant Shares so purchased upon the
exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.4 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such Shares
shall be deemed to have been issued and any Person so designated shall be deemed
to have become a Holder of record of such Warrant Shares as of the date of the
surrender of such Warrant Certificates and payment of the per share Exercise
Price or upon a Cashless Exercise.
The Company hereby agrees that no service charge will be made for
registration of transfer or exchange upon surrender of any Warrant Certificate
at the office of the Warrant Agent maintained for that purpose. Holders may be
required to make payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
transfer or exchange of Warrant Certificates.
3.4 Fractional Warrant Shares. The Company shall not be required to
-------------------------
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised in full at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon such exercise shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
pursuant thereto. If any fraction of a Warrant Share would, except for the
provisions of this Section 3.4, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company may, at its option, pay an amount in
cash equal to the Current Market Value for one Warrant Share on the Business Day
immediately preceding the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole Dutch guilder or Euro, as applicable.
3.5 Sufficient Authorized Share Capital: Listing:
--------------------------------------------
17
<PAGE>
(a) The Company has and will maintain an authorized share capital
sufficient for the issuance of such number of Shares as will be issuable upon
the exercise of all outstanding Warrants. Such Shares, when issued and paid for
in accordance with the Warrant Agreement, will be duly and validly issued, fully
paid and nonassessable, free of preemptive rights and free from all liens,
charges and security interests with respect to the issue thereof.
(b) The Company will use its best efforts to ensure that all Warrant
Shares, upon issuance or upon the resale thereof, are listed for trading on the
Neuer Markt of the Frankfurt Stock Exchange and are available for quotation on
the OTC Bulletin Board operated by NASDAQ, Inc.
3.6 Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the initial issuance of the Warrants and the Warrant
Shares issuable upon the exercise of Warrants; provided, however, that the
-------- -------
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or
Warrant Shares in a name other than that of the Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 4. Adjustment of Exercise Price and Number of Warrant Shares
---------------------------------------------------------
Issuable.
- --------
4.1 Adjustments. The Exercise Price and the number of Warrant Shares
-----------
purchasable upon the exercise of Warrants shall be subject to adjustment from
time to time as follows:
(a) Changes in Shares. In the event that at any time or from time to
-----------------
time after the date hereof the Company shall (i) pay a dividend or make a
distribution on its Shares in Shares or other shares of capital stock, (ii)
subdivide its outstanding Shares into a larger number of Shares, (iii) combine
its outstanding Shares into a smaller number of Shares or (iv) increase or
decrease the number of Shares outstanding by reclassification of its Shares,
then the number of Shares purchasable upon exercise of each Warrant immediately
after the happening of such event shall be adjusted (including by adjusting the
definition of "Warrant Shares") so that, after giving effect to such adjustment,
the Holder of each Warrant shall be entitled to receive the number of Shares
upon exercise that such Holder would have owned or have been entitled to receive
had such Warrants been exercised immediately prior to the happening of the
events described above (or, in the case of a dividend or distribution of Shares,
immediately prior to the record date therefor). An adjustment made pursuant to
this Section 4.1(a) shall become effective immediately after the effective date,
retroactive to the record date therefor in the case of a dividend or
distribution in Shares, and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
18
<PAGE>
(b) Cash Dividends and Other Distributions. In case at any time or
--------------------------------------
from time to time after the date hereof the Company shall distribute to Holders
of Shares (i) dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than, in each case set forth in (i) and (ii), (x) any
dividend or distribution described in Section 4.1(a) or (y) any rights, options,
warrants or securities described in Section 4.1(c)) then the number of Warrant
Shares purchasable upon the exercise of each Warrant shall be increased by a
number of additional Shares determined by multiplying the number of Shares
issuable immediately prior to the record date upon exercise of each Warrant by a
fraction, the numerator of which shall be the sum of (x) any cash distributed
per Warrant Share and (y) the Current Market Value of the portion, if any, of
the distribution applicable to one Warrant Share consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription of purchase rights and the denominator of which shall be the
Current Market Value of the Shares comprising one Warrant Share immediately
after such dividend or other distribution. Such adjustment shall be made
whenever any distribution is made and shall become effective as of the date of
distribution, retroactive to the record date for any such distribution;
provided, however, that the Company is not required to make an adjustment
- -------- -------
pursuant to this Section 4.1(b) if at the time of such distribution the Company
makes the same distribution to Holders of Warrants as it makes to holders of
Shares pro rata based on the number of Shares for which such Warrants are
exercisable (whether or not currently exercisable). No adjustment shall be made
pursuant to this Section 4.1(b) which shall have the effect of decreasing the
number of Warrant Shares purchasable upon exercise of each Warrant.
(c) Rights Issue. In the event that at any time or from time to time
------------
after the date hereof the Company shall issue, sell, distribute or otherwise
grant any rights to subscribe for or to purchase, or any options or warrants for
the purchase of, or any securities convertible or exchangeable into, Shares to
all holders of Shares, entitling such holders to subscribe for or purchase
Shares or stock, or securities convertible into or exchangeable or exercisable
for Shares within 60 days after the record date for such issuance, sale,
distribution or other grant, as the case may be, and the sum of (a) the offering
price of such right, option, warrant or other security (on a per share basis)
and (b) any subscription, purchase, conversion or exchange price per share of
Shares (the "Consideration") is lower at the record date for such issuance than
-------------
the then Current Market Value per share of such Shares, the number of Shares
thereafter purchasable shall be increased to a number determined by multiplying
the number of Shares issuable immediately prior to the record date upon exercise
of each Warrant by a fraction, the numerator of which shall be the number of
Shares outstanding on the date of issuance of such rights, options, warrants or
securities plus the number of additional Shares offered for subscription or
purchase or into or for which such securities are convertible or exchangeable,
and the denominator of which shall be the number of Shares outstanding on the
date of issuance of such rights, options, warrants or securities plus the total
number of Shares which could be purchased at the Current Market Value with the
aggregate of the Consideration with respect to such issuance, sale, distribution
or other grant. Such adjustment shall be made whenever such rights, options or
warrants are issued and shall become effective retroactively immediately after
the record date for the determination of stockholders entitled to receive such
rights, options, warrants or securities; provided however, that the Company is
not required to make an adjustment pursuant to this Section 4.1(c) if the
Company shall make the same distribution to Holders of Warrants. No adjustment
shall be made
19
<PAGE>
pursuant to this Section 4.1(c) which shall have the effect of decreasing the
number of Shares purchasable upon exercise of each Warrant.
If the Company at any time shall issue two or more securities as a
unit and one or more of such securities shall be rights, options or warrants for
or securities convertible or exchangeable into, Shares subject to this Section
4.1(c), the consideration allocated to each such security shall be determined in
good faith by the Board.
(d) Issuance of Additional Common Stock. If at any time the Company
-----------------------------------
shall (except as hereinafter provided) issue or sell any additional shares of
capital stock for consideration in an amount per such additional share less than
the Current Market Price, then the number of Shares for which this Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying the
number of Shares for which this Warrant is exercisable immediately prior to such
issue or sale by a fraction (A) the numerator of which shall be the number of
shares of capital stock outstanding immediately after such issue or sale, and
(B) the denominator of which shall be the sum of (1) the number of shares of
capital stock outstanding immediately prior to such issue or sale, and (2) the
aggregate consideration received from the issuance or sale of the additional
shares of capital stock divided by the Current Market Price. For the purposes of
this paragraph (d), the date as of which the Current Market Price per share of
capital stock shall be computed shall be the earlier of (x) the date on which
the Company shall enter into a firm contract for the issuance of such additional
shares or (y) the date of actual issuance of such additional shares.
(e) Combination; Liquidation. (i) Except as provided in clause (ii)
------------------------
below, in the event of certain consolidations, mergers or demergers of the
Company, or the sale of all or substantially all of the assets of the Company to
another Person (a "Combination"), each Warrant will thereafter be exercisable
-----------
for the right to receive the kind and amount of shares of stock or other
securities or property to which such Holder would have been entitled as a result
of such Combination had the Warrants been exercised immediately prior thereto.
Unless clause (ii) is applicable to a Combination, if any Warrants shall be
outstanding after a Combination, the Company shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination will enter into
-----------------
an agreement with the Warrant Agent confirming the Holders' rights pursuant to
this Section 4.1(e) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.1(e) shall similarly apply to successive
Combinations involving any Successor Company.
(ii) In the event of (A) a Combination, and, in connection therewith,
the consideration payable to the holders of Shares in exchange for their shares
is payable solely in cash or (B) a dissolution, liquidation or winding-up of the
Company, then the Holders of the Warrants will be entitled to receive
distributions on an equal basis with the holders of Shares or other securities
issuable upon exercise of the Warrants, as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of such
payment, if any, the Warrants will expire and the rights of Holders thereof will
cease.
20
<PAGE>
(iii) In the case of any such Combination, the surviving or acquiring
Person as described in this Section 4.1(e) and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the Holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
shall make payment to the Holders by delivering a check, or by wire transfer of
same-day funds, to such Person or Persons as it may be directed in writing by
the Holders surrendering such Warrants.
(f) Tender Offers; Exchange Offers. In the event that the Company or
------------------------------
any subsidiary of the Company shall purchase Shares pursuant to a tender offer
or an exchange offer for a price per Share that is greater than the then Current
Market Value per share of Shares in effect at the end of the trading day
immediately following the day on which such tender offer or exchange offer
expires, then the Company, or such subsidiary of the Company, shall, within 10
Business Days of the expiry of such tender offer or exchange offer, offer to
purchase Warrants for comparable consideration per Share based on the number of
Shares which the Holders of such Warrants would receive upon exercise of such
Warrants (the "Offer") (such amount less the Exercise Price in respect of such
-----
share, the "Per Share Consideration"); provided, however, if a tender offer is
----------------------- -------- -------
made for only a portion of the outstanding Shares, then such offer shall be made
for such Shares issuable upon exercise of the Warrants in the same pro rata
proportion.
The Offer shall remain open for a period of 20 Business Days following
its commencement and no longer, except to the extent that a longer period is
required by applicable law (the "Offer Period"). No later than five Business
------------
Days after the termination of the Offer Period (the "Purchase Date"), the
-------------
Company shall purchase such Warrants for the applicable Per Share Consideration.
(g) Other Events. If any event occurs as to which the foregoing
------------
provisions of this Section 4 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board, fairly and
adequately protect the purchase rights of holders of the Warrants in accordance
with the essential intent and principles of such provisions, then the Board
shall make such adjustments in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably necessary, in
the good faith opinion of the Board, to protect such purchase rights as
aforesaid.
(h) When No Adjustment Required. Without limiting any other
---------------------------
exception contained in this Section 4.1, and in addition thereto, no adjustment
need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of
equity securities to employees, directors, consultants or advisors of the
Company or any of its subsidiaries and (B) exercises of Rights by, or
issuances of equity securities in connection with Rights previously issued
to former employees, former directors, former consultants (to the extent
that all such securities, other than those permitted by clause (ii) below,
do not have an aggregate value in excess of 15% of the equity value of the
Company on a fully diluted basis, as determined in good faith by the
Board). As used herein, "Right" shall mean
-----
21
<PAGE>
any right, option, warrant or convertible or exchangeable security
containing the right to subscribe for or acquire on or more Shares,
excluding the Warrants;
(ii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into or granted prior to the date of
the issuance of the Warrants or any issuance of capital stock pursuant
thereto or in connection therewith;
(iii) in the case of bona fide public offerings or private
placements through investment banks of international standing;
(iv) rights to purchase Shares pursuant to a Company plan for
reinvestment of dividends or interest; and
(v) a change in the par value of Shares (including a change from
par value to no par value or vice versa).
(i) Adjustment of Exercise Price. Whenever the number of Shares
----------------------------
purchasable upon the exercise of each Warrant is adjusted, as provided under
this Section 4, the Exercise Price per Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $0.01) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which shall be the number of
Shares purchasable upon the exercise of each Warrant immediately prior to such
adjustment and the denominator of which shall be the number of Shares so
purchasable immediately thereafter. Following any adjustment to the Exercise
Price pursuant to this Section 4, the amount payable, when adjusted, shall never
be less than the par value per Share at the time of such adjustment.
If, after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege and the Exercise
Price of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Shares under this Section 4.
Such adjustment shall be made successively whenever any event listed
above shall occur.
4.2 Superseding Adjustment. Upon the expiration of any rights,
----------------------
options, warrants or conversion or exchange privileges which resulted in the
adjustments pursuant to this Section 4, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (A) the only Shares issuable upon exercise of
such rights, options, warrants, conversion or exchange privileges were the
Shares, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) Shares actually issued, if
any, were issuable for the consideration actually received by the Company upon
such exercise plus the aggregate consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants or
conversion or exchange privileges whether or not exercised;
22
<PAGE>
provided, however, that no such readjustment shall (except by reason of an
- -------- -------
intervening adjustment under Section 4.1(a)) have the effect of decreasing the
number of Warrant Shares purchasable upon the exercise of each Warrant by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion or
exchange privileges.
4.3 Minimum Adjustment. The adjustments required by the preceding
------------------
Sections of this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that no adjustment of the
number of Shares purchasable upon exercise of Warrants that would otherwise be
required shall be made (except in the case of a subdivision or combination of
Shares, as provided for in Section 4.1(a)) unless and until such adjustment
either by itself or with other adjustments not previously made increases or
decreases by at least 1% of the number of Shares purchasable upon exercise of
Warrants immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum adjustment.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Section 4, fractional interests in Shares shall be taken
into account to the nearest one-hundredth of a share.
4.4 Notice of Adjustment. Whenever the number of Shares and other
--------------------
property, if any, purchasable upon exercise of Warrants is adjusted, as herein
provided, the Company shall deliver to the Warrant Agent a certificate of a firm
of internationally recognized independent accountants (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of any evidences of indebtedness, other securities or
property or warrants or other subscription or purchase rights), and specifying
the number of Shares purchasable upon exercise of Warrants after giving effect
to such adjustment. The Company shall promptly mail, or at the expense of the
Company cause the Warrant Agent to mail, a copy of such certificate to each
Holder in accordance with Section 7.2. The Warrant Agent shall be entitled to
conclusively rely on such certificate and shall be under no duty or responsi
bility with respect to any such certificate, except to exhibit the same from
time to time, to any Holder desiring an inspection thereof during reasonable
business hours or to provide a copy to any Holder upon written request and at
the expense of such Holder. The Warrant Agent shall not at any time be under
any duty or responsibility to any Holder to determine whether any facts exist
which may require any adjustment of the number of Shares or other stock or
property, purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value of any Shares.
4.5 Notice of Certain Transactions. In the event that the Company
------------------------------
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Shares or to make any other distribution to the holders of its
Shares, (b) to offer the holders of its Shares rights to subscribe for or to
purchase any securities convertible into Shares or Shares or shares of stock
23
<PAGE>
of any class or any other securities, rights or options, (c) to effect any
reclassification of its Shares, capital reorganization or Combination or (d) to
effect the voluntary or involuntary dissolution, liquidation or winding-up of
the Company, or in the event of a tender offer or exchange offer described in
Section 4.1(f), the Company shall within 5 Business Days of making such
proposal, tender offer or exchange offer send to the Warrant Agent a notice and
the Warrant Agent shall within 5 Business Days thereafter send the Holders such
notice (in such form as shall be furnished to the Warrant Agent by the Company)
of such proposed action or offer, such notice to be mailed by the Company, or at
the expense of the Company by the Warrant Agent, to the Holders at their
addresses as they appear in the Warrant Register, which shall specify the record
date for the purposes of such dividend, distribution or rights, or the date such
issuance or event is to take place and the date of participation therein by the
holders of Shares, if any such date is to be fixed, and shall briefly indicate
the effect of such action on the Shares and on the number and kind of any other
shares of stock and on other property, if any, and the number of Shares and
other property, if any, purchasable upon exercise of each Warrant after giving
effect to any adjustment which will be required as a result of such action.
Such notice shall be given by the Company as promptly as possible and, in the
case of any action covered by clause (a) or (b) above, at least 10 Business Days
prior to the record date for determining holders of the Shares for purposes of
such action and, in the case of any other such action, at least 20 Business Days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Shares, whichever shall be the earlier.
4.6 Adjustment to Warrant Certificate. The form of Warrant
---------------------------------
Certificate need not be changed because of any adjustment made pursuant to this
Section 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of Shares as are stated in any Warrant
Certificates issued prior to the adjustment. The Company, however, may at any
time in its sole discretion make any change in the form of Warrant Certificate
that it may deem appropriate to give effect to such adjustments and that does
not affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
4.7 Challenge to Good Faith Determination. Whenever the Board shall
-------------------------------------
be required to make a determination in good faith of the Current Market Value of
any item under Section 4, such determination may be challenged in good faith by
the Majority Holders.
4.8 Treasury Stock. The sale or other disposition of any issued
--------------
Shares owned or held by or for the account of the Company shall be deemed an
issuance thereof and a repurchase thereof and designation of such shares as
treasury stock shall be deemed to be a redemption thereof for the purposes of
this Agreement.
SECTION 5. Holders' Rights.
---------------
24
<PAGE>
5.1 Registration Rights.
--------------------
(a) Shelf Registration Statement. The Company agrees with and for the
----------------------------
benefit of the Holders to file with the Commission a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 covering the
issuance of Warrant Shares to the Holders upon exercise of the Warrants by the
Holders (or, if required by applicable law, the resale of Warrants or of Warrant
Shares received by such Holder upon exercise) (the "Shelf Registration
------------------
Statement") a sufficient period of time in advance of any Exercisability Date so
as to enable such Shelf Registration Statement to be declared effective by the
time specified in Section 5.1(b). The Shelf Registration Statement shall be on
Form S-1 or another appropriate form permitting registration of such Warrants
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Warrants and the Warrant Shares to be
included in the Shelf Registration Statement. In addition, the Company agrees
that it shall make all required filings pursuant to all applicable state "Blue
Sky" or securities laws.
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act (and to
make any required filings as may be necessary to comply with all applicable
state "Blue Sky" or securities laws) on or prior to the Exercisability Date
(other than when the Exercisability Date is first triggered by the closing of a
Public Offering, in which event the Shelf Registration Statement shall be
declared effective on or before the next such Exercisability Date) and shall
cause such Shelf Registration Statement to remain effective under the Securities
Act (and all applicable state "Blue Sky" or securities laws) until the earlier
of (i) such time as all Warrants have been exercised and the Warrant Shares in
respect thereof have either been issued or been resold by such holders pursuant
to an effective registration statement under the Securities Act and (ii) the
Expiration Date (the "Effectiveness Period").
--------------------
(c) Withdrawal of Stop Orders. If the Shelf Registration Statement
-------------------------
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof.
(d) Supplements and Amendments. The Company shall promptly
--------------------------
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if requested
by the Holders of a majority of the Warrants covered by such Registration
Statement or by any underwriter of such Warrants based on a reasonable belief
that such supplement or amendment is required by law.
(e) Suspension of Shelf Registration Statement. During any
------------------------------------------
consecutive 365-day period, the Company shall be entitled to suspend the
availability of the Shelf Registration Statement for up to two 30 consecutive-
day periods (except for the 30 consecutive-day period immediately prior to the
Expiration Date) if the Board determines in the exercise of its reasonable
judgment that there is a valid business purpose for such suspension and provides
notice to the Holders of the Warrants that such determination was made;
provided, however, that
25
<PAGE>
in no event shall the Company be required to disclose the business purpose for
such suspension if the Company determines in good faith that such business
purpose must remain confidential.
(f) Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with this Section 5.1 will be borne by the Company,
including without limitation: (i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Warrant Shares and printing of prospectuses), messenger and
delivery services; (iv) all fees and disbursements of counsel for the Company;
(v) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance); and (vi) the Company's internal
expenses, the expenses of any annual or other audit and the fees and expenses of
any Person, including special experts, retained by the Company.
(g) In the case of any Shelf Registration Statement relating to the
resale of Warrants or Warrant Shares by the holders thereof, such holders will
be named in the Shelf Registration Statement and will enter into such customary
agreements (which shall include customary representations, warranties, covenants
and indemnification provisions) and take such other actions as the Company (or
any underwriters of the Company) may reasonably require in order to expedite and
facilitate the disposition of Warrants or Warrant Shares pursuant thereto.
(h) For purposes of this Section 5.1, the Company shall enter into
such customary agreements (which shall include customary representations,
warranties, covenants and indemnification provisions) and take such other
actions as the holders of Warrants or Warrant Shares (or any underwriters in
connection with any offering) may reasonably request in order to expedite and
facilitate the disposition of Warrants and Warrant Shares pursuant to this
Section 5.1, and generally shall use its reasonable best efforts to take all
other steps necessary to effect the registration and sale of such Warrants and
Warrant Shares. In addition, in the case of any Shelf Registration Statement
relating to the resale of Warrants or Warrant Shares by the holders thereof, the
Company shall also furnish to any such holders upon request such number of
copies of the prospectus included in such Shelf Registration Statement as shall
be reasonably required by such holder in order to comply with the Securities Act
in connection with such resale.
5.2 Piggyback Registration Right. (a) If the Company proposes to
----------------------------
effect a Public Offering, the Company must, not later than the date of the
initial filing of a registration statement pertaining thereto, provide written
notice thereof to the Holders of the Warrants and Warrant Shares. Each such
Holder will have the right, within 20 days after receipt of such notice, to
request (which request will indicate the intended method of distribution) that
the Company include such Holder's Warrant Shares for sale pursuant to such
registration statement.
(b) The Company will include in such Public Offering all the Warrant
Shares for which it receives notice pursuant to Section 5.2(a), unless the
managing underwriter for such Public Offering (the "Managing Underwriter")
--------------------
determines that, in its opinion, the number of Warrant Shares that the Holders
of Warrants and Warrant Shares (the "Requesting Holders")
------------------
26
<PAGE>
have requested to be sold in such Public Offering, plus the total number of
Shares that the Company and any other selling stockholders entitled to sell
Shares in such Public Offering propose to sell in such Public Offering, exceed
the maximum number of Shares that may be distributed without materially
adversely affecting the price, timing or distribution of the Shares to be sold
by the Company. In such event, the Company will be required to include in such
Public Offering only that number of Warrant Shares which the Managing
Underwriter believes may be sold without causing such adverse effect in the
following order: (i) all the Shares that the Company proposes to sell in such
Public Offering, (ii) all Shares that are proposed to be sold by any holder of
Shares who is exercising a demand registration right existing on the date of the
issuance of the Warrants, if such Public Offering is being made pursuant to such
demand and (iii) Warrant Shares of the Requesting Holders and all other Shares
that are proposed to be sold by any holder of Shares on a pro rata basis in an
aggregate number which is equal to the difference between the maximum number of
Shares that may be distributed in such Public Offering as determined by the
Managing Underwriter and the number of Shares to be sold in such Public Offering
pursuant to clauses (i) and (ii) above. The Company will have the right to
postpone or withdraw any registration statement prior to the effective date
without obligation to any Requesting Holder.
(c) Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with Section 5.2 will be borne by the Company,
including without limitation: (i) all registration and filing fees and expenses;
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Warrant Shares and printing of prospectuses), messenger and
delivery services; (iv) all fees and disbursements of counsel for the Company
and of a single counsel on behalf of all sellers of Warrant Shares thereunder;
(v) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance); and (vi) the Company's internal
expenses, the expenses of any annual or other audit and the fees and expenses of
any Person, including special experts, retained by the Company.
(d) In connection with the exercise of any such piggyback
registration right, the holders of Warrant Shares will be named in the
registration statement relating thereto, and will be required to enter into such
customary agreements (which shall include customary representations, warranties,
covenants and indemnification provisions) and take such other actions as the
underwriters in connection with such offering reasonably request in order to
expedite and facilitate the disposition of Warrant Shares pursuant thereto.
In addition the Company shall enter into such customary agreements
(which shall include customary representations, warranties, covenants and
indemnification provisions) and take such other actions for the benefit of such
holders of Warrant Shares as are reasonable and customary for such offerings and
in order to expedite and facilitate the disposition of Warrant Shares pursuant
to this Section 5.2, and generally shall use its reasonable best efforts to take
all other steps necessary to effect the registration and sale of such Warrant
Shares.
SECTION 6. Warrant Agent.
-------------
27
<PAGE>
6.1 Appointment of Warrant Agent. The Company hereby appoints the
----------------------------
Warrant Agent to act as agent for the Company in accordance with provisions of
this Agreement and the Warrant Agent hereby accepts such appointment. The
Company hereby agrees that so long as any Units remain outstanding, the Warrant
Agent may appoint the Unit Agent to act as its agent with respect to its duties
hereunder as provided in the Unit Agreement.
6.2 Rights and Duties of Warrant Agent. (a) In acting under this
----------------------------------
Warrant Agreement and in connection with the Warrant Certificates, the Warrant
Agent is acting solely as agent of the Company and does not assume any
obligation or relationship or agency or trust for or with any of the Holders of
Warrant Certificates or beneficial owners of Warrants.
(b) The Warrant Agent may consult with counsel satisfactory to it
(who may be counsel for the Company), and the advice of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(c) The Warrant Agent shall be protected and shall incur no liability
for or in respect of any action taken or thing suffered by it in reliance upon
any Warrant Certificate, certificate of shares, notice, resolution, direction,
consent, certificate, affidavit, statement or other paper or document believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) The Warrant Agent shall be obligated to perform only such duties
as are herein and in the Warrant Certificates specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be under
any obligation to institute any action, suit or legal proceeding or to take any
other action which may tend to involve it in any expense or liability for which
it does not receive indemnity satisfactory to it if such indemnity is requested.
The Warrant Agent shall not be accountable or under any duty or responsibility
for the use by the Company of any of the Warrant Certificates countersigned by
the Warrant Agent and delivered by it to the Holders or on behalf of the Holders
pursuant to this Agreement or for the application by the Company of the proceeds
of the Warrants. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or agreements
contained herein or in the Warrant Certificates or in the case of the receipt of
any written demand from a Holder with respect to such default, including any
duty or responsibility to initiate or attempt to initiate any proceedings at law
or otherwise.
(e) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that may
require an adjustment of the number of Shares purchasable upon exercise of each
Warrant or the Exercise Price, or with respect to the nature or extent of any
adjustment when made, or with respect to the method employed, or herein or in
any supplemental agreement provided to be employed, in making the same. The
Warrant Agent shall not be responsible to determine the Cashless Exercise Ratio
or any other calculation hereunder. The Warrant Agent shall not be accountable
with respect to the validity or value of any Shares or of any securities or
property which may at any time be issued or delivered upon the
28
<PAGE>
exercise of any Warrant or upon any adjustment pursuant to Section 4, and it
makes no representation with respect thereto. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any Shares or stock certificates upon the surrender of any
Warrant Certificate for the purpose of exercise or upon any adjustment pursuant
to Section 4, or to comply with any of the covenants of the Company contained in
Section 4.
(f) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require
from the Company:
(i) an Officers' Certificate of the Company stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in
this Warrant Agreement relating to the proposed action have been complied
with; and
(ii) an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been complied
with.
Each Officers' Certificate or opinion of counsel with respect to
compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
provided, however, that with respect to matters of fact an Opinion of Counsel
- -------- -------
may rely on an Officers' Certificate or certificates of public officials.
The Warrant Agent shall not be liable for any action it takes or omits
to take in good faith in reliance on any such certificate or opinion.
(g) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office or shall
provide copies of such documents to any Holder upon the written request of such
Holder and at the expense of such Holder. The Company shall supply
29
<PAGE>
the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may request.
(h) The Warrant Agent shall not be liable for any action taken or
omitted or for any loss or injury resulting from its actions or its performance
or lack of performance of its duties hereunder in the absence of gross
negligence or willful misconduct on its part. In no event shall the Warrant
Agent be liable (i) for any indirect, consequential, punitive or special
damages, regardless of the form of action and whether or not any such damages
were foreseeable or contemplated, or (ii) for the acts or omissions of its
nominees, correspondents, designees, agents, subagents or independent
contractors.
(i) The Warrant Agent shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of its
duties hereunder.
6.3 Individual Rights of Warrant Agent. The Warrant Agent and any
----------------------------------
stockholder, director, officer or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or its affiliates
or become pecuniarily interested in transactions in which the Company or its
affiliates may be interested, or contract with or lend money to the Company or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
6.4 Warrant Agent's Disclaimer. The Warrant Agent shall not be
--------------------------
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Warrant Certificates and it shall not be responsible for
any statement in this Agreement or the Warrant Certificates other than its
countersignature thereon.
6.5 Compensation and Indemnity. The Company shall pay to the Warrant
--------------------------
Agent from time to time such compensation as the Company and the Warrant Agent
shall from time to time agree in writing for its acceptance of this Warrant
Agreement and services hereunder. The Company shall reimburse the Warrant Agent
upon request for all reasonable disbursements, expenses and advances (including
reasonable fees and expenses of counsel) incurred or made by it in addition to
the compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Warrant Agent's gross negligence or bad
faith. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Warrant Agent's accountants, experts and counsel.
The Company shall indemnify each of the Warrant Agent and any
predecessor Warrant Agent for, and hold them harmless against, any and all loss,
damage, claim, expense or liability including taxes (other than taxes based on
the income of the Warrant Agent) incurred by the Warrant Agent without gross
negligence, willful misconduct or bad faith on its part in connection with or in
any way relating to or arising out of its acceptance of administration of this
Agreement and its duties under this Warrant Agreement, including the reasonable
expenses and attorneys' fees and expenses of defending itself against any claim
of liability arising hereunder. The Warrant Agent shall notify the Company
promptly of any claim asserted against the Warrant
30
<PAGE>
Agent for which it may seek indemnity. However, the failure by the Warrant Agent
to so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Warrant Agent shall
cooperate in the defense (and may employ its own counsel satisfactory to the
Warrant Agent) at the Company's expense. The Warrant Agent may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent as a result of the violation of this Warrant Agreement by the
Warrant Agent if such violation arose from the Warrant Agent's gross negligence
or bad faith.
To secure the Company's payment obligations in this Section 6.5, the
Warrant Agent shall have a senior lien against all money or property held or
collected by the Warrant Agent in its capacity as Warrant Agent.
When the Warrant Agent incurs expenses or renders services after an
Event of Default specified in the Indenture occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's obligations under this
Section 6.5 and any claim arising hereunder shall survive the termination of
this Warrant Agreement, the resignation or removal of any Warrant Agent, and any
rejection or termination under any Bankruptcy Law.
6.6 Successor Warrant Agent. (a) The Company agrees for the benefit
-----------------------
of the Holders that there shall at all times be a Warrant Agent hereunder until
all the Warrants have been exercised or are no longer exercisable.
(b) The Warrant Agent may at any time resign by giving written notice
to the Company of such intention on its part, specifying the date on which its
desired resignation shall become effective; provided, however, that such date
-------- -------
shall not be less than 30 days after the date on which such notice is given
unless the Company otherwise agrees. The Warrant Agent hereunder may be removed
at any time by the filing with it of an instrument in writing signed by or on
behalf of the Company and specifying such removal and the date when it shall
become effective, which date shall not be less than 30 days after such notice is
given unless the Warrant Agent otherwise agrees. Any removal under this Section
6.6 shall take effect upon the appointment by the Company as hereinafter
provided of a successor Warrant Agent (which shall be a bank or trust company
authorized under the laws of the jurisdiction of its organization to exercise
corporate trust powers) and the acceptance of such appointment by such successor
Warrant Agent.
(c) In case at any time the Warrant Agent shall resign, or shall be
removed, or shall become incapable of acting, or shall be adjudged a bankrupt or
insolvent, or shall commence a voluntary case under the Federal bankruptcy laws,
as now or hereafter constituted, or under any other applicable Federal or state
bankruptcy, insolvency or similar law or shall
31
<PAGE>
consent to the appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Warrant Agent or its property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take corporate action in furtherance of
any such action, or a decree or order for relief by a court having jurisdiction
in the premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
similar law; or a decree order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up of or liquidation, a successor Warrant
Agent, qualified as aforesaid, shall be appointed by the Company by an
instrument in writing, filed with the successor Warrant Agent. Upon the
appointment as aforesaid of a successor Warrant Agent and acceptance by the
successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
Warrant Agent hereunder; provided, however, that in the event of the resignation
-------- -------
of the Warrant Agent hereunder, such resignation shall be effective on the
earlier of (i) the date specified in the Warrant Agent's notice of resignation
and (ii) the appointment and acceptance of a successor Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Company an instrument
accepting such appointment hereunder, and thereupon such successor Warrant
Agent, without any further act, deed or conveyance, shall become vested with all
the rights and obligations of such predecessor with like effect as if originally
named as Warrant Agent hereunder, and such predecessor, upon payment of its
charges and disbursements then unpaid, shall thereupon become obligated to
transfer, deliver and pay over, and such successor Warrant Agent shall be
entitled to receive, all monies, securities and other property on deposit with
or held by such predecessor, as Warrant Agent hereunder.
(e) Any corporation into which the Warrant Agent hereunder may be
merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation to
which the Warrant Agent shall sell or otherwise transfer all or substantially
all its corporate trust business, provided that it shall be qualified as
aforesaid, shall be the successor Warrant Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
SECTION 7. Miscellaneous.
-------------
7.1 Reports. (a) The Company will file on a timely basis with the
-------
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q if the Company were required to file such
forms (which financial statements shall be prepared in accordance with U.S.
GAAP), including a
32
<PAGE>
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual financial information, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. Such quarterly financial
information shall be filed with the Commission within 45 days following the end
of each fiscal quarter of the Company, and such annual financial information
shall be furnished within 90 days following the end of each fiscal year of the
Company. Such annual financial information shall include the geographic segment
financial information required to be disclosed by the Company under Item 101(d)
of Regulation S-K under the Securities Act.
(b) The Company will also be required (a) to file with the Warrant
Agent, and provide to each Holder of the Warrants or Warrant Shares, without
cost to such Holder, copies of such reports and documents within 15 days after
the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective Holder of Warrants or Warrant
Shares promptly upon request. In addition, for so long as the Warrants or
Warrant Shares remain outstanding and the Company is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act nor exempt
from reporting under Rule 12g3-2(b) of the Exchange Act, the Company shall
furnish to the Holders of Warrants and Warrant Shares and to prospective Holders
thereof, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act and, to any beneficial Holder of
Warrants or Warrant Shares, information of the type that would be filed with the
Commission pursuant to the foregoing provisions, upon the request of any such
Holder.
7.2 Notices to the Company and Warrant Agent. Any notice or demand
----------------------------------------
authorized by this Agreement to be given or made by the Warrant Agent or by the
Holder of any Warrant Certificate to or on the Company shall be sufficiently
given or made (i) five business days after deposited in the mail, first class or
registered, postage prepaid, (ii) one business day after being timely delivered
to a next-day air courier or (ii) when receipt is acknowledged by the addressee,
if telecopied, addressed (until another address is filed in writing by the
Company with the Warrant Agent), as follows:
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
81929 Munich
Germany
Attention: Robert Eckert
Telecopy: +49-89-993-15199
with a copy to:
Powell, Goldstein, Frazer and Murphy LLP
1001 Pennsylvania Avenue, N.W.
33
<PAGE>
Washington D.C. 20004
Attention: Joseph M. Berl
Facsimile: +1-202- 624-7222
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given or made (i) upon receipt, if mailed, first-class or
registered, postage prepaid, (ii) one business day after being timely delivered
to a next-day air courier or (ii) when receipt is acknowledged by the addressee,
if telecopied, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: 212-815-5915
7.3 Supplements and Amendments. This Agreement may be amended by the
--------------------------
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that such action shall not
-------- -------
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has or would have an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
outstanding Warrants. The consent of each Holder of Warrants affected shall be
required for any amendment pursuant to which the Exercise Price would be
increased or the number of Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided herein) or the exercise
period with respect to the Warrants would be shortened. Prior to executing any
supplement or amendment, the Warrant Agent shall be entitled to receive, and
shall be fully protected in relying upon, an opinion of counsel stating that the
execution of such supplement or amendment is authorized or permitted by this
Agreement.
7.4 Severability. The provisions of this Agreement are severable,
------------
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
34
<PAGE>
7.5 Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
7.6 Termination. This Agreement (other than the Company's
-----------
obligations with respect to Warrants previously exercised) shall terminate at
5:00 p.m., New York City time on the Expiration Date.
7.7 Governing Law. This Agreement and the Warrants shall be governed
-------------
by, and construed and interpreted in accordance with, the law of the State of
New York.
7.8 Submission to Jurisdiction; Appointment of Agent for Service;
-------------------------------------------------------------
Waiver. To the fullest extent permitted by applicable law, the Company
- -------
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement and the Warrants, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints CSC, at Two World Trade Center, Suite 8746, New York, New York 10048
(the "Authorized Agent"), as its authorized agent upon whom process may be
----------------
served in any such suit or proceeding. The Company represents that it has
notified the Authorized Agent of such designation and appointment and that the
Authorized Agent has accepted the same in writing. The Company hereby
irrevocably authorizes and directs its Authorized Agent to accept such service.
The Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Warrant Agreement, the Warrant Certificates or
the transactions contemplated hereby.
To the extent permitted by applicable law, the Company and the Warrant
Agent each waive any right to have a jury participate in resolving any dispute,
whether sounding in contract, tort, or otherwise arising out of, connected with,
related to or incidental to the relationship established between them in
connection with this Agreement. Instead, any disputes resolved in court will be
resolved in a bench trial without a jury.
35
<PAGE>
The provisions of this Section 7.8 are intended to be effective upon
the execution of this Warrant Agreement and the Warrant Certificates without any
further action by the Company or the Warrant Agent and the introduction of a
true copy of this Warrant Agreement into evidence shall be conclusive and final
evidence as to such matters.
7.9 Benefits of this Agreement. (a) Nothing in this Agreement shall
--------------------------
be construed to give to any Person or corporation other than the Company, the
Warrant Agent and the Holders of the Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the Holders of
the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Company, to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's affairs or any other
matter or to receive any notice of any proceedings of the Company, except as may
be specifically provided for herein.
(c) All rights of action in respect of this Agreement are vested in
the Holders of the Warrants, and any Holder of any Warrant, without the consent
of the Warrant Agent or the Holder of any other Warrant, may, on such Holder's
own behalf and for such Holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, such Holder's rights hereunder, including the right
to exercise, exchange or surrender for purchase such Holder's Warrants in the
manner provided in this Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
7.11 Table of Contents. The table of contents and headings of the
-----------------
Sections of this Agreement have been inserted for convenience of reference only,
are not intended to be considered a part hereof and shall not modify or restrict
any of the terms or provisions hereof.
7.12 Survival of Provisions. The provisions of Section 6.5 herein
----------------------
shall survive the termination of this Agreement, and the resignation or removal
of the Warrant Agent.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By: /s/ Authorized Signatory
-----------------------------
By: /s/ Authorized Signatory
-----------------------------
37
<PAGE>
THE BANK OF NEW YORK, as Warrant Agent
By: /s/ Authorized Signatory
-------------------------------
38
<PAGE>
EXHIBIT A TO
WARRANT AGREEMENT
[FORM OF FACE OF GLOBAL WARRANT CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO
A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 2.9 AND 2.10 OF THE WARRANT AGREEMENT DATED
AS OF JULY 8, 1999.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
<PAGE>
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) WITH THE CONSENT OF THE
COMPANY, PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND; PROVIDED THAT (I) IN CONSENTING TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D), THE COMPANY SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER, TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT, AND (II) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE>
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
THIS CERTIFIES THAT, Cede & Co., or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
--------
Each Warrant entitles the holder thereof (the "Holder"), at its option and
------
subject to the provisions contained herein and in the Warrant Agreement dated as
of July 8, 1999 (the "Warrant Agreement"), between the Company and The Bank of
-----------------
New York, as Warrant Agent (the "Warrant Agent", which term includes any
-------------
successor Warrant Agent under the Warrant Agreement), to purchase from Cybernet
Internet Services International, Inc., a Delaware corporation (the "Company"),
30.2310693 Warrant Shares per Warrant at the exercise price of $22.278 per share
(the "Exercise Price"), or by Cashless Exercise. This Warrant is subject to the
--------------
terms and provisions contained in the Warrant Agreement, to all of which terms
and provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The Warrant Agreement is hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement for a
full statement of the respective rights, limitations of rights, duties and
obligations of the Company, the Warrant Agent and the Holders of the Warrants.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement. This Warrant Certificate shall terminate and
become void as of 5:00 p.m. on July 8, 2009 (the "Expiration Date") or upon the
---------------
exercise hereof as to all the Shares subject hereto. The Exercise Price and the
number of Warrant Shares purchasable upon exercise of the Warrants shall be
subject to adjustment from time to time as set forth in the Warrant Agreement.
As provided in the Warrant Agreement until the earliest of (1) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement, each relating to the Notes, and (2) such other date as the Initial
Purchasers shall jointly determine in their sole discretion, each $1,000
principal amount of Notes and one Warrant which collectively comprise each Unit
may not be transferred or exchanged separately.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
The Warrant Agreement and the Warrants shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, Cybernet Internet Services International, Inc. has
caused this Warrant Certificate to be executed on behalf of the Company by two
Officers of the Company.
Dated: July 8, 1999
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
---------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
<PAGE>
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By
------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at The
Bank of New York, 101 Barclay Street, Floor 21W, New York, New York, 10286,
Attention: Corporate Trust Trustee Administration, Telecopy: +212-815-5915.
Warrants may be exercised at any time commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time on
the Expiration Date. Subject to the terms of the Warrant Agreement, the
Warrants may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash to
the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose. Payment by Cashless Exercise shall be made by the surrender
of a Warrant or Warrants represented by one or more Warrant Certificates and
without payment of the Exercise Price in cash, in exchange for the issuance of
such number of Shares equal to the product of (1) the number of Shares for which
such Warrant would otherwise then be nominally exercised if payment of the
Exercise Price were being made in cash and (2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the number of Shares issuable upon the exercise of
each Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which
this Warrant remains outstanding, the Holder hereof will be entitled to receive
upon exercise of the Warrants the shares of capital stock or other securities or
other property of such surviving entity as such Holder would have been entitled
to receive upon or as the result of such Combination had the Holder exercised
its Warrants immediately prior to such Combination; provided, however, that in
-------- -------
the event that, in connection with such Combination, consideration to holders of
Shares in exchange for their shares is payable solely in cash or in the event of
the dissolution, liquidation or winding-up of the Company, the Holder hereof
will be entitled to receive distributions on an equal basis with the holders of
Shares or other securities issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such events, less the Exercise
Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE>
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the Warrants shall not have been
exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. In the event any fractional Warrant
Shares would have to be issued upon the exercise of the Warrants, the Company
may, at its option, pay an amount in cash equal to the Current Market Value for
one Warrant Share on the Business Day immediately preceding the date the Warrant
is exercised, multiplied by such fraction, computed to the nearest whole Dutch
guilder in lieu of issuing such fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Shares issuable upon exercise of
the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to effect a
Public Offering, it shall be obligated to include the Warrant Shares of holders
who request to have such Warrant Shares included; provided, however, that the
-----------------
Managing Underwriter may, under certain conditions, limit the number of such
Warrant Shares to be included in the Public Offering.
The Warrants do not entitle any holder hereof to any of the rights of
a stockholder of the Company. All Shares issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and non-assessable.
The Holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither the Company nor
the Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
<PAGE>
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise
____________________ Warrants at an exercise price per Warrant Share
of $22.278 to acquire an equal number of Warrant Shares on the terms and
conditions specified in the within Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to , and directs that the Shares deliverable
upon the exercise of such Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Date: ,
----------------- ----
/1/
--------------------------------
(Signature of Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
--------------------------------
- ----------------
/1/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed.
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANTS
The following increases or decreases in this Global Warrant have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant or increase Warrant Agent
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B TO
WARRANT AGREEMENT
[FORM OF FACE OF DEFINITIVE WARRANT CERTIFICATE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY,
AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION
DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) WITH THE CONSENT OF THE COMPANY, PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
(I) IN CONSENTING TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D),
THE COMPANY SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO IT, AND (II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE
OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT
AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
<PAGE>
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
THIS CERTIFIES THAT, _______________ is the owner of _____ Warrants
(the "Warrants") as described above, transferable only on the books of the
--------
Company by the holder thereof in person or by his or her duly authorized
attorney, on surrender of the Certificate properly endorsed. This Warrant
entitles the holder thereof (the "Holder"), at its option and subject to the
------
provisions contained herein and in the Warrant Agreement, dated as of July 8,
1999 (the "Warrant Agreement"), between the Company and The Bank of New York, as
-----------------
Warrant Agent (the "Warrant Agent", which term includes any successor Warrant
-------------
Agent under the Warrant Agreement), to purchase from Cybernet Internet Services
International, Inc., a Delaware corporation (the "Company"), 30.2310693 Warrant
Shares per Warrant at the exercise price per share of $22.278 (the "Exercise
--------
Price"), or by Cashless Exercise. This Warrant is subject to the terms and
- -----
provisions contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full statement
of the respective rights, limitations of rights, duties and obligations of the
Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Warrant Agreement. This Warrant Certificate shall terminate and become void as
of 5:00 p.m. on July 8, 2009 (the "Expiration Date") or upon the exercise hereof
---------------
as to all the Shares subject hereto. The Exercise Price and the number of
Warrant Shares purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time as set forth in the Warrant Agreement.
As provided in the Warrant Agreement until the earliest of (1) the
commencement of an exchange offer or the effectiveness of a shelf registration
statement, each relating to the Notes, and (2) such other date as the Initial
Purchasers shall jointly determine in their sole discretion, each $1,000
principal amount of Notes and one Warrant which collectively comprise each Unit
may not be transferred or exchanged separately.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
The Warrant Agreement and the Warrants shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, Cybernet Internet Services International, Inc. has
caused this Warrant Certificate to be executed on behalf of the Company by two
Officers of the Company.
Dated: July 8, 1999
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE>
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By
---------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at The
Bank of New York, 101 Barclay Street, Floor 21W, New York, New York, 10286,
Attention: Corporate Trust Trustee Administration, Telecopy: +212-815-5915.
Warrants may be exercised at any time commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time on
the Expiration Date. Subject to the terms of the Warrant Agreement, the
Warrants may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash to
the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose. Payment by Cashless Exercise shall be made by the surrender
of a Warrant or Warrants represented by one or more Warrant Certificates and
without payment of the Exercise Price in cash, in exchange for the issuance of
such number of Shares equal to the product of (1) the Exercise Price and the
number of Shares for which such Warrant would otherwise then be nominally
exercised if payment of the Exercise Price were being made in cash and (2) the
Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Shares issuable upon the exercise of each Warrant shall,
subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which
this Warrant remains outstanding, the Holder hereof will be entitled to receive
upon exercise of the Warrants the shares of capital stock or other securities or
other property of such surviving entity as such Holder would have been entitled
to receive upon or as the result of such Combination had the Holder exercised
its Warrants immediately prior to such Combination; provided, however, that in
-------- -------
the event that, in connection with such Combination, consideration to holders of
Shares in exchange for their shares is payable solely in cash or in the event of
the dissolution, liquidation or winding-up of the Company, the Holder hereof
will be entitled to receive distributions on an equal basis with the holders of
Shares or other securities issuable upon exercise of the Warrants, as if the
Warrants had been exercised immediately prior to such events, less the Exercise
Price.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE>
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the Warrants shall not have been
exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. In the event any fractional Warrant
Shares would have to be issued upon the exercise of the Warrants, the Company
may, at its option, pay an amount in cash equal to the Current Market Value for
one Warrant Share on the Business Day immediately preceding the date the Warrant
is exercised, multiplied by such fraction, computed to the nearest whole Dutch
guilder in lieu of issuing such fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Shares issuable upon exercise of
the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to effect a
Public Offering, it shall be obligated to include the Warrant Shares of holders
who request to have such Warrant Shares included; provided, however, that the
-----------------
Managing Underwriter may, under certain conditions, limit the number of such
Warrant Shares to be included in the Public Offering.
The Warrants do not entitle any holder hereof to any of the rights of
a stockholder of the Company. All Shares issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued and
fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and treated by
the Company and the Warrant Agent as the absolute owner of the Warrant
Certificate for all purposes whatsoever and neither the Company nor the Warrant
Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
<PAGE>
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise
____________________ Warrants at an exercise price per Warrant Share
of $22.278 to acquire an equal number of Warrant Shares on the terms and
conditions specified in the within Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to , and directs that the Shares deliverable
upon the exercise of such Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Date: ,
----------------- ----
/1/
-------------------------------
(Signature of Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-------------------------------
- ------------
/1/ The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed.
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
EXHIBIT 10.23
CONFORMED COPY
(Euro)25,000,000
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Pay-In-Kind Notes due 2009
Registration Rights Agreement
-----------------------------
Dated as of August 26, 1999
Between
Cybernet Internet Services International, Inc.
and
Morgan Stanley & Co. International Limited
<PAGE>
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into
as of August 26, 1999, between Cybernet Internet Services International, Inc.
(the "Company") and Morgan Stanley & Co. International Limited (the "Initial
Purchaser"), who has agreed to purchase the Company's 13.0% Convertible Senior
Subordinated Pay-In-Kind Notes due 2009 (the "Notes") pursuant to the Purchase
Agreement dated as of August 19, 1999 between the Company and the Initial
Purchaser (the "Purchase Agreement"). This Agreement is being executed pursuant
to Section 6(j) of the Purchase Agreement. The Notes are convertible into
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), under the terms and conditions set forth in an Indenture, dated as of
August 26, 1999, between the Company and The Bank of New York, as trustee (the
"Indenture").
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
Broker-Dealer. Any broker or dealer registered under the Exchange
Act.
Business Day. A day other than a Saturday or Sunday or other day on
which commercial banking institutions are authorized or required by law to
close in New York City or Munich.
Closing Date. The date of this Agreement.
Commission. The United States Securities and Exchange Commission.
Common Stock. As defined in the preamble hereto.
Company. As defined in the preamble hereto.
Conversion Ratio. As defined in the Indenture.
Conversion Shelf Registration Statement. As defined in Section 2(b).
Conversion Shares. The shares of Common Stock issuable upon
conversion of Notes at the rate and in the manner described in the
Indenture.
Damages Payment Date. Each February 15 and August 15 after a Resale
Registration Default, until the cure of such Resale Registration Default.
Effectiveness Target Date. As defined in Section 3 hereof.
Exchange Act. The United States Securities Exchange Act of 1934, as
amended.
First Conversion Date. As defined in Section 2(b) hereof.
Holder. A Person who owns, beneficially or otherwise, Notes or
Conversion Shares.
<PAGE>
2
Indemnified Holder. As defined in Section 6(a) hereof.
Indenture. As defined in the preamble hereto.
Initial Purchaser. As defined in the preamble hereto.
Liquidated Damages. As defined in Section 3 hereof.
Majority Holders. The holders of a majority of the aggregate
principal amount of Notes or a majority of the Conversion Shares, as
applicable; provided, that for purposes of Section 10(c), any Notes or
Conversion Shares held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the
Initial Purchaser or subsequent Holders of Notes or Conversion Shares if
such subsequent Holders are deemed to be affiliates of the Company solely
by reason of their holding Notes or Conversion Shares) shall not be counted
in determining whether any consent was given.
NASD. National Association of Securities Dealers, Inc.
Notes. As defined in the preamble hereto. References herein to the
Notes shall be deemed to include notes issuable in payment of interest on
the Notes wherever applicable.
Person. An individual, trustee, partnership, corporation, limited
liability company, unincorporated organization, trust, joint venture, firm
or other legal entity or a government or agency or political subdivision
thereof.
Prospectus. The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Purchase Agreement. As defined in the preamble hereto.
Record Holder. Each Person who is a Holder of Transfer Restricted
Securities on February 1 and August 1 immediately preceding each Damages
Payment Date.
Registrable Shares. Each Conversion Share until the registration of
such Conversion Share under the Securities Act (pursuant to the Conversion
Shelf Registration Statement or otherwise).
Registration Statement. The Conversion Shelf Registration Statement
and the Resale Shelf Registration Statement including, in each case, all
amendments and supplements to such registration statement, the Prospectus
included therein, all exhibits thereto and all material incorporated by
reference therein.
<PAGE>
3
Resale Registration. A shelf registration under the Securities Act
effected pursuant to the Resale Shelf Registration Statement or, in the
case of a resale of Conversion Shares, pursuant to the Conversion Shelf
Registration Statement.
Resale Registration Default. As defined in Section 3(a) hereof.
Resale Shelf Registration Statement. As defined in Section 2(a)
hereof.
Resale Shelf Filing Deadline. As defined in Section 2 hereof.
Securities Act. The Securities Act of 1933, as amended.
TIA. The United States Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities. Each Note and the Common Stock
issuable upon conversion thereof until the earliest of (a) the date on
which such Note (and the Common Stock issuable upon conversion thereof) has
been effectively registered under the Securities Act and disposed of in
accordance with the Resale Shelf Registration Statement, (b) the date on
which such Note (and the Common Stock issuable upon conversion thereof) is
distributed to the public pursuant to Rule 144 under the Securities Act (or
any similar provision then in effect) or is saleable pursuant to Rule
144(k) under the Securities Act (or any similar provision then in effect)
or (c) the date on which such Note (and the Common Stock issuable upon
conversion thereof) ceases to be outstanding.
Underwritten Registration or Underwritten Offering. A registration in
which securities of the Company are sold to an underwriter for reoffering
to the public.
2. Shelf Registration.
(a) The Company shall: (i) as soon as practicable, but not later than
90 days after the date hereof (the "Resale Shelf Filing Deadline"), cause to be
filed a shelf registration statement pursuant to Rule 415 under the Securities
Act (the "Resale Shelf Registration Statement"), which Resale Shelf Registration
Statement shall provide for resales of all Transfer Restricted Securities held
by Holders that have provided the information required pursuant to Section 2(c)
hereof; (ii) use its best efforts to cause such Resale Shelf Registration
Statement to be declared effective by the Commission on or before 150 days after
the date hereof; and (iii) use its best efforts to keep such Resale Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 4(b) hereof to the extent necessary to
ensure that it is available for resales by the Holders of Transfer Restricted
Securities entitled to the benefit of this Agreement, and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, until, subject to the provisions of Section 4(b)(i) hereof, such time as
no Notes remain Transfer Restricted Securities.
<PAGE>
4
(b) The Company shall: (i) cause to be filed a registration statement
(the "Conversion Shelf Registration Statement") covering the issuance of the
Conversion Shares upon conversion of the Notes prior to the one year anniversary
of the Closing Date, (ii) use its best efforts to cause such Conversion Shelf
Registration Statement to become effective by the date that is one year after
the Closing Date (the "First Conversion Date") and (iii) use its best efforts to
keep such Conversion Shelf Registration Statement continuously effective until
the earlier of (A) such time as all Notes have been converted into Conversion
Shares or redeemed and (B) August 15, 2009; provided, that if the Company
determines that, notwithstanding its best efforts, the Commission will not
declare such Conversion Shelf Registration Statement effective, the Company
shall (i) file a registration statement (also, a "Conversion Shelf Registration
Statement") with respect to the resale of Conversion Shares before the one year
anniversary of the Closing Date, (ii) use its best efforts to cause such
registration statement to become effective by the First Conversion Date and
(iii) use its best efforts to keep such registration statement continuously
effective until the earlier of (A) the date on which all Notes can be resold by
holders thereof without restrictions and without registration under the
Securities Act and (B) such time as all Conversion Shares covered by such
registration statement have been resold pursuant thereto. The Company further
agrees to supplement and amend the Conversion Shelf Registration Statement, as
required by the applicable provisions of Section 4(b) hereof.
(c) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in any Resale Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 10 Business Days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with
such Resale Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein and in any application to be filed with or under state
securities laws. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 3 hereof unless and until such Holder
shall have provided all such reasonably requested information. Each Holder as to
which any Resale Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
3. Liquidated Damages; Conversion Ratio Adjustment.
(a) If the Resale Shelf Registration Statement required by this
Agreement (i) is not filed with the Commission on or before the date specified
for such filing in Section 2(a)(i) hereof, (ii) has not been declared effective
by the Commission on or before the date specified for such effectiveness in
Section 2(a)(ii) hereof (the "Effectiveness Target Date"), or (iii) subject to
the provisions of Section 4(b)(i) below, is filed and declared effective but,
during the period specified in Section 2(a)(ii) hereof, shall thereafter cease
to be effective or fail to be usable for its intended purpose without being
succeeded within 15 Business Days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in foregoing clauses (i) through
(iii), a "Resale Registration Default"), the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes with respect
to any period during which a Resale Registration Default shall have occurred and
be continuing, in an amount equal to (i) for the first 90-day period during
which there exists a Resale Registration
<PAGE>
5
Default, one half of one percent (50 basis points) per annum per (Euro)1.00
principal amount of Notes held by such Holder; and (ii) for each subsequent 90-
day period, an additional one half of one percent (50 basis points) per annum
per (Euro)1.00 principal amount of Notes held by such Holder; provided, however,
that Liquidated Damages may not at any time exceed one and one half percent (150
basis points) per annum per (Euro)1.00 principal amount of Notes.
(b) All accrued Liquidated Damages shall be paid to Record Holders by
the Company on each Damages Payment Date by wire transfer of immediately
available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Note, the accrual of Liquidated
Damages with respect to such Note shall cease.
(c) If a Conversion Shelf Registration Statement required by this
Agreement covering all Conversion Shares is not declared effective on or prior
to the First Conversion Date, the denominator of the Conversion Ratio will be
decreased by 2.04%.
4. Registration Procedures.
(a) In connection with each of the Resale Shelf Registration
Statement and the Conversion Shelf Registration Statement, the Company shall
comply with all applicable provisions of Section 4(b) below and shall use its
best efforts to effect such registration in accordance with the intended method
or methods of distribution of the Transfer Restricted Securities or Registrable
Shares, as the case may be, and the Company will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act.
(b) In connection with each Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted
Securities or the issuance of Conversion Shares, the Company shall:
(i) Use its best efforts to keep such Registration Statement
continuously effective; upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) to not be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its reasonable best efforts to cause such amendment
to be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as
practicable thereafter. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in its reasonable judgment that there
is a valid business purpose for the Company to suspend the effectiveness of
either Registration Statement, and the Company gives notice of such
determination to Holders, the Company may allow such Registration Statement
to fail to be effective and usable for two consecutive 30-day periods
(except for the 30 consecutive-day period prior to August 15, 2009) in any
365-day period; provided, that in no event shall the Company be required to
disclose the business purpose for such suspension of effectiveness if the
Company determines in good faith that such business purpose must remain
confidential.
<PAGE>
6
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statements as may be
necessary to keep the applicable Registration Statement effective for the
periods set forth in Section 2(a)(iii) and 2(b)(iii) hereof, as the case
may be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution set forth in such Registration Statement or supplement to the
Prospectus.
(iii) Advise the underwriter(s), if any, and Holders of Transfer
Restricted Securities and Registrable Shares promptly (but in any event
within two Business Days) and, if requested by such Persons, to confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Securities Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities or the Registrable Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in a Registration
Statement, a Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in any Registration Statement or any
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of a Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities or Registrable Shares under state securities or Blue
Sky laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(iv) Furnish to each of the Holders of Transfer Restricted
Securities or Registrable Shares, as the case may be, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement or
Prospectus (including, upon request in writing, all documents incorporated by
reference after the initial filing of such Registration Statement), which
documents will be subject to the review of such Holders and any underwriter(s),
for a period of at least three Business Days, and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a Holder of Transfer Restricted Securities
or Registrable Shares covered by such Registration
<PAGE>
7
Statement or any underwriter(s) shall reasonably object within three
Business Days after the receipt thereof. A Holder of Transfer Restricted
Securities or Registrable Shares or any underwriter shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission.
(v) Promptly before the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus after
the initial filing of such Registration Statement, (A) provide copies of
such document to the Holders of Transfer Restricted Securities or
Registrable Shares, as the case may be, and to any underwriter, (B) make
the Company's representatives available for discussion of such document and
other customary due diligence matters, and (C) include such information in
such document before the filing thereof as such Holders or underwriter(s),
if any, reasonably may request.
(vi) In the case of a Resale Registration, make available at
reasonable times for inspection by the selling Holders, any underwriter
participating in any distribution pursuant to such Registration Statement,
and any attorney or accountant retained by such selling Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement after the filing thereof and
before its effectiveness.
(vii) In the case of a Resale Registration, if requested by any
selling Holders or the underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement or post-
effective amendment if necessary, such information as such selling Holders
and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities or Registrable
Shares, information with respect to the principal amount of Transfer
Restricted Securities or the number of Registrable Shares being sold to
such underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities or Registrable
Shares to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(viii) In the case of a Resale Registration, furnish to each
selling Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including, if requested in
writing, all documents incorporated by reference therein and, if requested
in writing, all exhibits (including exhibits incorporated therein by
reference).
<PAGE>
8
(ix) In the case of a Resale Registration, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities or Registrable Shares, as the case may be,
covered by the Prospectus or any amendment or supplement thereto.
(x) In the case of a Resale Registration, whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company shall: (A) upon request,
furnish to each selling Holder and each underwriter, if any, in such
substance and scope as they may reasonably request and as are customarily
made by issuers to underwriters in primary underwritten offerings, upon the
date of effectiveness of the Registration Statement: (1) a certificate,
dated the date of effectiveness of such Registration Statement, signed by
(y) the President and (z) the Chief Financial Officer of the Company
confirming, as of the date thereof, the matters set forth in Section 1 of
the Purchase Agreement and such other matters as such parties may
reasonably request; (2) an opinion, dated the date of effectiveness of such
Registration Statement, of counsel for the Company covering the matters set
forth in Sections 6(c) and 6(d) of the Purchase Agreement; and (3)
customary comfort letters, dated as of the date of effectiveness of such
Registration Statement from the Company's independent accountants, in the
customary form and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary underwritten
offerings; (B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of section 6 hereof with respect to all parties to be
indemnified pursuant to said section; and (C) deliver such other documents
and certificates as may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by
the selling Holders pursuant to this clause (x).
(xi) Cooperate with the Holders of Transfer Restricted
Securities or Registrable Shares, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities or the Registrable Shares, as the case
may be, under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s), if any, may reasonably request and do
any and all other acts or things necessary or advisable to enable the
disposition or transfer in such jurisdictions of the Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement;
provided, however, that the Company shall not be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process, in any
jurisdiction where it is not now so subject.
(xii) In the case of a Resale Registration, cooperate with the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities or Registrable Shares, as the
<PAGE>
9
case may be, to be sold; and enable such Transfer Restricted Securities or
Registrable Shares to be in such denominations and registered in such names
as the Holders or the underwriter(s), if any, may request at least two
Business Days before any sale of Transfer Restricted Securities or
Registrable Shares made by such underwriter(s).
(xiii) Use its reasonable best efforts to cause the Transfer
Restricted Securities or the Registrable Shares covered by the Registration
Statement to be registered with or approved by such other U.S. governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities or the transfer of the Registrable
Shares.
(xiv) Subject to Section 4(b)(i) above, if any fact or event
contemplated by Section 4(b)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(xv) Cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter that is required to be retained in
accordance with the rules and regulations of the NASD.
(xvi) Otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158 (which
need not be audited) for each twelve-month period beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the first Registration Statement effected pursuant to this
Agreement.
(xvii) Cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the trustee
and the holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its reasonable best efforts to cause the
trustee thereunder to execute all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable the Indenture to be so qualified in a timely
manner.
(xviii) Upon the request of the Initial Purchaser, cause all
Transfer Restricted Securities or Registrable Shares, as the case may be,
covered by a Registration Statement to be listed on an internationally
recognized stock exchange.
<PAGE>
10
(xix) Provide promptly to each Holder upon written request
each document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act after the Effective Date of
each Registration Statement.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities or
Registrable Shares pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiv) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities or Registrable Shares, as the case
may be, that was current at the time of receipt of such notice.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by the Initial Purchaser or any Holders with the NASD (and, if applicable,
the fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of Transfer
Restricted Securities or Registrable Shares and determination of the eligibility
of Transfer Restricted Securities and Registrable Shares for investment under
the laws of such jurisdictions where (x) the Holders of Transfer Restricted
Securities are located and (y) the selling Holders or underwriters, if any, may
request pursuant to Section 4(b)(xi) hereof; (iii) fees and expenses in
connection with the obtaining of any approval from any relevant authority in the
Federal Republic of Germany; (iv) all expenses of printing (including printing
of Prospectuses); (v) all reasonable fees and disbursements of counsel for the
Company and, subject to Section 5(b) below, the Holders of Transfer Restricted
Securities; (vi) all application, admission and filing fees in connection with
listing or admission on an internationally recognized stock exchange of any
Transfer Restricted Securities or Registrable Shares; (vii) all fees and
disbursements of independent certified public accountants of the Company
(including, without limitation, the expenses of any special audit and comfort
letters required by or incident to such performance); (viii) rating agency fees,
if any, and any fees associated with making the Transfer Restricted Securities,
Registrable Shares and Conversion Shares eligible for trading through The
Depository Trust Company; (ix) Securities Act liability insurance, if the
Company desires such insurance, (x) reasonable fees and expenses of all other
Persons retained by the Company, (xi) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties); (xii) the
expenses of any annual audit; and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements,
<PAGE>
11
securities sales agreements, indentures and any other documents necessary in
order to comply with this Agreement.
(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Holders of Transfer Restricted
Securities or Registrable Shares being registered pursuant to such Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority in principal amount of
Notes and in number of Registrable Shares for whose benefit such Registration
Statement is being prepared.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless: (i) each
Holder; (ii) each person, if any, who controls (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being referred to as a "controlling
person"); and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii), or (iii) hereinafter being referred to as an
"Indemnified Holder"), against any losses, claims, damages or liabilities, joint
or several, or any action in respect thereof to which such Indemnified Holder
may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages, liabilities or actions arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement or Prospectus or any
amendment or supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Notes and the Conversion Shares under the state
securities or "Blue Sky" laws or filed with the Commission or any securities
association or securities exchange (each an "Application"); (ii) the omission or
alleged omission to state, in such Registration Statement or Prospectus or any
amendment or supplement thereto, or in any Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
(iii) any act or failure to act, or any alleged act or failure to act, by any
Indemnified Holder in connection with, or relating in any manner to, the
Transfer Restricted Securities or Registrable Shares or the registration
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable in the case of any matter covered by this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such
act or failure to act undertaken or omitted to be taken by such Indemnified
Holder through its gross negligence or wilful misconduct), and shall reimburse
each Indemnified Holder promptly upon demand for any legal or other expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability or action is finally judicially determined to arise out
of or be based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in such Registration Statement or Prospectus or
amendment or supplement thereto or Application in reliance upon and in
<PAGE>
12
conformity with written information furnished to the Company through the Holders
by or on behalf of any Holder (or its related Indemnified Holder) specifically
for use therein. The foregoing indemnity agreement is in addition to any
liability that the Company may otherwise have to the Indemnified Holders.
(b) In the case of a Resale Registration, each Holder, severally and
not jointly, will indemnify and hold harmless each of the Company, its officers
and employees, each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or other controlling person may become subject under the
Securities Act, the Exchange Act, or otherwise, insofar as such losses, claims,
damages, liabilities or action arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement or Prospectus or any amendment or supplement thereto or
any Application or (ii) the omission or the alleged omission to state therein
any material fact required to be stated therein, or necessary to make the
statements therein not misleading, but in each case only to the extent, that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through the Holders by or on behalf of any Holder or its related
Indemnified Holder specifically for use therein; and each such Holder shall
reimburse the Company or any director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Holder may otherwise have to the Company or any such
director, officer or controlling person. No Holder shall be liable under this
Section 6 for any settlement of any claim or action effected without its
consent, which shall not be unreasonably withheld. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of Transfer
Restricted Securities or Registrable Securities giving rise to such
indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure; and provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with
<PAGE>
13
the defense thereof other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time (in addition to one separate firm constituting local counsel, if
appropriate) for all such indemnified parties, which firm shall be designated in
writing by the Holders, if the indemnified parties under this Section 6 consist
of any of the Holders, or by the Company, if the indemnified parties under this
Section 6 consist of the Company. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 6(a) and 6(b), shall use its
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld) settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
(a) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (b) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 6(a) or 6(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and any Holder on the other from such
Holder's sale of Transfer Restricted Securities or Registrable Shares, as the
case may be, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
<PAGE>
14
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Holders on the other
with respect to statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Holder, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of Transfer Restricted Securities or Registrable
Shares agree that it would not be just and equitable if contributions pursuant
to this Section 6(d) were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purposes of this Section 6(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no Holder
(or any of their related Indemnified Holders) shall be required to contribute
any amount in excess of the amount by which proceeds received by such Holder
from an offering of Transfer Restricted Securities or Registrable Shares, as the
case may be, exceeds the amount of any damages which such Holder has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Holder's obligations to contribute as provided
in this Section 6(d) are several in proportion to their respective purchase
obligations and not joint. For purposes of this paragraph (d), each person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Holder, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
7. Rule 144A. The Company hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder's Transfer Restricted Securities or Registrable
Shares on the basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lockup letters and other documents required under the
terms of such underwriting arrangements.
9. Selection of Underwriters. The Holders of Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement who desire
to do so may
<PAGE>
15
sell such Transfer Restricted Securities or Registrable Shares in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the Majority Holders wishing to sell in such offering;
provided, that such investment bankers and managers must be reasonably
satisfactory to the Company.
10. Miscellaneous.
(a) Remedies. The Company agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement (other than with respect to Registration Defaults) and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to
their securities to any Person which rights conflict with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to the Company:
Cybernet Internet Services
International, Inc.
Stefan-George-Ring 19-23
81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
with a copy to:
Powell, Goldstein, Frazer
& Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
<PAGE>
16
Facsimile No: +1-202-624-7222
Attention: Joseph M. Berl, Esq.
(ii) if to the Initial Purchaser:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile No: +1-212-761-0192
Attention: Syndicate Department
with a copy to:
Simpson Thacher & Bartlett
99 Bishopsgate
London EC2M 3YH
Facsimile: +44-171-422-4022
Attention: William R. Dougherty, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered, five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities and Registrable Shares;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities or Registrable
Shares from such Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the
<PAGE>
17
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities and Registrable Shares. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Submission to Jurisdiction; Appointment of Agent for Service;
Waiver. To the fullest extent permitted by applicable law, the Company
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement, and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in any such court. The Company, to
the fullest extent permitted by applicable law, irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
and hereby irrevocably designates and appoints Corporation Services Company (the
"Authorized Agent"), for a period of ten years or until such time as no Transfer
Restricted Securities are outstanding, as its authorized agent upon whom process
may be served in any such suit or proceeding. The Company represents that it has
notified the Authorized Agent of such designation and appointment and that the
Authorized Agent has accepted the same in writing. The Company hereby
irrevocably authorizes and directs its Authorized Agent to accept such service.
The Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner. Notwithstanding the
foregoing, any action against the Company arising out of or based on this
Agreement or the transactions contemplated hereby may also be instituted by any
of the Holders, their officers and employees or any person who controls any of
the Holders within the meaning of the Securities Act in any competent court in
the Federal Republic of Germany, and the Company expressly accepts the
jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 10(k) are intended to be effective upon
the execution of this Agreement without any further action by the Company, the
Initial Purchaser
<PAGE>
18
or any Holder and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(l) Currency Indemnity. The Company shall indemnify each Holder
against any loss incurred by it as a result of any judgment or order being given
or made and expressed and paid in a currency (the "Judgment Currency") other
than U.S. dollars and as a result of any variation as between (i) the rate of
exchange at which the U.S. dollar amount is converted into the Judgment Currency
for the purpose of such judgment or order and (ii) the spot rate of exchange in
New York, New York at which such Holder on the date of payment of such judgment
or order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by such Holder. If the U.S. dollars so purchased are
greater than the amount originally due to such Holder hereunder, such Holder
agrees to pay to the Company an amount equal to the excess of the U.S. dollars
so purchased over the amount originally due to such Holder hereunder. The
foregoing shall constitute a separate and independent obligation of the Company
and the Holder, as the case may be, and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, U.S. dollars.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
By: /s/ Andreas Eder
----------------------------------
Name: Andreas Eder
Title: President and Chief Executive Officer
By: /s/ Robert Eckert
----------------------------------
Name: Robert Eckert
Title: Chief Financial Officer and Treasurer
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By: /s/ Jorg Mohaupt
----------------------------------
Name: Jorg Mohaupt
Title: Vice President
<PAGE>
EXHIBIT 10.24
EXECUTION COPY
================================================================================
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
as Company,
and
THE BANK OF NEW YORK
as Trustee, Registrar and
Paying Agent
_________________
INDENTURE
Dated as of August 26, 1999
_________________
(Euro)25,000,000 aggregate principal amount of 13.0% Convertible Senior
Subordinated Pay-In-Kind Notes due 2009
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE.......................... 1
1.1 Definitions............................................................. 1
1.2 Incorporation by Reference of TIA....................................... 22
1.3 Rules of Construction................................................... 22
ARTICLE II THE NOTES........................................................... 23
2.1 Form and Dating......................................................... 23
2.2 Execution and Authentication............................................ 24
2.3 Registrar and Paying Agent.............................................. 25
2.4 Paying Agent To Hold Assets in Trust.................................... 26
2.5 List of Holders......................................................... 26
2.6 Book-Entry Provisions for Global Notes.................................. 26
2.7 Registration of Transfer and Exchange................................... 27
2.8 Replacement Notes....................................................... 32
2.9 Outstanding Notes....................................................... 33
2.10 Treasury Notes......................................................... 33
2.11 Temporary Notes........................................................ 33
2.12 Cancellation........................................................... 34
2.13 Defaulted Interest..................................................... 34
2.14 CUSIP, ISIN and Common Code Numbers.................................... 34
2.15 Deposit of Moneys...................................................... 35
2.16 Certain Matters Relating to Global Notes............................... 35
ARTICLE III REDEMPTION.......................................................... 35
3.1 Optional Redemption..................................................... 35
3.2 Notices to Trustee...................................................... 35
3.3 Selection of Notes to Be Redeemed....................................... 35
3.4 Notice of Redemption.................................................... 36
3.5 Effect of Notice of Redemption.......................................... 37
3.6 Deposit of Redemption Price............................................. 37
3.7 Notes Redeemed in Part.................................................. 38
ARTICLE IV COVENANTS........................................................... 38
4.1 Payment of Notes........................................................ 38
4.2 Maintenance of Office or Agency......................................... 38
4.3 Limitation on Restricted Payments....................................... 39
4.4 Limitation on Indebtedness.............................................. 41
4.5 Corporate Existence..................................................... 45
4.6 Payment of Taxes and Other Claims....................................... 45
4.7 Maintenance of Properties and Insurance................................. 45
4.8 Compliance Certificate; Notice of Default............................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
4.9 Compliance with Laws.................................................... 47
4.10 Reports................................................................ 47
4.11 Waiver of Stay; Extension or Usury Laws................................ 48
4.12 Limitation on Transactions with Shareholders and Affiliates............ 48
4.13 Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries............................................ 49
4.14 Limitation on Liens.................................................... 50
4.15 Change of Control...................................................... 50
4.16 Limitation on Asset Sales.............................................. 52
4.17 Limitation on Issuance of Guarantees of Indebtedness by Restricted
Subsidiaries....................................................... 55
4.18 Business of the Company; Restriction on Transfers of Existing
Business........................................................... 56
4.19 Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries....................................................... 56
4.20 Additional Amounts..................................................... 57
4.21 Payment of Non-Income Taxes and Similar Charges........................ 57
4.22 Limitation on Layering................................................. 57
4.23 Limitation on Investment Company Activities............................ 58
ARTICLE V SUCCESSOR CORPORATION.............................................. 58
5.1 Consolidation, Merger, and Sale of Assets............................... 58
5.2 Successor Corporation Substituted....................................... 59
ARTICLE VI DEFAULT AND REMEDIES............................................... 59
6.1 Events of Default....................................................... 59
6.2 Acceleration............................................................ 60
6.3 Other Remedies.......................................................... 61
6.4 The Trustee May Enforce Claims Without Possession of Securities......... 61
6.5 Rights and Remedies Cumulative.......................................... 61
6.6 Delay or Omission Not Waiver............................................ 61
6.7 Waiver of Past Defaults................................................. 61
6.8 Control by Majority..................................................... 62
6.9 Limitation on Suits..................................................... 62
6.10 Rights of Holders To Receive Payment................................... 63
6.11 Collection Suit by Trustee............................................. 63
6.12 Trustee May File Proofs of Claim....................................... 63
6.13 Priorities............................................................. 63
6.14 Restoration of Rights and Remedies..................................... 64
6.15 Undertaking for Costs.................................................. 64
6.16 Compliance Certificate; Notices of Default............................. 64
ARTICLE VII TRUSTEE............................................................ 65
7.1 Duties of Trustee....................................................... 65
7.2 Rights of Trustee....................................................... 66
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
7.3 Individual Rights of Trustee............................................ 67
7.4 Trustee's Disclaimer.................................................... 67
7.5 Notice of Default....................................................... 68
7.6 Report by Trustee to Holders............................................ 68
7.7 Compensation and Indemnity.............................................. 68
7.8 Replacement of Trustee.................................................. 69
7.9 Successor Trustee by Merger, etc........................................ 70
7.10 Corporate Trustee Required; Eligibility................................ 70
7.11 Disqualification; Conflicting Interests................................ 71
7.12 Preferential Collection of Claims Against Company...................... 71
ARTICLE VIII SATISFACTION AND DISCHARGE OF INDENTURE............................ 71
8.1 Option to Effect Legal Defeasance or Covenant Defeasance................ 71
8.2 Legal Defeasance and Discharge.......................................... 71
8.3 Covenant Defeasance..................................................... 72
8.4 Conditions to Legal or Covenant Defeasance.............................. 72
8.5 Satisfaction and Discharge of Indenture................................. 74
8.6 Survival of Certain Obligations......................................... 74
8.7 Acknowledgment of Discharge by Trustee.................................. 74
8.8 Application of Trust Moneys............................................. 75
8.9 Repayment to the Company; Unclaimed Money............................... 75
8.10 Reinstatement.......................................................... 76
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS................................ 76
9.1 Without Consent of Holders of Notes..................................... 76
9.2 With Consent of Holders of Notes........................................ 77
9.3 Compliance with TIA..................................................... 78
9.4 Revocation and Effect of Consents....................................... 78
9.5 Notation on or Exchange of Notes........................................ 78
9.6 Trustee to Sign Amendments, etc......................................... 78
9.7 Senior Indebtedness..................................................... 79
ARTICLE X CONVERSION......................................................... 79
10.1 Right to Convert; Mandatory Conversion................................. 79
10.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends................ 80
10.3 Cash Payments in Lieu of Fractional Shares............................. 81
10.4 Conversion Price....................................................... 81
10.5 Adjustment of Conversion Price......................................... 81
10.6 Effect of Reclassification, Consolidation, Merger or Sale.............. 86
10.7 Taxes on Shares Issued................................................. 86
10.8 Reservation of Shares; Shares to be Fully Paid......................... 86
10.9 Permanent Reduction of Conversion Ratio upon Certain Registration
Defaults........................................................... 86
10.10 Definition of Closing Price........................................... 87
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI SUBORDINATION...................................................... 87
11.1 Notes Subordinated to Senior Indebtedness.............................. 87
11.2 Reliance on Certificate of Liquidating Agent; Further Evidence as to
Ownership of Senior Indebtedness................................... 91
11.3 Payment Permitted If No Default........................................ 91
11.4 Disputes with Holders of Certain Senior Indebtedness................... 91
11.5 Trustee Not Charged with Knowledge of Prohibition...................... 92
11.6 Trustee to Effectuate Subordination.................................... 92
11.7 Rights of Trustee as Holder of Senior Indebtedness..................... 92
11.8 Article Applicable to Paying Agents.................................... 93
11.9 Subordination Rights Not Impaired by Acts or Omissions of the Company or
Holders of Senior Indebtedness..................................... 93
11.10 Trustee Not Fiduciary for Holders of Senior Indebtedness.............. 93
11.11 Notice of Acceleration................................................ 93
11.12 Relative Rights....................................................... 93
ARTICLE XII MISCELLANEOUS...................................................... 94
12.1 TIA Controls........................................................... 94
12.2 Notices................................................................ 94
12.3 Communications by Holders with Other Holders........................... 95
12.4 Certificate and Opinion as to Conditions Precedent..................... 95
12.5 Statements Required in Certificate or Opinion.......................... 96
12.6 Rules by Trustee, Paying Agent, Registrar.............................. 96
12.7 Legal Holidays......................................................... 96
12.8 Governing Law.......................................................... 96
12.9 Submission to Jurisdiction; Appointment of Agent for Service; Waiver... 96
12.10 No Adverse Interpretation of Other Agreements......................... 97
12.11 No Personal Liability of Directors, Officers, Employees, Stockholders
or Incorporators................................................... 97
12.12 Currency Indemnity.................................................... 98
12.13 Successors............................................................ 98
12.14 Counterpart Originals All parties hereto may sign any number of copies
of this Indenture.................................................. 98
12.15 Severability.......................................................... 98
12.16 Table of Contents, Headings, etc...................................... 98
</TABLE>
EXHIBITS
Exhibit A - Form of Global Note
Exhibit B - Form of Definitive Note
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
part of this Indenture.
-iv-
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
<S> <C>
310(a)(1)................................................................. 7.10
(a)(2)................................................................. 7.10
(a)(3)................................................................. NA
(a)(4)................................................................. NA
(a)(5)................................................................. 7.8; 7.11
(b).................................................................... 7.8; 7.11
(c).................................................................... NA
311(a).................................................................... 7.12
(b).................................................................... 7.12
(c).................................................................... NA
312(a).................................................................... 2.5
(b).................................................................... 11.3
(c).................................................................... 11.3
313(a).................................................................... 7.6
(b)(1)................................................................. 11.3
(b)(2)................................................................. 7.6
(c).................................................................... 7.6; 11.2
(d).................................................................... 7.6
314(a).................................................................... 4.8; 4.10; 11.2; 11.4
(b).................................................................... 11.2
(c)(1)................................................................. 7.2; 11.4
(c)(2)................................................................. 7.2; 11.4
(c)(3)................................................................. NA
(d).................................................................... 11.3;11.4; 11.5
(e).................................................................... 11.5
(f).................................................................... NA
315(a).................................................................... 7.1(c)
(b).................................................................... 7.5; 11.2
(c).................................................................... 7.1(a)
(d).................................................................... 6.8; 7.1(c)
(e).................................................................... 6.15
316(a)(last sentence)..................................................... 2.9
(a)(1)(A).............................................................. 6.8
(a)(1)(B).............................................................. 6.7
(a)(2)................................................................. NA
(b).................................................................... 6.10
317(a)(1)................................................................. 6.11
(a)(2)................................................................. 6.12
(b).................................................................... 2.4
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C>
318(a)...................................................................... 11.1
(c)...................................................................... 11.1
</TABLE>
______________________
NA means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
-vi-
<PAGE>
INDENTURE, dated as of August 26, 1999, between Cybernet Internet Services
International, Inc., a Delaware corporation (the "Company"), and The Bank of New
-------
York, a New York banking corporation, as Trustee, Registrar and Paying Agent.
The Company has duly authorized the creation and issuance of (i) its 13.0%
Convertible Senior Subordinated Pay-In-Kind Notes due 2009 issued on the date
hereof (the "Original Notes") and (ii) Additional Notes (as defined herein) that
--------------
may be issued on any Issue Date (all such notes referred to in (i) and (ii)
being referred to as the "Notes"); and, to provide therefor, the Company has
-----
duly authorized the execution and delivery of this Indenture. Except as
otherwise provided herein, the Notes shall be limited to (Euro)100,000,000
(excluding Secondary Notes (as defined herein)) in aggregate principal amount
outstanding, of which (Euro)25,000,000 in aggregate principal amount shall be
initially issued on the date hereof. Subject to the conditions and compliance
with the covenants set forth herein, the Company may issue up to
(Euro)75,000,000 aggregate principal amount of Additional Notes.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions. For purposes of this Indenture, unless otherwise
-----------
specifically indicated herein, the term "consolidated" with respect to any
Person refers to such Person consolidated with its Restricted Subsidiaries, and
excludes from such consolidation any Unrestricted Subsidiary as if such
Unrestricted Subsidiary were not an Affiliate of such Person. In addition, for
purposes of the following definitions and this Indenture generally, all
calculations and determinations shall be made in accordance with US GAAP and
shall be based upon the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with US GAAP. As used in this Indenture, the
following terms shall have the following meanings:
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted Subsidiary or assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary, such merger or consolidation 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 the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into the Company or any Restricted Subsidiary or such
Asset Acquisition shall not be Indebtedness.
"Additional Amounts" shall have the meaning set forth in Section 4.20.
<PAGE>
2
"Additional Notes" means up to (Euro)75,000,000 aggregate principal amount
of 13.0% Senior Subordinated Pay-In-Kind Notes due 2009 issued under the terms
of this Indenture after the Closing Date.
"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" is defined to mean any Registrar, Paying Agent, Authenticating
Agent or co-Registrar.
"Agent Members" shall have the meaning set forth in Section 2.16.
"Asset Acquisition" is defined to mean (i) any capital contribution (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise) by the Company or
any Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary 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 an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any property or
asset and awards of compensation for any asset taken by condemnation, eminent
domain or similar proceedings). For the purposes of this definition, the term
"Asset Sale" shall not include (a) any transaction consummated in compliance
with Section 5.1 and the creation of any Lien not prohibited by Section 4.14;
provided, however, that any transaction consummated in compliance with such
Section 5.1, involving a sale, conveyance, assignment, transfer, lease or other
disposal of less than all of the properties or assets of the Company and the
Restricted Subsidiaries shall be deemed to be an Asset Sale with respect to the
properties or assets of the Company and Restricted Subsidiaries that are not so
sold, conveyed, assigned, transferred, leased or otherwise disposed of in such
transaction; (b) sales of property or
<PAGE>
3
equipment that has become worn out, obsolete or damaged or otherwise unsuitable
for use in connection with the business of the Company or any Restricted
Subsidiary, as the case may be; (c) sales of telecommunications network capacity
of the Company or any Restricted Subsidiary including sales of indefeasible
rights of use of or transfers of dark fiber optic transmission cable, in each
case in the ordinary course of business; and (d) any transaction consummated in
compliance with Section 4.3. In addition, solely for purposes of Section 4.16,
any sale, conveyance, transfer, lease or other disposition of any property or
asset, whether in one transaction or a series of related transactions, involving
assets with a Fair Market Value not in excess of 1.0 million in any fiscal year
shall be deemed not to be an "Asset Sale."
"Asset Sale Offer" shall have the meaning set forth in Section 4.16.
"Authenticating Agent" shall have the meaning set forth in Section 2.2.
"Bankruptcy Law" is defined to mean Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of creditors.
"Board of Directors" is defined to mean the Board of Directors of the
Company.
"Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.
"Business Day" is defined to mean a day other than a Saturday, Sunday or
other day on which commercial banking institutions in New York City and Munich,
Germany are authorized or required by law to close.
"Capital Stock" is defined to mean, 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, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Capitalized Lease" is defined to mean, 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 US GAAP, is required to be capitalized and reflected as a liability on the
balance sheet of such Person; and "Capitalized Lease Obligation" is defined to
mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.
"Cash Equivalents" is defined to mean, (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof or by the German government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) overnight bank deposits or certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities of 360 days or
less from the
<PAGE>
4
date of acquisition, in each case with any commercial bank having capital and
surplus in excess of $500 million and outstanding debt rated at least "A" or the
equivalent thereof by S&P or Moody's; (c) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (a) and (b) entered into with any financial institution meeting the
qualifications specified in clause (b) above; (d) commercial paper rated at
least A-1 or P-1, or the equivalent thereof, by S&P or Moody's, respectively,
and in each case maturing within 360 days after the date of acquisition and (e)
direct obligations of, or obligations fully and unconditionally guaranteed by,
any member of the European Community rated at least "AAA" or the equivalent
thereof by both S&P and Moody's.
"Cedel" is defined to mean Cedelbank, societe anonyme.
"Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes 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 then outstanding Voting Stock of the Company on a fully
diluted basis, provided that the relevant threshold in the case of Cybermind
Interactive Europe and Holger Timm shall be 40%; (ii) individuals who at the
beginning of any period of two consecutive calendar years constituted the Board
of Directors (together with any directors who are members of the Board of
Directors on the date hereof and any new directors whose election by the Board
of Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then still in office who either were members of the Board of Directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of such Board of Directors then in office; (iii) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company to any such "person" or "group"
(other than to a Restricted Subsidiary); or (iv) the merger or consolidation of
the Company with or into another corporation or the merger of another
corporation with or into the Company with the effect that immediately after such
transaction any such "person" or "group" of persons or entities shall have
become the beneficial owner of securities of the surviving corporation of such
merger or consolidation representing a majority of the total voting power of the
then outstanding Voting Stock of the surviving corporation.
"Change of Control Offer" shall have the meaning set forth in Section 4.15.
"Change of Control Payment" shall have the meaning set forth in Section
4.15.
"Change of Control Payment Date" shall have the meaning set forth in
Section 4.15.
"Closing Date" is defined to mean the date of this Indenture.
"Commission" is defined to mean the United States Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of the
<PAGE>
5
Indenture such commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time.
"Common Depositary" is defined to mean The Bank of New York or any of its
successors acting in the capacity of common depositary for Euroclear and Cedel.
"Common Stock" is defined to mean the authorized common Capital Stock of
the Company, par value $0.001 per share.
"Company" is defined to mean the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Company Order" is defined to mean a written order or request signed in the
name of the Company by two officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company or any other officer so
authorized and delivered to the Trustee.
"Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication), Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (iii) any amount attributable
to depreciation and amortization expense and (iv) all other non-cash items
reducing Consolidated Net Income (excluding any non-cash charge to the extent
that it requires or represents an accrual of, or reserve for, cash charges in
any future period), less all non-cash items increasing Consolidated Net Income
(excluding any items which represent the reversal of an accrual of, or reserve
for, anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with US GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.
"Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
"Consolidated Interest Expense" is defined to mean with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with US GAAP; 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 such Person or any
of its Restricted Subsidiaries, less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued
<PAGE>
6
or scheduled to be paid or to be accrued by such Person and its Restricted
Subsidiaries during such period; excluding, however, any amount of such interest
of any Restricted Subsidiary to the extent the net income of such Restricted
Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to
the last proviso of such definition.
"Consolidated Net Income" is defined to mean, for any period, the net
income (or loss) of the Company and its consolidated Restricted Subsidiaries
determined in accordance with US GAAP; provided, however, that there will not be
included in such Consolidated Net Income: (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject to
the limitations contained in clauses (iv), (v) and (vi) below, the Company's
equity in the net income of any such Person for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (b) the Company's equity in a net loss of
any such Person (other than an Unrestricted Subsidiary) for such period will be
included in determining such Consolidated Net Income to the extent such loss has
been funded with cash from the Company or a Restricted Subsidiary; (ii) any net
income (loss) of any Person acquired by the Company or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (a) subject to the limitations
contained in clauses (iv), (v) and (vi) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary as a dividend (subject, in the case of a
dividend to another Restricted Subsidiary, to the limitation contained in this
clause) and (b) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such Consolidated Net
Income; (iv) any gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated Restricted
Subsidiaries which is not sold or otherwise disposed of in the ordinary course
of business and any gain (loss) realized upon the sale or other disposition of
any Capital Stock of any Person; (v) any extraordinary gain or loss; and (vi)
the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with US GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
<PAGE>
7
"Conversion Price" has the meaning set forth in Section 10.4.
"Conversion Shares" shall have the meaning set forth in Section 10.1.
"Conversion Ratio" shall have the meaning set forth in Section 10.1.
"Corporate Trust Office" is defined to mean the address of the Trustee
specified in Section 12.2.
"Covenant Defeasance" shall have the meaning set forth in Section 8.3.
"Credit Facilities" is defined to mean one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with US GAAP.
"Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with US GAAP.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
"Current Market Price" is defined to mean (i) if the security is not
registered under the Exchange Act, the fair market value of the security
(without any discount for lack of liquidity, the amount of such security offered
to be purchased or the fact that such securities may represent a minority
interest in a private company or a company under the control of another Person)
as determined in good faith by the Board of Directors and certified in a board
resolution that is delivered to the Trustee, and determined to be fair, from a
financial point of view, to the holders of such security or another security
exercisable for such security, by an Independent Financial Expert (as set forth
in such Independent Financial Expert's written fairness opinion); or (ii) if the
security is registered under the Exchange Act, the average of the last reported
sale price of the security on the principal exchange on which it trades (or the
equivalent in an over-the-counter market) for each Business Day during the
period commencing 15 Business Days before such date
<PAGE>
8
and ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 15 consecutive Business Days
before such date, the average of the daily closing bid prices (or such
equivalent) for all of the Business Days before such date for which daily
closing bid prices are available (provided, however, that if the closing bid
price is not determinable for at least 10 Business Days in such period, the
"Current Market Price" of the security shall be determined as if the security
were not registered under the Exchange Act). The Company shall pay the fees and
expenses of any Independent Financial Expert in the determination of Current
Market Price.
"Custodian" is defined to mean any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Default Interest Payment Date" shall have the meaning set forth in Section
2.13.
"Definitive Notes" is defined to mean Notes in definitive registered form
substantially in the form of Exhibit B.
"Depositary" and "Depositaries" shall have the meaning set forth in Section
2.1.
"Designated Senior Indebtedness" under the Notes is defined to mean the
Senior Notes and any Indebtedness constituting Senior Indebtedness that, at the
date of determination, has an aggregate principal amount of, or under which the
holders thereof are committed to lend up to, (Euro)20.0 million and that is
specifically designated by the Company in the instrument creating or evidencing
such Senior Indebtedness as "Designated Senior Indebtedness."
"Discount Notes" is defined to mean the 13.0% Convertible Senior
Subordinated Discount Notes due 2009 of the Company that are being offered
simultaneously herewith, if any are issued.
"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with US
GAAP) of any Person that are not more than 60 days past their due date and that
were entered into in the ordinary course of business on normal payment terms as
shown on the most recent consolidated balance sheet of such Person filed with
the Commission, all in accordance with US GAAP.
"Equity Interests" is defined to mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euro" or "(Euro)" is defined to mean the lawful currency of countries of
the European Monetary Union.
<PAGE>
9
"Euroclear" is defined to mean Morgan Guaranty Trust Company of New York
(Brussels office), as operator of the Euroclear System.
"Euro Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the European Monetary Union for the payment of which
obligations or guarantee the full faith and credit of the European Monetary
Union is pledged and are not callable or redeemable at the option of the issuer
thereof.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Excess Proceeds" shall have the meaning set forth in Section 4.16.
"Exchange Act" is defined to mean the United States Securities Exchange Act
of 1934, as amended, or any successor statute, and the rules and regulations
thereunder.
"Fair Market Value" is defined to mean, with respect to any asset or
property, the price (after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction; provided, however,
that the Fair Market Value of any such asset or assets shall be determined
conclusively by the Board of Directors acting in good faith, which determination
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee and, when required by the express provisions hereof, an Officers'
Certificate filed with the Trustee.
"Global Notes" is defined to mean the Rule 144A Global Note and the
Regulation S Global Note.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; 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" is defined to mean a Person in whose name a Note is registered on
the Registrar's books.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that none of the accrual of interest, the payment of interest in the form of
additional Indebtedness or the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
<PAGE>
10
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the 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, (D)
representing Capitalized Lease Obligations, (ii) 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, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of determination
and (v) 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 that (x) the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with US GAAP, (y) money borrowed and set aside at the time of the
Incurrence of any Indebtedness for the sole purpose of prefunding the payment of
interest on such Indebtedness (and which is pledged in favor of the holders of
such Indebtedness pending such application) shall not be deemed to be
"Indebtedness" so long as such money is held to secure the payment of such
interest and (z) Indebtedness shall not include any liability for federal,
state, local or other taxes.
"Indenture" is defined to mean this Indenture, as amended, modified or
supplemented from time to time in accordance with the terms hereof.
"Independent Financial Expert" is defined to mean an internationally
recognized investment bank that does not (and the directors, executive officers
and 5% stockholders of which do not) have a direct or indirect financial
interest in the Company or any of its Subsidiaries or Affiliates, which has not
been for at least five years, and at the time it is called upon to give
independent financial advice to the Company is not (and none of its directors,
executive officers or 5% stockholders is), a promoter, director, or officer of
the Company or any of its Subsidiaries or Affiliates. The Independent Financial
Expert may be compensated and indemnified by the Company for opinions or
services it provides as an Independent Financial Expert.
"Initial Purchaser" is defined to mean Morgan Stanley & Co. International
Limited.
"Interest Payment Date" is defined to mean the Stated Maturity of an
installment of interest on the Notes.
<PAGE>
11
"Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
"Investment" in any Person is defined to mean 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 US GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to another Person or any payment for any
property or services for the account or use of another Person), or any purchase
or acquisition of Equity Interests, bonds, notes, debentures, or other similar
instruments issued by any other Person. For purposes of the definition of
"Unrestricted Subsidiary" and Sections 4.3 and 4.19, (i) "Investment" shall
include (a) the Fair Market Value of the assets (net of liabilities) of any
Restricted Subsidiary of the Company at the time that such Restricted Subsidiary
of the Company is designated an Unrestricted Subsidiary and shall exclude the
Fair Market Value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company and (b) the Fair Market Value, in the case
of a sale of Equity Interests in accordance with Section 4.19 such that a Person
no longer constitutes a Restricted Subsidiary, of the remaining assets (net of
liabilities) of such Person after such sale, and shall exclude the Fair Market
Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Company and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.
"Issue Date" is defined to mean the date on which the Notes are originally
issued under the Indenture.
"Legal Defeasance" shall have the meaning set forth in Section 8.2.
"Legal Holiday" is defined to mean a Saturday, a Sunday or a day on which
banking institutions in the City of Munich, Germany or The City of New York or a
place of payment are authorized or required by law, regulation or executive
order to remain closed. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
"Liquidated Damages" shall have the meaning set forth in the Registration
Rights Agreement.
<PAGE>
12
"Market Criteria" shall have the meaning set forth in Section 10.1.
"Market Criteria Period" shall have the meaning set forth in Section 10.1.
"Maturity Date" is defined to mean August 15, 2009.
"Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any 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 US GAAP; provided that such amounts which cease to be held as reserves
shall be deemed Net Cash Proceeds; and (b) with respect to any issuance or sale
of Equity Interests (other than Redeemable 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 (1) such obligations are financed, directly or
indirectly, with money borrowed from the Company or any Restricted Subsidiary or
otherwise financed or sold with recourse to the Company or any Restricted
Subsidiary or (2) the purchase of the Equity Interests is otherwise financed,
directly or indirectly, by the Company or any Restricted Subsidiary, including
through funds contributed, extended, guaranteed or otherwise advanced by the
Company or any Affiliate) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of attorneys' 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.
"Neuer Markt" is defined to mean the Neuer Markt of the Frankfurt Stock
Exchange.
"Notes" shall have the meaning set forth in the preamble of this Indenture.
"Offer Amount" shall have the meaning set forth in Section 4.16.
<PAGE>
13
"Offer Period" shall have the meaning set forth in Section 4.16.
"Officer" is defined to mean, with respect to any Person (other than any
Agent), the Chairman of the Board, any Director, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Assistant Treasurer, the Controller or the Secretary of such Person.
"Officers' Certificate" is defined to mean a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Sections 12.4 and 12.5 of the Indenture.
"Opinion of Counsel" is defined to mean a written opinion from legal
counsel which and who are reasonably acceptable to, and addressed to, the
Trustee complying with the requirements of Sections 11.4 and 11.5. Unless
otherwise required by the TIA, the legal counsel may be an employee of or
counsel to the Company.
"Original Notes" shall have the meaning set forth in the preamble to this
Indenture.
"Paying Agent" shall have the meaning set forth in Section 2.3.
"Permitted Assets" is defined to mean, with respect to any Person, assets
used in the Permitted Business (or Equity Interests of a Person that becomes a
Restricted Subsidiary, the assets of which consist principally of such Permitted
Assets) that are purchased or acquired by the Company or a Restricted Subsidiary
after the Issue Date.
"Permitted Business" is defined to mean the business of (i) operating an
Internet connectivity or internet enhancement service as it may exist from time
to time, including, without limitation, providing dial up or dedicated internet
service, web hosting or co-location services, security solutions, configuration
services, electronic commerce, intranet solutions, data backup and restoral,
business content and collaboration or consulting services with respect to the
foregoing (including, without limitation, any business conducted by the Company
or any Restricted Subsidiary on the Issue Date), (ii) transmitting or providing
services relating to the transmission of, voice, video or data through owned or
leased transmission facilities, (iii) constructing, creating, developing,
providing or marketing communications-related network equipment, products,
software and other devices for use in an Internet or telecommunications
business, or (iv) evaluating, participating in or pursuing any other activity or
opportunity that is primarily related to those identified in clause (i), (ii) or
(iii) above. A good faith determination by a majority of the Board of Directors
as to whether a business meets the requirements of this definition shall be
conclusive, absent manifest error.
"Permitted Holder" is defined to mean Andreas Eder, Alessandro Giacalone
and any Affiliate of the foregoing Persons.
<PAGE>
14
"Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with US GAAP; (iii) stock, obligations or securities received (a) in
satisfaction of judgments or (b) in settlement of debts, or as a result of
foreclosure, perfection or enforcement of any Lien, in each case under this
clause (b) arising in the ordinary course of business and not in contemplation
of the acquisition of such stock, obligations or securities; (iv) Investments in
Cash Equivalents; (v) Investments made as a result of the receipt of noncash
consideration from any Asset Sale made in compliance with Section 4.16; (vi)
Investments in negotiable instruments held for collection, lease, utility and
workers' compensation, performance and other similar pledges or deposits, and
other pledges or deposits permitted under Section 4.14; (vii) obligations under
Interest Rate Agreements or Currency Agreements; provided that such agreements
(a) are designed solely to protect the Company or the Restricted Subsidiary, as
the case may be, 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; (viii) Investments made in the ordinary course
of business and on ordinary business terms in the Permitted Business in
consortia formed to construct transmission infrastructure for use primarily in
the Permitted Business, provided such Investment entitles the Company to rights
of way or rights of use on such transmission infrastructure; and (ix) any
Investment purchased by the Company and deposited in an escrow account
established in connection with the issuance of any Senior Indebtedness of the
Company that is pari passu with the Senior Notes.
"Permitted Liens" is defined to mean (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 US GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with US 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 or other
similar legislation and other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers under
insurance or self-insurance arrangements); (iv) 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; (v)
Liens (including extensions and renewals thereof) upon real or personal property
of a Restricted Subsidiary purchased or leased after the Issue Date; provided
that (a) such Lien is created solely for the purpose of securing Indebtedness
Incurred by such Restricted Subsidiary in compliance
<PAGE>
15
with Sections 4.4 and 4.17 (1) to finance the cost 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 and the Incurrence of such
Indebtedness or (2) to refinance any Indebtedness of a Restricted Subsidiary
previously so secured, (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; (vi) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease of a Restricted Subsidiary which, in each
case, is permitted under this Indenture; (vii) Liens on property of, or on
Equity Interests in or Indebtedness of, any Person existing at the time such
Person becomes, or becomes a part of, any Restricted Subsidiary; provided that
such Liens were not created, incurred or assumed in contemplation of such
transaction and do not extend to or cover any property or assets of the Company
or any Restricted Subsidiary other than the property or assets so acquired;
(viii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary of the Company that does not give rise to
an Event of Default; (ix) Liens encumbering customary initial deposits and
margin deposits and other Liens that are either within the general parameters
customary in the industry or incurred in the ordinary course of business, in
each case, securing Indebtedness under Interest Rate Agreements and Currency
Agreements; (x) 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 Issue Date; (xi) Liens existing on the Issue Date or
securing the Notes or any Guarantee of the Notes; (xii) Liens granted after the
Issue Date on any assets or Equity Interests in the Company or its Restricted
Subsidiaries created in favor of the holders; (xiii) Liens with respect to the
assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the
Company or another Restricted Subsidiary to secure Indebtedness owing to the
Company or such Restricted Subsidiary and Incurred in compliance with clause
(ii) of paragraph (b) of Section 4.4; (xiv) Liens created in connection with the
incurrence of any Indebtedness permitted to be Incurred under clause (iii) of
paragraph (b) of Section 4.4; provided that the Indebtedness which it refinances
is secured by similar Liens; (xv) Liens securing Indebtedness under Credit
Facilities incurred in compliance with clause (viii) of paragraph (b) of Section
4.4; (xvi) Liens securing other Senior Indebtedness of the Company; (xvii) Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
subleases, licenses, sublicenses, obligations for utilities, statutory or
regulatory obligations, bankers' acceptances, letters of credit, surety and
appeal bonds, government or other contracts, completion guarantees, 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); (xviii) 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; and (xix) Liens with respect to an escrow account
established in connection with the issuance of any Senior Indebtedness which are
pari passu with the Senior Notes.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
<PAGE>
16
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
"Private Placement Legend" is defined to mean the legend set forth in
Section 2.7(g).
"Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Sale or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Sale or Asset
Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.
"Purchase Date" shall have the meaning set forth in Section 4.16.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" is defined to mean the Record Dates specified in the Notes.
"Redemption Date" when used with respect to any Note to be redeemed, is
defined to mean the date fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Notes.
"Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under Section 4.15 and Section 4.16 and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.
<PAGE>
17
"Redemption Price" when used with respect to any Note to be redeemed, is
defined to mean the price fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Notes.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" is defined to mean that certain
Registration Rights Agreement, dated the date hereof, between the Company and
the Trustee.
"Regulation S" is defined to mean Regulation S under the Securities Act.
"Regulation S Global Note" shall have the meaning set forth in Section 2.1.
"Regulation S Notes" shall have the meaning set forth in Section 2.1.
"Relevant Taxing Jurisdiction" shall have the meaning set forth in Section
4.20.
"Replacement Assets" is defined to mean any property, plant or equipment of
a nature or type that are used or usable in the Permitted Business (as
determined in good faith by the Board of Directors, whose determination shall be
evidenced by a Board Resolution).
"Restricted Period" shall have the meaning set forth in Section 2.7(c).
"Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary.
"Rule 144" is defined to mean Rule 144 (including any successor regulation
thereto) under the Securities Act, as it may be amended from time to time.
"Rule 144A" is defined to mean Rule 144A (including any successor
regulation thereto) under the Securities Act, as it may be amended from time to
time.
"Rule 144A Global Note" shall have the meaning set forth in Section 2.1.
"Rule 144A Notes" shall have the meaning set forth in Section 2.1.
"S&P" is defined to mean Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, and its successors.
"Secondary Notes" is defined to mean the additional Notes issued in lieu of
cash payment of any or all of the interest due on any Interest Payment Date
occurring prior to February 15, 2005; upon issuance, Secondary Notes shall be
deemed "Notes" for all purposes under this Indenture.
<PAGE>
18
"Securities Act" is defined to mean the United States Securities Act of
1933, as amended, or any successor statute, and the rules and regulations
thereunder.
"Senior Indebtedness" is defined to mean the following obligations of the
Company, whether outstanding on the date of the Indenture or thereafter
Incurred: (i) all Indebtedness and all other monetary obligations of the Company
under the Senior Notes; (ii) all other Indebtedness of the Company other than
the Notes and the Discount Notes, if any (including, without limitation,
Indebtedness Incurred under Credit Facilities), including principal and interest
on such Indebtedness, unless such Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such Indebtedness is issued, is
pari passu with, or subordinated in right of payment to, the Notes; and (iii)
all fees, expenses and indemnities payable in connection with the Senior Notes
(including any agreement pursuant to which the Senior Notes were issued);
provided that the term "Senior Indebtedness" shall not include (a) any
Indebtedness of the Company that, when Incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code, was without
recourse to the Company, (b) any Indebtedness of the Company to a Subsidiary of
the Company or a joint venture in which the Company has an interest, (c) any
Indebtedness of the Company, to the extent not permitted under the Indenture,
(d) any repurchase, redemption or other obligation in respect of Redeemable
Stock, (e) any Indebtedness to any employee of the Company or one of its
Subsidiaries, (f) any liability under federal, state, local, foreign or other
taxes owed or owing by the Company, (g) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities) or (h) any
Indebtedness, guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including without limitation, any Senior
Subordinated Indebtedness and Subordinated Obligations. Senior Indebtedness will
also include interest accruing subsequent to events of bankruptcy of the Company
and its Subsidiaries at the rate provided for in the document governing such
Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the debtor in a bankruptcy case under federal bankruptcy
law.
"Senior Notes" is defined to mean the 14.0% Senior Notes due 2009 of the
Company, issued on July 8, 1999.
"Senior Subordinated Indebtedness" is defined to mean the Notes and any
other Indebtedness of the Company, including, without limitation, any Discount
Notes that specifically provides that such Indebtedness is to rank equally with
the Notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness.
"Significant Subsidiary" is defined to mean, at any time of determination,
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.
<PAGE>
19
"Specified Date" is defined to mean any redemption date, any date of
purchase for any purchase of the Notes pursuant to Section 4.16 or Section 4.15,
any date of conversion or exchange of Notes or any date on which the Notes are
due and payable after an Event of Default.
"Stated Maturity" is defined to mean, (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.
"Subordinated Obligations" is defined to mean any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (A) more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof
whether in the form of membership, general, special or limited partnership or
otherwise and (B) such Person or any Restricted Subsidiary of such Person is a
controlling general partner, co-venturer, manager or is in a similar position or
otherwise controls such entity.
"Successor Company" shall have the meaning set forth in Section 5.1.
"Taxes" shall have the meaning set forth in Section 4.20.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb), as it may be amended from time to time.
"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Trading Day" is defined to mean, so long as the Common Stock trades on the
Neuer Markt, a day on which such exchange is open for the transaction of
business, or, if the Common Stock ceases to trade on the Neuer Markt, a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not so listed or admitted to trading on any national
securities exchange, a day on which the Nasdaq National Market System (or any
successor thereto) or such other system then in use is open for the transaction
of business, or, if the
<PAGE>
20
Common Stock is not quoted by any such organization, any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Officer" is defined to mean any officer within the corporate trust
department (or any successor group of the Trustee), including any vice
president, assistant vice president, corporate trust officer, assistant
corporate trust officer, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his or her knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.
"Trustee" is defined to mean the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated 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 Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (a) the Company certifies in an
Officers' Certificate that such designation complies with the covenants
described under Section 4.3, (b) such Subsidiary is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might reasonably be obtained in a
comparable arm's-length transaction at the time from Persons who are not
Affiliates of the Company, (c) neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (1) to subscribe for
additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating results
and (d) such Subsidiary and its Subsidiaries have not at the time of
designation, and do not thereafter, Incur any Indebtedness other than
Unrestricted Subsidiary Indebtedness. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) the Company could
Incur Euro 1.00 of additional Indebtedness under Section 4.4(a) on a pro forma
basis taking into account such designation and (y) no Default or Event of
Default shall have occurred and be continuing.
<PAGE>
21
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"US GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act or any successor to such Rule.
"Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products of the number of years from such date
of determination to the dates of each successive scheduled principal payment of,
or redemption or similar payment with respect to, such Indebtedness multiplied
by (b) the amount of such principal payment, by (ii) the sum of all such
principal payments.
"Wholly Owned Restricted Subsidiary" is defined to mean any Restricted
Subsidiary all of the outstanding voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.2 Incorporation by Reference of TIA. This Indenture is
---------------------------------
subject to the mandatory provisions of the TIA which as of the date hereof and
thereafter as in effect are 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;
<PAGE>
22
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the 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 Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.3 Rules of Construction. Unless the context otherwise
---------------------
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with U.S. GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) "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.
ARTICLE II
THE NOTES
---------
SECTION 2.1 Form and Dating. The Notes and the notation relating to
---------------
the Trustee's certificate of authentication thereof, shall be substantially in
the form of Exhibits A or B, as applicable. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company and the Trustee shall approve the form of the Notes and any notation,
legend or endorsement on them. Each Note shall be dated the date of its
issuance and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as Exhibits
A and B shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. The Notes will initially be represented by
the Global Notes.
<PAGE>
23
Notes offered and sold in their initial distribution in reliance on Rule
144A shall be initially issued as one or more global notes in registered, global
form without interest coupons, substantially in the form of Exhibit A hereto,
with such applicable legends as are provided in Exhibit A, except as otherwise
permitted herein. Such Global Notes shall be referred to collectively herein as
the "Rule 144A Global Note." Such Rule 144A Global Notes shall be deposited on
---------------------
behalf of the holders of the Notes represented thereby with the Common
------
Depositary for Euroclear and Cedelbank (each, a "Depositary" and together, the
- ---------- ----------
"Depositaries"), at its London office, as custodian for the Depositaries, and
------------
registered in the name of a Depositary or its respective nominee duly executed
by the Company and authenticated by the Trustee or an Authenticating Agent as
provided herein for credit to the accounts of designated agents holding on
behalf of the Depositaries (or such other accounts as they may direct). The
aggregate principal amount of the Rule 144A Global Note may from time to time be
increased or decreased by adjustments made on the records of the Common
Depositary, as custodian for the Depositary, or the records of the Depositary or
its nominee, as the case may be, as hereinafter provided (or by the issue of a
further Rule 144A Global Note), in connection with a corresponding decrease or
increase in the aggregate principal amount of the Regulation S Global Note or in
consequence of the issue of Definitive Notes or additional Rule 144A Notes, as
hereinafter provided. The Rule 144A Global Note and all other Notes, if any,
evidencing the debt, or any portion of the debt, initially evidenced by such
Rule 144A Global Note, shall collectively be referred to herein as the "Rule
----
144A Notes."
- ----------
Notes offered and sold in their initial distribution in reliance on
Regulation S shall be initially issued as one or more global notes, in
registered global form without interest coupons, substantially in the form of
Exhibit A hereto, with such applicable legends as are provided in Exhibit A
hereto, except as otherwise permitted herein. Such Global Notes, as the case
may be, shall be referred to collectively herein as the "Regulation S Global
-------------------
Note." Such Regulation S Global Note shall be deposited on behalf of the
- ----
holders of the Notes represented thereby with the Common Depositary, at its
London office, as custodian for the Depositaries, and registered in the name of
the Depositary or its nominee, duly executed by the Company and authenticated by
the Trustee or an Authenticating Agent as provided herein, for credit to the
accounts of the designated agents holding on behalf of each Depositary (or such
other accounts as they may direct). The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Common Depositary, as custodian for the
Depositaries, or the records of the Depositary or its nominee, as the case may
be, as hereinafter provided (or by the issue of a further Regulation S Global
Note), in connection with a corresponding decrease or increase in the aggregate
principal amount of the Rule 144A Global Note or in consequence of the issue of
Definitive Notes or additional Regulation S Notes, as hereinafter provided. The
Regulation S Global Note and all other Notes that are not Rule 144A Global Notes
shall collectively be referred to herein as the "Regulation S Notes".
------------------
SECTION 2.2 Execution and Authentication. Two Officers shall sign, or
----------------------------
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
<PAGE>
24
If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
Except as otherwise provided herein, the aggregate principal amount of
Notes which may be outstanding at any time under this Indenture, is (Euro)
100,000,000, excluding Secondary Notes. The Trustee shall authenticate an
aggregate principal amount of Notes not to exceed (Euro)100,000,000 for
issuance, which shall consist of (i) Original Notes for original issue on the
Closing Date in the aggregate principal amount not to exceed (Euro)
25,000,000.00 and (ii) Additional Notes from time to time for issue in an
aggregate principal amount not to exceed (Euro)75,000,000.00, which may be
issued by the Company after the Closing Date. Additional Notes and Secondary
Notes will be treated as the same series of Notes as the Original Notes for all
purposes under this Indenture, including, without limitation, for purposes of
waivers, amendments, redemptions and offers to purchase. The Officers'
Certificate shall specify the aggregate principal amount of Notes to be
authenticated, the series and type of Notes, the date on which the Notes are to
be authenticated, the issue price, whether the Notes are to be Original Notes or
Additional Notes, whether the Notes are to be issued as Definitive Notes or
Global Notes and whether or not the Notes shall bear the Private Placement
Legend, or such other information as the Trustee may reasonably request. In
authenticating the Notes and accepting the responsibilities under this Indenture
in relation to the Notes, the Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture. Upon receipt of a Company Order, the Trustee shall authenticate Notes
in substitution of Notes originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent ("Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate Notes. Unless otherwise
provided in the appointment, 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 Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
The Notes (including the Secondary Notes) shall be issuable only in
denominations of (Euro)1.00 principal amount and any integral multiple thereof,
provided, however, that Notes (including Secondary Notes) will not be issued in
denominations of less than (Euro)1.00. No payments, in cash or otherwise, will
be made in respect of any fractional denomination amounts to which Holders would
otherwise be entitled (including, without limitation, in respect of interest
paid in the form of Secondary Notes); provided, however, that a Holder's
entitlement to such Secondary Notes in denominations of (Euro)1.00 or integral
multiples thereof shall be calculated on the basis of the aggregate principal
amount of Notes registered in such Holder's name on the relevant Record Date.
<PAGE>
25
SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an
--------------------------
office or agency in London, England and in the Borough of Manhattan, The City of
New York and, if and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market, in whatever location the rules of
such stock exchange or trading market so require, where (i) Global Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar"), (ii) Global Notes may be presented or surrendered for payment
---------
("Paying Agent") and (iii) notices and demands in respect of such Global Notes
------------
and this Indenture may be served. In the event that Definitive Notes are
issued, (x) Definitive Notes may be presented or surrendered for registration of
transfer or for exchange, (y) Definitive Notes may be presented or surrendered
for payment and (z) notices and demands in respect of the Definitive Notes and
this Indenture may be served at an office of the Registrar or the Paying Agent,
as applicable, in the Borough of Manhattan, The City of New York. The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company, upon notice to the Trustee, may have one or more co-Registrars and one
or more additional Paying Agents. The term "Registrar" includes any co-
Registrar and the term "Paying Agent" includes any additional Paying Agent. The
Company initially appoints The Bank of New York as Registrar and Paying Agent
until such time as The Bank of New York has resigned or a successor has been
appointed. The Company may change any Registrar or Paying Agent without notice
to any Holder. Payment of principal will be made upon the surrender of
Definitive Notes at the office of the Paying Agent. In the case of a transfer
of a Definitive Note in part, upon surrender of the Definitive Note to be
transferred, a Definitive Note shall be issued to the transferee in respect of
the principal amount transferred and a Definitive Note shall be issued to the
transferor in respect of the balance of the principal amount of the transferred
Definitive Note at the office of any transfer agent.
SECTION 2.4 Paying Agent To Hold Assets in Trust. The Company shall
------------------------------------
require each Paying Agent other than the Trustee to agree in writing that each
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
assets held by the Paying Agent for the payment of principal of or interest, if
any, Additional Amounts, if any, Liquidated Damages, if any, premium, if any, or
interest on, the Notes, and shall notify the Trustee of any Default by the
Company in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account for
any assets 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 distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.5 List of Holders. 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. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee before each Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
<PAGE>
26
SECTION 2.6 Book-Entry Provisions for Global Notes. (a) The Global Notes
--------------------------------------
initially shall (i) be registered in the name of a Depositary or the nominee of
a Depositary, (ii) be delivered to a Depositary or, pursuant to such
Depositary's instructions, to the Common Depositary as custodian for the
Depositaries and (iii) bear legends as set forth in Section 2.7(g) hereto.
Owners of beneficial interests in a Global Note will not be entitled to have
Notes registered in their names, and will not receive or be entitled to receive
Definitive Notes except as expressly set forth in this Section 2.6. Furthermore,
any Holder of a Global Note shall, by acceptance of such Global Note, agree that
transfers of beneficial interests in such Global Note may be effected only
through a book-entry system maintained by the Holder of such Global Note (or its
agent) and that ownership of a beneficial interest in the Note shall be required
to be reflected in a book entry.
(b) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
-----------------------------------------------------
any other provisions of this Indenture, transfers of a Global Note shall be
limited to transfers of such Global Note in whole, but not in part, to the
relevant Depositary, its successors or their a nominees. Interests of beneficial
owners in the Global Notes may be transferred or exchanged for Definitive Notes
in accordance with the rules and procedures of each Depositary and the
provisions of Section 2.7. All Global Notes shall be exchanged by the Company
(with authentication by the Trustee) for one or more Definitive Notes, if (i) a
Depositary (A) has notified the Company that it is unwilling or unable to
continue to act as a depositary and (B) a successor to such Depositary is not
appointed by the Company within 90 days of such notification, (ii) a Depositary
so requests following an Event of Default under this Indenture, (iii) Cybernet
in its sole discretion determines that the Global Notes, in whole, but not in
part, should be exchanged for Definitive Notes or (iv) the beneficial owner
requests such exchange in writing delivered through either Euroclear or Cedel
following an Event of Default. If an Event of Default occurs and is continuing,
the Company shall, at the request of the Holder thereof, and subject to the
applicable conditions in the foregoing sentence, exchange all or part of a
Global Note for one or more Definitive Notes (with authentication by the
Trustee); provided, however, that the principal amount at maturity of such
Definitive Notes and such Global Note after such exchange shall be (Euro)1.00
or integral multiples thereof. Whenever all of a Global Note is exchanged for
one or more Definitive Notes, it shall be surrendered by the Holder thereof to
the Trustee for cancellation. Whenever a part of a Global Note is exchanged for
one or more Definitive Notes, the Global Note shall be surrendered by the Holder
thereof to the Trustee who shall cause an adjustment to be made to Schedule A of
such Global Note such that the principal amount of such Global Note will be
equal to the portion of such Global Note not exchanged and shall thereafter
return such Global Note to such Holder. A Global Note may not be exchanged for a
Definitive Note other than as provided in this Section 2.6(b).
(c) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.6, the Global
Notes shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall upon written instructions from the
Company authenticate and make available for delivery, to the Depositary for each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Notes, an equal aggregate principal amount of Definitive
Notes of authorized denominations.
<PAGE>
27
(d) Any Definitive Note constituting a Rule 144A Note or a Regulation S
Note delivered in exchange for an interest in a Global Note pursuant to
paragraph (b) of this Section 2.6 shall, except as otherwise provided by Section
2.8, bear the Private Placement Legend.
SECTION 2.7 Registration of Transfer and Exchange. (a) Notwithstanding any
-------------------------------------
provision to the contrary herein, so long as a Note remains outstanding,
transfers of beneficial interests in Global Notes or transfers of Definitive
Notes, in whole or in part, shall be made only in accordance with this Section
2.7.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedelbank" and "Customer Handbook" of Cedel shall be applicable to
transfers of beneficial interests in the Global Note that are held by the
Holders through Euroclear or Cedel.
(b) Rule 144A Global Note to Regulation S Global Note. If a holder of a
-------------------------------------------------
beneficial interest in the Rule 144A Global Note wishes at any time to exchange
its interest in such Rule 144A Global Note for an interest in the Regulation S
Global Note, or to transfer its interest in such Rule 144A Global Note to a
Person who wishes to take delivery thereof in the form of an interest in such
Regulation S Global Note, such holder may, subject to the rules and procedures
of the relevant Depositary, to the extent applicable, and to the requirements
set forth in the following sentence, exchange or cause the exchange or transfer
or cause the transfer of such interest for an equivalent beneficial interest in
such Regulation S Global Note. Upon receipt by the Trustee, as transfer agent,
of (1) instructions from the relevant Depositary directing the Trustee, as
transfer agent, to credit or cause to be credited a beneficial interest in the
Regulation S Global Note in an amount equal to the beneficial interest in the
Rule 144A Global Note to be exchanged or transferred, (2) a written order given
in accordance with the procedures of the relevant Depositary, to the extent
applicable, containing information regarding the account with such Depositary to
be credited with such increase and the name of such account, and (3) a
certificate in the form of Exhibit C given by the holder of such beneficial
interest stating that the exchange or transfer of such interest has been made
pursuant to and in accordance with Rule 904 of Regulation S or Rule 144A under
the Securities Act, the Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, to reduce or reflect on its records a
reduction of the Rule 144A Global Note by the aggregate principal amount of the
beneficial interest in such Rule 144A Global Note to be so exchanged or
transferred from the relevant participant, and the Trustee, as transfer agent,
shall promptly deliver appropriate instructions to the Depositary, its nominee,
or the custodian for the Depositary, as the case may be, concurrently with such
reduction, to increase or reflect on its records an increase of the principal
amount of such Regulation S Global Note by the aggregate principal amount of the
beneficial interest in such Rule 144A Global Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions (who shall be the agent member of Euroclear or
Cedel, or both, as the case may be) a beneficial interest in such Regulation S
Global Note equal to the reduction in the principal amount of such Rule 144A
Global Note.
<PAGE>
28
(c) Regulation S Global Note to Rule 144A Global Note. If a holder of a
-------------------------------------------------
beneficial interest in the Regulation S Global Note wishes at any time to
exchange its interest in such Regulation S Global Note for an interest in the
Rule 144A Global Note, or to transfer its interest in such Regulation S Global
Note to a Person who wishes to take delivery thereof in the form of an interest
in such Rule 144A Global Note, such holder may, subject to the rules and
procedures of the relevant Depositary, to the extent applicable, and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such interest for an equivalent beneficial
interest in such Rule 144A Global Note. Upon receipt by the Trustee, as transfer
agent, of (l) instructions given in accordance with the procedures of the
relevant Depositary, to the extent applicable, from or on behalf of a beneficial
owner of an interest in the Regulation S Global Note directing the Trustee, as
transfer agent, to credit or cause to be credited a beneficial interest in the
Rule 144A Global Note in an amount equal to the beneficial interest in the
Regulation S Global Note to be exchanged or transferred, (2) a written order
given in accordance with the procedures of the relevant Depositary containing
information regarding the account with such Depositary to be credited with such
increase and the name of such account, and (3) prior to or on the 40th day after
the later of the commencement of the offering of the Notes and the Closing Date
(the "Restricted Period"), a certificate in the form of Exhibit D given by the
-----------------
holder of such beneficial interest and stating that the Person transferring such
interest in such Regulation S Global Note reasonably believes that the Person
acquiring such interest in such Rule 144A Global Note is a Qualified
Institutional Buyer (as defined in Rule 144A) and is obtaining such beneficial
interest in a transaction meeting the requirements of Rule 144A and any
applicable securities laws of any state of the United States or any other
jurisdiction, the Trustee, as transfer agent, shall promptly deliver appropriate
instructions to the relevant Depositary, its nominee, or the custodian for the
relevant Depositary, as the case may be, to reduce or reflect on its records a
reduction of the Regulation S Global Note by the aggregate principal amount of
the beneficial interest in such Regulation S Global Note to be exchanged or
transferred, and the Trustee, as transfer agent, shall promptly deliver
appropriate instructions to the Depositary, its nominee, or the custodian for
the Depositary, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of such
Rule 144A Global Note by the aggregate principal amount of the beneficial
interest in such Regulation S Global Note to be so exchanged or transferred, and
to credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in such Rule 144A Global Note equal to the
reduction in the principal amount of such Regulation S Global Note. After the
expiration of the Restricted Period, the certification requirement set forth in
clause (3) of the second sentence of this Section 2.7(c) will no longer apply to
such transfers.
(d) Any beneficial interest in one of the Global Notes that is transferred
to a Person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and become
an interest in the other Global Note and, accordingly, will thereafter be
subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
(e) Other Exchanges. In the event that a Global Note is exchanged for
---------------
Definitive Notes in registered form without interest coupons, pursuant to
Section 2.6(b), or a Definitive Note is exchanged for a beneficial interest in a
Global Note, such Notes may be exchanged or transferred
<PAGE>
29
for one another only in accordance with such procedures as are substantially
consistent with the provisions of Sections 2.6 and 2.7 herein and as may be from
time to time adopted by the Company and the Trustee.
(f) Interests in Regulation S Global Notes to be held through Euroclear and
-----------------------------------------------------------------------
Cedel. Prior to the expiration of the Restricted Period, beneficial interests in
- -----
the Regulation S Global Note may only be held through Agent Members of Euroclear
and Cedel, unless delivery is made through the Rule 144A Global Note in
accordance with the certification requirements hereof.
(g) Private Placement Legend. Each Note issued hereunder shall, upon
------------------------
issuance, bear the legend set forth herein and such legend shall not be removed
from such Note except as provided in the next sentence. Except in connection
with a Resale Shelf Registration Statement contemplated by and pursuant to the
Registration Rights Agreement, the legend required for a Rule 144A Note or a
Regulation S Note may be removed from a Rule 144A Note or a Regulation S Note if
there is delivered to the Company and the Trustee such satisfactory evidence,
which may include an opinion of independent counsel licensed to practice law in
the State of New York, as may be reasonably required by the Company and the
Trustee, that neither such legend nor the restrictions on transfer set forth
therein are required to ensure that transfers of such Note will not violate the
registration requirements of the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the direction of the Company, shall
authenticate and deliver in exchange for such Note another Note or Notes having
an equal aggregate principal amount that does not bear such legend. If such a
legend required for a Rule 144A Note or a Regulation S Note has been removed
from a Rule 144A Note or a Regulation S Note as provided above, no other Note
issued in exchange for all or any part of such Note shall bear such legend,
unless the Company has reasonable cause to believe that such other Note is a
"restricted security" within the meaning of Rule 144 and instructs the Trustee
to cause a legend to appear thereon.
The Notes shall bear the following legend (the "Private Placement Legend")
------------------------
on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
--------------
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY
<PAGE>
30
PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
-----------------------------------
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUER AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
(h) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Agent Members or
beneficial owners of interest in any Global Note) other than to require delivery
of such certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by the terms of, this
Indenture, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in
<PAGE>
31
violation of any provision of this Indenture and/or applicable United States
Federal or state securities law.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.6 or this Section 2.7. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
(i) Definitive Notes shall be transferable only upon the surrender of a
Definitive Note for registration of transfer. When a Definitive Note is
presented to the Registrar or a co-registrar with a request to register a
transfer, the Registrar shall register the transfer as requested if its
requirements for such transfers are met. When Definitive Notes are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Definitive Notes of other denominations, the Registrar shall
make the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Notes at the Registrar's or co-registrar's
request.
(j) The Company shall not be required to make, and the Registrar need not
register transfers or exchanges of, any Definitive Notes (i) during a period
beginning at the opening of business 15 days prior to any date fixed for
redemption of the Notes, (ii) during a period of 15 calendar days immediately
prior to the date fixed for the selection of Notes to be redeemed in part, (iii)
during a period of 15 calendar days prior to the Record Date with respect to any
Interest Payment Date and (iv) which the holder has tendered (and not withdrawn)
for repurchase in connection with a Change of Control Offer.
(k) Prior to the due presentation for registration of transfer of any Note,
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
may deem and treat the Person in whose name a Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal, interest,
Additional Amounts, if any, or Liquidated Damages, if any, on such Note and for
all other purposes whatsoever, whether or not such Note is overdue, and none of
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(l) The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section 2.7.
(m) All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
(n) Holders of Notes (or holders of interests therein) and prospective
purchasers designated by such Holders (or holders of interests therein) will
have the right to obtain from the Company upon request by such Holders (or
holders of interests therein) or prospective
<PAGE>
32
purchasers, during any period in which the Company is not subject to Section 13
or 15(d) of the Exchange Act, or is exempt from reporting pursuant to 12g3-2(b)
under the Exchange Act, the information required by paragraph d(4)(i) of Rule
144A in connection with any transfer or proposed transfer of such Notes.
SECTION 2.8 Replacement Notes. If a mutilated Definitive Note is
-----------------
surrendered to the Registrar, if a mutilated Global Note is surrendered to the
Company or if the Holder of a Note claims that such Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note in such form as the Note being replaced if the
requirements of the Trustee, the Registrar and the Company are met. If required
by the Trustee, the Registrar or the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of the Company,
the Registrar and the Trustee, to protect the Company, the Registrar, the
Trustee and any Agent from any loss which any of them may suffer if a Note is
replaced. The Company, the Trustee and Registrar, may charge such Holder for
its reasonable, out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel. Every replacement Note is an additional
obligation of the Company.
SECTION 2.9 Outstanding Notes. Notes outstanding at any time are all
-----------------
the Notes that have been authenticated by the Trustee except those canceled by
it, those delivered to it for cancellation, those reductions in the Global Note
effected in accordance with the provisions hereof and those described in this
Section as not outstanding. Subject to Section 2.10, a Note does not cease to
be outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.8 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.8.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest, Additional Amounts, if any
and Liquidated Damages, if any, on it cease to accrue.
If, on a Redemption Date or the Maturity Date, the Paying Agent holds
cash in Euro or Euro Government Securities sufficient to pay all of the
principal and interest due on the Notes payable on that date, then, on and after
that date, such Notes cease to be outstanding and interest, Additional Amounts,
if any, and Liquidated Damages, if any, on such Notes cease to accrue.
SECTION 2.10 Treasury Notes. In determining whether the Holders of the
--------------
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Company or its Affiliates shall be disregarded,
except that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes that a
Trust Officer of the Trustee actually knows are so owned shall be disregarded.
The Company shall notify the Trustee, in writing, when it or any of
its Affiliates repurchases or otherwise acquires Notes of the aggregate
principal amount of such Notes so
<PAGE>
33
repurchased or otherwise acquired. The Trustee may require an Officers'
Certificate listing Notes owned by the Company, a Subsidiary of the Company or
an Affiliate of the Company.
SECTION 2.11 Temporary Notes. Until permanent Definitive Notes are
---------------
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Definitive Notes upon receipt of a Company Order in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
temporary Definitive Notes to be authenticated and the date on which the
temporary Definitive Notes are to be authenticated. Temporary Definitive Notes
shall be substantially in the form of permanent Definitive Notes but may have
variations that the Company considers appropriate for temporary Definitive
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate upon receipt of a Company Order pursuant to Section 2.2
permanent Definitive Notes in exchange for temporary Definitive Notes.
SECTION 2.12 Cancellation. The Company at any time may deliver Notes to
------------
the Trustee for cancellation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written direction of the
Company, shall dispose of (subject to the record retention requirements of the
Exchange Act) all Notes surrendered for transfer, exchange, payment or
cancellation; provided, however, that the Trustee may, but shall not be required
to, destroy such canceled Notes. Subject to Section 2.7, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.12.
SECTION 2.13 Defaulted Interest. If the Company defaults in a payment
------------------
of interest on the Notes, it shall pay the defaulted interest, plus (to the
extent lawful) any interest payable on the defaulted interest, to the Holder
thereof on a subsequent special record date, which date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest. The Company shall notify the Trustee and Paying Agent in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment (a "Default Interest Payment Date"), and at the same
-----------------------------
time the Company shall deposit with the Trustee or Paying Agent an amount of
money equal to the aggregate amount proposed to be paid in respect of such
defaulted interest or shall make arrangements satisfactory to the Trustee or
Paying Agent for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such defaulted interest as in this Section 2.13; provided, however, that in
no event shall the Company deposit monies proposed to be paid in respect of
defaulted interest later than 10:00 a.m. New York City time on the proposed
Default Interest Payment Date with respect to defaulted interest to be paid on
the Note. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder, with a copy to the Trustee, a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
<PAGE>
34
SECTION 2.14 CUSIP, ISIN and Common Code Numbers. The Company in
-----------------------------------
issuing the Notes may use a "CUSIP," "ISIN" or "Common Code" number, and if so,
the Trustee shall use the CUSIP, ISIN and Common Code number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN and Common Code number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP, ISIN or Common Code number.
SECTION 2.15 Deposit of Moneys. Prior to 10:00 a.m. New York City time
-----------------
on each Interest Payment Date and Maturity Date, the Company shall have
deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, on all Notes then outstanding. Such payments shall be
made by the Company in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or Maturity Date, as the
case may be.
SECTION 2.16 Certain Matters Relating to Global Notes. Members of, or
----------------------------------------
participants in, the Depositaries ("Agent Members") shall have no rights under
-------------
this Indenture with respect to any Global Note held on their behalf by a
Depositary or the Common Depositary as its custodian, or under the 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 the Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Note.
(b) The Holder of any Global Note may grant proxies and otherwise authorize
any person, including the Depositary and its Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
ARTICLE III
REDEMPTION
----------
SECTION 3.1 Optional Redemption. The Company may redeem all or any
-------------------
portion of the Notes, upon the terms and at the redemption prices set forth in
each of the Notes. Any redemption pursuant to this Section 3.1 shall be made
pursuant to the provisions of this Article III.
<PAGE>
35
SECTION 3.2 Notices to Trustee. If the Company elects to redeem Notes
------------------
pursuant to Paragraphs 8 or 9 of such Notes, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Notes to be redeemed
at least 15 days prior to the giving of the notice contemplated by Section 3.4
(or such shorter period as the Trustee in its sole discretion shall determine).
The Company shall give notice of redemption as required under the relevant
paragraph of the Notes pursuant to which such Notes are being redeemed.
SECTION 3.3 Selection of Notes to Be Redeemed. If less than all of the
---------------------------------
Notes are to be redeemed at any time, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
securities exchange, if any, on which such Notes are listed, or if such Notes
are not so listed or such exchange prescribes no method of selection, on a pro
rata basis, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate (and in such manner as complies with applicable
legal and exchange requirements); provided, however, that no Note of
(Euro)1.00 in aggregate principal amount or less shall be redeemed in part. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the Redemption Date by the Trustee from the outstanding
Notes not previously called for redemption.
SECTION 3.4 Notice of Redemption. At least 30 days but not more than
--------------------
60 days before a Redemption Date, the Company shall publish in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allegmeine Zeitung) (and, if and so long as the Notes are listed, admitted or
eligible for trading on a stock exchange or trading market and the rules or
regulations of such stock exchange or trading market shall so require, a
newspaper having a general circulation in the additional jurisdictions as such
rules or regulations may require) or, in the case of Definitive Notes, the
Company shall mail to the Holders by first-class mail, postage prepaid, at their
respective addresses as they appear on the registration books of the Registrar.
At the Company's request made at least 45 days before the Redemption Date (or
such shorter period as the Trustee in its sole discretion shall determine), the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense; provided, however, that the Company shall deliver to the
Trustee, an Officers' Certificate requesting that the Trustee give such notice
and setting forth the information to be stated in such notice as provided in the
following items. Each notice for redemption shall identify the Notes to be
redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Prices and the amount of interest, if any, Additional
Amounts, if any, and Liquidated Damages, if any, to be paid;
(c) the name and address of the Paying Agent;
<PAGE>
36
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued and unpaid interest, if any,
Additional Amounts, if any, and Liquidated Damages, if any;
(e) that, unless the Company defaults in making the redemption payment,
interest, Additional Amounts, if any, and Liquidated Damages, if any, on Notes
called for redemption cease to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Notes is to receive payment of the
Redemption Price upon surrender to the Paying Agent of the Notes redeemed;
(f) (i) if any Global Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, interest, Additional Amounts, if any, and Liquidated Damages, if any,
shall cease to accrue on the portion called for redemption, and upon surrender
of such Global Note, the Global Note with a notation on Schedule A thereof
adjusting the principal amount thereof to be equal to the unredeemed portion,
will be returned and (ii) if any Definitive Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed, and that, after the
Redemption Date, upon surrender of such Definitive Note, a new Definitive Note
or Notes in aggregate principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof, upon cancellation of the
original Note;
(g) if fewer than all the Notes are to be redeemed, the identification of
the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate principal
amount of Notes to be outstanding after such partial redemption;
(h) the paragraph of the Notes pursuant to which the Notes are to be
redeemed; and
(i) the CUSIP, ISIN or Common Code number, and that no representation is
made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number,
if any, listed in such notice or printed on the Notes.
SECTION 3.5 Effect of Notice of Redemption. Once notice of redemption
------------------------------
is given in accordance with Section 3.4, Notes called for redemption become due
and payable on the Redemption Date and at the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages, if
any. Upon surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the Redemption Price (which shall include accrued
and unpaid interest thereon, if any, Additional Amounts, if any, and Liquidated
Damages, if any, to the Redemption Date), but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant Record Dates.
SECTION 3.6 Deposit of Redemption Price. Prior to 10:00 a.m. New York
---------------------------
City time on the Redemption Date, the Company shall deposit with the Paying
Agent cash in Euro sufficient to pay the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if
<PAGE>
37
any, and Liquidated Damages, if any, of all Notes to be redeemed on that date.
The Paying Agent shall promptly return to the Company any cash in Euro so
deposited which is not required for that purpose upon the written request of the
Company.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, Additional Amounts, if any, and Liquidated Damages, if any,
interest, Additional Amounts and Liquidated Damages on the Notes to be redeemed
will cease to accrue on and after the applicable Redemption Date, whether or not
such Notes are presented for payment. With respect to Definitive Notes, if a
Definitive Note is redeemed on or after an interest Record Date but on or prior
to the related Interest Payment Date, then any accrued and unpaid interest,
Additional Amounts, if any, and Liquidated Damages, if any, shall be paid to the
Person in whose name such Note was registered at the close of business on such
Record Date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, Additional Amounts, if any, Liquidated Damages, if any,
and interest shall be paid on the unpaid principal, from the redemption date
until such principal is paid, and to the extent lawful on any interest not paid
on such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1.
SECTION 3.7 Notes Redeemed in Part. Upon surrender and cancellation of
----------------------
a Definitive Note that is redeemed in part, the Company shall execute and the
Trustee shall authenticate for the Holder (at the Company's expense) a new
Definitive Note equal in principal amount to the unredeemed portion of the
Definitive Note surrendered and canceled; provided, however, that each such
Definitive Note shall be in a principal amount at maturity of (Euro)1.00 or an
integral multiple thereof. Upon surrender of a Global Note that is redeemed in
part, the Paying Agent shall forward such Global Note to the Trustee who shall
make a notation on Schedule A thereof to reduce the principal amount of such
Global Note to an amount equal to the unredeemed portion of the Global Note
surrendered; provided, however, that each such Global Note shall be in a
principal amount at maturity of (Euro)1.00 or an integral multiple thereof.
ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Notes. (a) The Company shall pay the principal,
----------------
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on the Notes in the manner provided in such Notes and this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent holds at 10:00 a.m. New York
City time on that date money deposited by the Company in immediately available
funds and designated for, and sufficient to pay the installment in full and is
not prohibited from paying such money to the Holders pursuant to the terms of
this Indenture.
(b) The Company shall pay, to the extent such payments are lawful,
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and on
<PAGE>
38
overdue installments of interest (without regard to any applicable grace
periods), on any Additional Amounts, and on any Liquidated Damages, from time to
time on demand at the rate borne by the Notes plus 1.5% per annum. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.2 Maintenance of Office or Agency. The Company shall
-------------------------------
maintain the offices or agencies (which offices may be an office of the Trustee
or an affiliate of the Trustee, Registrar or co-Registrar) required under
Section 2.3 where Notes may be surrendered for registration of transfer or for
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 11.2. The Company
hereby initially designates the office of Corporation Services Company, located
at Two World Trade Center, Suite 8746, New York, New York, 10048, as its office
or agency in the State of New York as required under Section 2.3 hereof. The
Company shall maintain or appoint such other paying or transfer agents as may be
required by the rules of any stock exchange or trading market on which the Notes
may be listed, admitted or eligible for trading from time to time.
SECTION 4.3 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 account of any Equity
Interest in the Company or any Restricted Subsidiary to the holders thereof,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions payable solely in
Equity Interests (other than Redeemable Stock) of the Company, (B) dividends or
distributions made only to the Company or a Restricted Subsidiary and (C) pro
rata dividends or distributions of Capital Stock of a Restricted Subsidiary held
by Persons other than the Company or a Restricted Subsidiary), (ii) purchase,
redeem, retire or otherwise acquire for value any Equity Interests of the
Company, an Unrestricted Subsidiary or a Restricted Subsidiary (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary), (iii)
make any principal payment or redeem, purchase, repurchase, defease, or
otherwise acquire or retire for value, in each case, prior to any scheduled
repayment, or maturity, any 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 (all such payments or any other actions
described in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments") unless, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing;
(B) the Company could Incur at least 1.00 of additional Indebtedness
under Section 4.4(a); and
<PAGE>
39
(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, 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) after the Issue Date is less than the sum
of (1) 50% of the aggregate amount of the Consolidated Net Income (or, if
the Consolidated Net Income is a loss, 100% of the amount of such loss)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter beginning
immediately following the Issue 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
4.10 plus (2) 100% of the aggregate Net Cash Proceeds received by the
Company after the Issue Date from the issuance and sale of its Equity
Interests (other than Redeemable Stock and excluding any Equity Interests
issued in connection with the Offering) to a Person (other than a
Subsidiary of the Company), except to the extent that such Net Cash
Proceeds are used (I) to purchase, redeem or otherwise retire Equity
Interests or Indebtedness as set forth below in clause (iii) or (iv) of the
immediately succeeding paragraph or (II) to Incur Indebtedness pursuant to
clause (x) of paragraph (b) of Section 4.4, plus (3) the aggregate amount
by which Indebtedness (other than any Indebtedness subordinated in right of
payment to the Notes) of the Company or any Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date
into Equity Interests (other than Redeemable Stock and less the amount of
any cash, or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange), plus (4) without
duplication of any amount included in the calculation of Consolidated Net
Income, in the case of repayment of, or return of capital with respect to,
any Investment constituting a Restricted Payment (including the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries) made
after the Issue Date, an amount equal to the lesser of (x) the repayment
of, or the return of capital with respect to, such Investment and (y) the
cost of such Investment, in either case less the cost of the disposition of
such Investment and net of taxes.
(b) The foregoing provisions of Section 4.3(a) shall not prohibit: (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 provisions of
this Indenture; (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
paragraph Section 4.4(b); (iii) the repurchase, redemption or other acquisition
of Equity Interests in the Company in exchange for, or out of the Net Cash
Proceeds of, a substantially concurrent offering of Equity Interests (other than
Redeemable Stock and excluding any Equity Interests issued in connection with
the Offering) in the Company to any Person (other than a Subsidiary); (iv) the
repurchase, redemption or other acquisition of Indebtedness of the Company which
is subordinated in right of payment to the Notes in exchange for, or out of the
Net Cash Proceeds of, a substantially concurrent offering of Equity Interests
(other than Redeemable Stock and excluding any Equity Interests issued in
connection with the Offering) in the Company to any Person (other than a
Subsidiary); (v) repurchases of Equity Interests of the Company from employees
of the Company
<PAGE>
40
or any of its Restricted Subsidiaries deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise price of
such options, provided that any payments made pursuant to this clause (v) may
not exceed in the aggregate (Euro)5.0 million in any fiscal year 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 Investment); provided that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) (Euro)25.0 million, plus (b) the amount of Net Cash
Proceeds received by the Company after the Issue Date from the issuance and sale
of its Equity Interests (other than Redeemable Stock and excluding any Equity
Interests issued in connection with the Offering) to a Person (other than a
Subsidiary of the Company), except to the extent that such Net Cash Proceeds are
used (I) to make Restricted Payments pursuant to clause (C)(2) of Section 4.3(a)
or clauses (iii) or (iv) of Section 4.3(b) or (II) to Incur Indebtedness
pursuant to clause (x) of paragraph (b) of Section 4.4, plus (c) the aggregate
amount by which Indebtedness (other than any Indebtedness subordinated in right
of payment to the Notes) of the Company or any Restricted Subsidiary is reduced
on the Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date into Equity Interests
(other than Redeemable Stock and less the amount of any cash, or the fair value
of property, distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange); and (vii) Investments acquired in exchange for Capital
Stock (other than Redeemable Stock) of the Company; provided that, in the case
of clauses (ii) through (vii), no Default or Event of Default shall have
occurred and be continuing or occur as a consequence of the actions or payments
set forth therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payments referred to in clauses (ii) and
(vii) thereof and the Net Cash Proceeds from any issuance of Equity Interests
referred to in clauses (iii) and (iv) thereof) shall be included in calculating
whether the conditions of clause (C) of Section 4.3(a) have been met with
respect to any subsequent Restricted Payments. In the event the proceeds of an
issuance of Equity Interests (other than Redeemable Stock and excluding any
Equity Interests issued in connection with the Offering) of the Company are used
for the redemption, repurchase or other acquisition of the Notes, then the Net
Cash Proceeds of such issuance shall be included in clause (C) of Section 4.3(a)
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
(c) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.3 were computed, which calculations may
be based upon the Company's latest available financial statements. The Trustee
shall have no duty to recompute or recalculate or verify the accuracy of the
information set forth in such Officers' Certificate.
SECTION 4.4 Limitation on Indebtedness. The Company will not, and will
--------------------------
not permit any of its Restricted Subsidiaries to, Incur any Indebtedness;
provided, however, that if no Default or Event of Default shall have occurred
and be continuing at the time, or would occur as a consequence of the Incurrence
of any such Indebtedness, the Company may Incur Indebtedness
<PAGE>
41
if immediately thereafter the ratio of (i) the aggregate principal amount of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the pro forma Consolidated
Cash Flow for the preceding two full fiscal quarters multiplied by two,
determined on a pro forma basis as if any such Indebtedness had been Incurred
and the proceeds thereof had been applied at the beginning of such two fiscal
quarters, would be greater than zero and less than or equal to 6.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi), (x) and (xii) below) any Restricted Subsidiary may Incur
each and all of the following:
(i) Indebtedness (other than Acquired Indebtedness) in an aggregate
principal amount at any one time outstanding not to exceed (Euro)100.0
million Incurred to finance the cost (provided that such Indebtedness is
Incurred at any time on or before, or within 90 days following, the
incurrence of such cost) (including the cost of design, development,
construction, acquisition, transportation, installation or integration) of
equipment, inventory or network assets used in the Permitted Business or
Equity Interests of (A) a Restricted Subsidiary that owns principally such
assets from a Person other than the Company or a Restricted Subsidiary of
the Company or (B) any Person that is principally engaged in the Permitted
Business, that would become a Restricted Subsidiary and owns principally
such assets; provided that (x) any such Indebtedness of a Restricted
Subsidiary must be Incurred under one or more Credit Facilities, under one
or more Capitalized Leases or from the vendor of the equipment, inventory
or network assets acquired with the proceeds of such Indebtedness, (y) the
amount of such Indebtedness of the Company or any Restricted Subsidiary may
not exceed the Fair Market Value of the assets so acquired and (z) the
amount of any such Indebtedness permitted to be Incurred to acquire Equity
Interests pursuant to clauses (A) or (B) shall be reduced by the amount of
any Acquired Indebtedness Incurred in such acquisition;
(ii) Indebtedness of any Restricted Subsidiary owing to and held by
the Company, Indebtedness of the Company owing to and held by any
Restricted Subsidiary or Indebtedness of any Restricted Subsidiary owing to
and held by any other Restricted Subsidiary; provided that any subsequent
issuance or transfer of any Capital Stock or any other 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
the Incurrence of such Indebtedness not permitted by this clause (ii); and
provided, further, that Indebtedness of the Company owing to and held by a
Restricted Subsidiary must be unsecured and subordinated in right of
payment to the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness of the
Company or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (ii), (iv), (vii), (viii), (x) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, and reasonable fees
<PAGE>
42
and expenses); provided that such new Indebtedness shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced or refunded is pari passu with the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness
being refinanced or refunded and (D) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, has a Weighted Average
Life to Maturity which is not less than the remaining Weighted Average Life
to Maturity of the Indebtedness to be refinanced or refunded; and provided
further that in no event may Indebtedness of the Company be refinanced or
refunded 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 or letters of credit supporting Trade Payables, in each case provided
in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements (x) are designed
solely to protect the Company or the Restricted Subsidiary, as the case may
be, against fluctuations in foreign currency exchange rates or interest
rates and (y) do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, bankers' acceptances, surety bonds
or performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred
for the purpose of financing such acquisition by the Person acquiring all
or any portion of such business, assets or Restricted Subsidiary), 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, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described in Sections 8.1,
8.2 and 8.3;
(vi) Indebtedness of the Company represented by the Notes;
<PAGE>
43
(vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of the Company by a Restricted Subsidiary
in each case permitted by and made in accordance with Section 4.17;
(viii) Indebtedness under one or more Credit Facilities (which shall be
in addition to any such Indebtedness incurred under one or more Credit
Facilities under clause (b)(i) above) in an aggregate principal amount at
any one time outstanding not to exceed the greater of (x) (Euro)50.0
million and (y) 80.0% of Eligible Accounts Receivable at such time;
(ix) Acquired Indebtedness; provided that the aggregate amount of
such Acquired Indebtedness of the Person that is to become a Restricted
Subsidiary, or to be merged or consolidated with or into the Company or any
Restricted Subsidiary in the contemplated transaction, or to be assumed by
the Company or a Restricted Subsidiary in connection with an Asset
Acquisition, outstanding at the time of such transaction does not exceed
the Fair Market Value of the equipment, inventory, network assets and Cash
Equivalents of any Restricted Subsidiary so acquired or that are acquired
in such Asset Acquisition, as the case may be;
(x) Indebtedness of the Company not to exceed, at any one time
outstanding, the sum of (A) 2.00 times the Net Cash Proceeds received from
the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Redeemable Stock and excluding any Equity Interests issued in
connection with the Offering) of the Company, less (I) the amount of such
proceeds used to make Restricted Payments as provided in clause (C)(2) of
subsection 4.3(a) or clauses (iii) or (iv) of the first paragraph of
subsection 4.3(b) and (II) if such proceeds are used to consummate a
transaction pursuant to which the Company Incurs Acquired Indebtedness,
one-half of the amount of such Acquired Indebtedness so Incurred and (B)
the Fair Market Value of any Permitted Assets acquired by the Company in
exchange for Equity Interests of the Company issued after the Issue Date;
provided, however, that in determining the Fair Market Value of any such
Permitted Assets so acquired, if the estimated Fair Market Value of such
Permitted Assets exceeds (x) (Euro)2.0 million, then the Fair Market Value
of such Permitted Assets will be determined by a majority of the Board of
Directors, which determination will be evidenced by a resolution thereof,
and (y) (Euro)10.0 million, then the Company will deliver to the Trustee a
written appraisal as to the fair market value of such Permitted Assets
prepared by an internationally recognized investment banking or public
accounting firm (or, if no such investment banking or public accounting
firm is qualified to prepare such an appraisal, by an internationally
recognized appraisal firm); and provided further that such Indebtedness
(other than the Indebtedness Incurred under one or more Credit Facilities,
under one or more Capitalized Leases or from the vendor of assets, property
or services acquired with the proceeds of such Indebtedness) does not
mature prior to the Stated Maturity of the Notes and the Weighted Average
Life to Maturity of such Indebtedness is longer than that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
<PAGE>
44
(xii) Unsecured Indebtedness of the Company (in addition to
Indebtedness permitted under clauses (i) through (xi) above) in an
aggregate principal amount outstanding at any one time not to exceed
(Euro)200.0 million.
(c) For purposes of determining any particular amount of Indebtedness under
subsection 4.4, 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; provided, however, that the foregoing
shall not in any way be deemed to limit the provisions of Section 4.17. For
purposes of determining compliance with this Section 4.4, (A) in the event that
an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in subsection 4.4(b), the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses and (B)
the principal amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with US GAAP.
(d) For purposes of determining compliance with any Euro-denominated
restriction on the Incurrence of Indebtedness, the Euro-equivalent principal
amount of Indebtedness denominated in a non-Euro currency shall be calculated
based on the relevant currency exchange rate in effect on the date such
Indebtedness was Incurred, in the case of term Indebtedness, or first committed,
in the case of revolving credit Indebtedness; provided that if such Indebtedness
is Incurred to refinance other Indebtedness denominated in a non-Euro currency,
and such refinancing would cause the applicable Euro-denominated restriction to
be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such Euro-denominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. 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 currency exchange rate applicable
to the currencies in which such refinancing Indebtedness is denominated that is
in effect on the date of such refinancing.
SECTION 4.5 Corporate Existence. Except as otherwise permitted by
-------------------
Article V, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate, partnership, limited liability or other existence of each of its
Subsidiaries in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory) of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right, or
the corporate, partnership, limited liability or other existence of any
Subsidiary, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
each of its Subsidiaries, taken as a whole, and that the loss thereof is not,
and will not be, adverse in any material respect to the Holders.
SECTION 4.6 Payment of Taxes and Other Claims. The Company shall pay
---------------------------------
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all
<PAGE>
45
material taxes, assessments and governmental charges levied or imposed upon it
or any of its Subsidiaries or upon the income, profits or property of it or any
of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies
which, in each case, if unpaid, might by law become a material liability or Lien
upon the property of it or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings and for
which appropriate provision has been made.
SECTION 4.7 Maintenance of Properties and Insurance. The Company shall
---------------------------------------
cause all material properties owned by or leased by it or any of its
Subsidiaries useful and necessary to the conduct of its business or the business
of any of its Subsidiaries to be improved or maintained and kept in normal
condition, repair and working order and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
its judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.7 shall prevent the Company or any of its Subsidiaries
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 Board of Directors or of the board of directors of any
Subsidiary of the Company concerned, or of an officer (or other agent employed
by the Company or of any of its Subsidiaries) of the Company or any of its
Subsidiaries having managerial responsibility for any such property, desirable
in the conduct of the business of the Company or any Subsidiary of the Company,
and if such discontinuance or disposal is not adverse in any material respect to
the Holders.
(b) To the extent available at commercially reasonable rates, the Company
shall maintain, and shall cause its Subsidiaries to maintain, insurance with
responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses of similar size.
SECTION 4.8 Compliance Certificate; Notice of Default. The Company shall
-----------------------------------------
deliver to the Trustee, within 90 days after the close of each fiscal year, an
Officers' Certificate stating that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether it has
kept, observed, performed and fulfilled, and has caused each of its Subsidiaries
to keep, observe, perform and fulfill its obligations under this Indenture and
further stating, as to each such Officer signing such certificate, that, to the
best of his or her knowledge, the Company during such preceding fiscal year has
kept, observed, performed and fulfilled, and has caused each of its Subsidiaries
to keep, observe, perform and fulfill each and every such covenant contained in
this Indenture and no Default occurred during such year and at the date of such
certificate there is no Default which has occurred and is continuing or, if such
signers do know of such Default, the certificate shall describe its status, with
particularity and that, to the best of his or her knowledge, no event has
occurred and remains by reason of which payments on the account of the principal
of or interest, if any, Additional Amounts, if any, or Liquidated Damages, if
any, on the Notes is prohibited or if such event has occurred, a description of
the
<PAGE>
46
event and what action each is taking or proposes to take with respect thereto.
The Officers' Certificate shall also notify the Trustee should the Company elect
to change the manner in which it fixes its fiscal year end. The Company shall
notify the Trustee of any default or defaults in the performance of any
covenants or agreements under this Indenture within five Business Days of
becoming aware of any such default.
(b) The annual financial statements delivered pursuant to Section 4.10
shall include, so long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, a written report of the
Company's independent accountants (who shall be a firm of established
international reputation) that in conducting their audit of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Articles IV, V or VI of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall deliver to the Trustee, within five Business Days,
upon any officer becoming aware of any Default or any default or event of
default under any document, instrument or agreement representing Indebtedness of
the Company, an Officers' Certificate specifying the Default or such default or
event of default and describing its status with particularity.
SECTION 4.9 Compliance with Laws. The Company shall comply, and shall
--------------------
cause each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders of the relevant jurisdiction in which they are incorporated
and/or in which they carry on business, all political subdivisions thereof, and
of any relevant governmental regulatory authority, in respect of the conduct of
their respective businesses and the ownership of their respective properties,
except for such noncompliances as would not in the aggregate have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries taken as a whole.
SECTION 4.10 Reports. The Company will file on a timely basis with the
-------
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (which financial statements shall be
prepared in accordance with US GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual financial information, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K, in each case, if the Company had a
class of securities registered under the Exchange Act, whether or not the
Company has such a class of securities registered under the Exchange Act. Such
quarterly financial information shall be filed with the Commission within 45
days following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end of
each fiscal year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed
<PAGE>
47
by the Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company shall also (a) file with the Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, supply, at the Company's cost, copies of
such reports and documents to any prospective holder promptly upon request. In
addition, if and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules or regulations of
such stock exchange or trading market shall require, copies of all reports and
information described above will be available in such places and during such
times as such rules or regulations may require.
(b) Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(c) Such reports shall be delivered to the Registrar and the Registrar will
mail them at the Company's expense to the Holders at their addresses appearing
in the register of Notes maintained by the Registrar if so requested by the
Holders in writing.
(d) Upon qualification of this Indenture with the TIA, the Company shall
also comply with the provisions of TIA Section 314(a).
SECTION 4.11 Waiver of Stay; Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, 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 Company from paying all or any portion of the
principal of and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture, and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.12 Limitation on Transactions with Shareholders and Affiliates.
-----------------------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into, renew or extend any transaction or series of
transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any direct
or indirect holder (or any Affiliate of such holder) of 5% or more of any class
of Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, unless (i) such transaction or series of transactions is
on terms that are no less favorable to the Company or such Restricted Subsidiary
than could reasonably be obtained in a comparable arm's-length
<PAGE>
48
transaction with a Person that is not such a holder or Affiliate, (ii) if such
transaction or series of transactions involves aggregate consideration in excess
of 2.5 million, the Company shall have delivered to the Trustee a resolution set
forth in an Officers' Certificate adopted by a majority of the Board of
Directors, including a majority of the independent, disinterested directors,
approving such transaction or series of transactions, and certifying that such
transaction or series of transactions comply with clause (i) above and (iii) if
such transaction or series of transactions involves aggregate consideration in
excess of 7.5 million, the Company shall have delivered to the Trustee a written
opinion as to the fairness to the Company or such Restricted Subsidiary of such
transaction or series of transactions from a financial point of view from an
internationally recognized investment banking firm (or, if an investment banking
firm is generally not qualified to give such an opinion, by an internationally
recognized appraisal firm or accounting firm).
(b) The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) the payment of dividends, distributions or other amounts by the Company or
any Restricted Subsidiary permitted by Section 4.3; (iv) issuances of Equity
Interests (other than Redeemable Stock) on terms consistent with the
requirements of clause (i) of the preceding paragraph; and (v) any payments or
other transactions pursuant to tax-sharing agreements 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.
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. (a) The Company will not, and will not
- ---------------------------------
permit any Restricted Subsidiary to, directly or indirectly, 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
Equity Interests 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.
(b) The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue Date, or
the property or assets of such Restricted Subsidiary, and 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; (iv) in the case of clause (iv) of
<PAGE>
49
subsection 4.13(a), (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject to, a
lease, purchase mortgage obligation, license, conveyance or contract or similar
property or asset, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the aggregate,
materially detract from the value of property or assets of the Company or any
Restricted Subsidiary 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 in, or property and assets of, such Restricted Subsidiary;
provided that such restriction shall terminate if such transaction is abandoned
or if such transaction is not consummated within six months of the date such
agreement was entered into; 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 applies only in the event of a payment default or a
default with respect to a financial covenant contained in such Indebtedness or
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 Board of Directors) and (C) the Board of
Directors determines that any such encumbrance or restriction will not
materially affect the Company's ability to make payments of principal or
interest on the Notes.
(c) Nothing contained in this Section 4.13 shall prevent the Company or any
Restricted Subsidiary from creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in Section 4.14 that limit the right of the debtor
to dispose of the assets securing such Indebtedness.
SECTION 4.14 Limitation on Liens. The Company will not, and will not
-------------------
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien (other than Permitted Liens) securing Senior
Subordinated Indebtedness or Subordinated Obligations on any asset or property
of the Company or any Restricted Subsidiary without making effective provisions
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; provided that any Lien
which is granted to secure the Notes under this covenant shall be discharged at
the same time as the discharge of the Lien that gave rise to the obligation to
so secure the Notes.
SECTION 4.15 Change of Control. (a) Upon the occurrence of a Change of
-----------------
Control, the Company will make an offer to purchase all or any part (equal to
(Euro)1.00 in principal amount and integral multiples thereof) of the Notes
pursuant to the offer described below (the "Change of Control Offer") at a price
in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount thereof plus, in either case, accrued and unpaid interest
thereon to the date of repurchase, plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase (and in the case of
Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest and Liquidated Damages, if any, due on the
relevant
<PAGE>
50
interest payment date and Additional Amounts, if any, in respect thereof).
Within 30 days following any Change of Control, the Company will publish notice
of such Change of Control Offer in a leading newspaper having a general
circulation in New York (which is expected to be The Wall Street Journal) and in
Frankfurt (which is expected to be the Frankfurter Allgemeine Zeitung) (and if
and so long as the Notes are listed, admitted or eligible for trading on a stock
exchange or trading market and the rules or regulations of such stock exchange
or trading market shall so require, a newspaper having a general circulation in
the additional jurisdictions as such rules or regulations may require) or, in
the case of Definitive Notes, mail a notice to each Holder (and if and so long
as the Notes are listed, admitted or eligible for trading on a stock exchange or
trading market and the rules or regulations of such stock exchange or trading
market shall so require, publish notice in a newspaper having a general
circulation in the additional jurisdictions as such rules or regulations may
require), with a copy to the Trustee, with the following information: (i) a
Change of Control Offer is being made pursuant to Section 4.15 and all Notes
properly tendered pursuant to such Change of Control Offer will be accepted for
payment; (ii) the purchase price and the purchase date, which will be no earlier
than 30 days nor later than 60 days from the date such notice is published, or
where relevant, mailed, except as may be otherwise required by applicable law
(the "Change of Control Payment Date"); (iii) any Note not properly tendered
will remain outstanding and continue to accrue interest and Liquidated Damages,
if any; (iv) unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest and Liquidated Damages, if any, on the Change of
Control Payment Date; (v) Holders electing to have any Notes purchased pursuant
to a Change of Control Offer will be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent and at the address specified in the notice prior
to the close of business on the third Business Day preceding the Change of
Control Payment Date; (vi) Holders will be entitled to withdraw their tendered
Notes and their election to require the Company to purchase such Notes; provided
that the Paying Agent receives, not later than the close of business on the last
Business Day of the offer period, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes tendered for
purchase, and a statement that such Holder is withdrawing his tendered Notes and
his election to have such Notes purchased; and (vii) Holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the principal amount of the Notes surrendered,
which unpurchased portion must be equal to (Euro)1.00 in principal amount or an
integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Indenture, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in this Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of
<PAGE>
51
Control may be waived or modified with the written consent of the Holders of a
majority in principal amount of the Notes.
(b) On the Change of Control Payment Date, the Company will, to the extent
permitted by law, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating that such Notes or portions thereof have been
tendered to and purchased by the Company. The Paying Agent will promptly either
(x) pay to the Holder against presentation and surrender (or, in the case of
partial payment, endorsement) of the Global Notes or (y) in the case of
Definitive Notes, mail to each Holder of Notes the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and deliver to the Holder
of the Global Notes a new Global Note or Notes or, in the case of Definitive
Notes, mail to each Holder a new Definitive Note, as applicable, equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided, however, that each new Definitive Note and Global Note will be in a
principal amount of (Euro)1.00 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
SECTION 4.16 Limitation on Asset Sales. The Company will not, and will not
-------------------------
permit any Restricted Subsidiary to, make any Asset Sale unless (i) the Company
or the Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the assets
sold or disposed of and (ii) at least 75% of the consideration received for such
Asset Sale consists of cash or Cash Equivalents or Replacement Assets or the
assumption of Indebtedness which ranks equal in right of payment with the Notes.
(b) The Company shall, or shall cause the relevant Restricted Subsidiary
to, apply the Net Cash Proceeds from an Asset Sale within 360 days of the
receipt thereof to (A) permanently prepay, repay or purchase Senior Indebtedness
of the Company or Senior Subordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary providing a Guarantee pursuant to
Section 4.17 or Indebtedness of any other Restricted Subsidiary, in each case
owing to a Person other than the Company or any of its Restricted Subsidiaries,
and elect to permanently reduce the commitments thereunder by the amount of such
Indebtedness prepaid, repaid or purchased, (B) invest in Replacement Assets or
(C) in any combination of prepayment, repayment, purchase and reinvestment
permitted by the foregoing clauses (A) and (B).
Any Net Cash Proceeds from such Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
subsection will be deemed to constitute "Excess Proceeds." If at any time the
aggregate amount of Excess Proceeds exceeds (Euro)5.0 million, the Company
shall, within 15 Business Days thereafter, make an offer (an "Asset Sale Offer")
to all Holders and to the extent required by the terms thereof, to all holders
of other Senior Subordinated Indebtedness outstanding with similar provisions
requiring the Company to make an offer to purchase such Senior Subordinated
Indebtedness with the proceeds from any Asset Sale ("Pari Passu Notes") to
purchase on a pro rata basis the maximum principal amount
<PAGE>
52
of Notes and the maximum principal amount (or accreted value, as the case may
be) of any such Pari Passu Notes to which the Asset Sale Offer applies, that is
an integral multiple of (Euro)1,000 (or $1,000, as the case may be) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the outstanding principal amount or accreted value, as the case
may be, thereof, plus accrued and unpaid interest thereon plus Additional
Amounts and Liquidated Damages, if any, to the date fixed for the closing of
such offer (and, in the case of Definitive Notes, subject to the right of a
Holder of record on the relevant record date to receive interest and Liquidated
Damages, if any, due on the relevant interest payment date and Additional
Amounts, if any, in respect thereof), in accordance with the procedures set
forth in this Indenture or agreements governing the Pari Passu Notes, as
applicable. The Company will commence an Asset Sale Offer by publishing and
mailing the notice required pursuant to the terms of this Indenture, with a copy
to the Trustee. To the extent that the aggregate amount of Notes and Pari Passu
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
subject to applicable law, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate or principal amount of Notes and
accreted value or principal amount of Pari Passu Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the selection of such Notes and
Pari Passu Notes for purchase will be made by the Trustee in the same manner as
the Notes are redeemed, as provided in Section 3.1. Upon completion of any such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
------------
Business Days after the termination of the Offer Period (the "Purchase Date"),
-------------
the Company shall purchase the maximum principal amount of Notes that may be
purchased with such Excess Proceeds (or such pro rata portion) (which maximum
principal amount of Notes shall be the "Offer Amount") or, if less than the
------------
Offer Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer.
If the Purchase Date is on or after an interest Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest will
be paid in the case of a Global Note, to the Holder thereof or, in the case of a
Definitive Note, to the Person in whose name such Definitive Note is registered
at the close of business on such Record Date, and no additional interest will be
payable to Holders with respect to Notes tendered pursuant to the Asset Sale
Offer.
At least 30 days but not more than 60 days before a Purchase Date, the
Company shall publish in a leading newspaper having a general circulation in New
York (which is expected to be The Wall Street Journal) and in Frankfurt (which
is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so long as
the Notes are listed, admitted or eligible for trading on a stock exchange or
trading market and the rules of such stock exchange or trading market shall so
require, a newspaper having a general circulation in the locations which the
stock exchange or trading market requires or, in the case of Definitive Notes,
such notice shall be provided to Holders by first-class mail, postage prepaid,
at their respective addresses as they appear on the registration books of the
Registrar with a copy of such notice to the Trustee (and, if and so long as the
Notes are listed, admitted or eligible for trading on a stock exchange or
trading market and
<PAGE>
53
the rules of such stock exchange or trading market shall so require, by
publication in a newspaper having a general circulation in which stock exchange
or trading market requires)). The notice shall contain all instructions and
materials (or instructions on how to obtain instructions and materials)
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(A) that the Asset Sale Offer is being made pursuant to this Section
4.16 and the length of time the Asset Sale Offer shall remain open;
(B) the Offer Amount (including the amount of accrued and unpaid
interest, if any), the purchase price and the Purchase Date;
(C) that any Note or portion thereof not tendered or accepted for
payment shall continue to accrue interest, Additional Amounts, if any, and
Liquidated Damages, if any, in accordance with the terms thereof;
(D) that, unless the Company defaults in making payment therefor, any
Note or portion thereof accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest, Additional Amounts, if any, and
Liquidated Damages, if any, after the Purchase Date;
(E) (1) if any Global Note is being purchased in part, the portion of
the principal amount of such Note to be purchased and that, after the
Purchase Date, interest, Additional Amounts, if any, and Liquidated
Damages, if any, shall cease to accrue on the portion to be purchased, and
upon surrender of such Global Note, the Global Note with a notation on
Schedule A thereof adjusting the principal amount thereof to be equal to
the unpurchased portion, will be returned and (2) if a Definitive Note may
be purchased in part, that, after the Purchase Date, upon surrender of such
Definitive Note, a new Definitive Note or Notes in aggregate principal
amount equal to the unpurchased portion thereof will be issued in the name
of the Holder thereof, upon cancellation of the original Note;
(F) that Holders electing to have a Note or portion thereof purchased
pursuant to any Asset Sale Offer shall be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at least
three Business Days before the Purchase Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the Trustee
and the Paying Agent;
(G) that, subject to applicable law, Holders shall be entitled to
withdraw their election if the Company, depositary or Paying Agent, as the
case may be, receives, not later than the second Business Day before the
Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Note or portion
<PAGE>
54
thereof the Holder delivered for purchase, the Note certificate number and
a statement that such Holder is withdrawing his election to have the Note
or portion thereof purchased;
(H) that, if the aggregate principal amount of Notes tendered by
Holders, together with the aggregate principal amount or accreted value, as
the case may be, of any Pari Passu Notes, tendered by Holders exceeds the
Offer Amount, the selection of such Notes for purchase will be made by the
Trustee in compliance with the requirements of the principal securities
exchange, if any, on which such Notes are listed, or if such Notes are not
so listed or such exchange prescribes no method of selection, subject to
applicable law, on a pro rata basis by lot or by such other method as the
Trustee in its sole discretion shall deem fair and appropriate (and in such
manner as complies with applicable legal and exchange requirements);
provided, however, that no Notes of (Euro)1.00 or less shall be purchased
in part; provided further, that, subject to applicable law, in the event of
partial purchase by lot, the particular Notes to be purchased shall be
selected, unless otherwise provided herein, by the Registrar or Trustee
from the outstanding Notes not previously called for purchase; and
(I) the instructions that Holders must follow to tender their Notes.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered together with any Pari Passu
Notes, all Notes or portions thereof tendered, and deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section 4.16. On
the Purchase Date, the Paying Agent shall promptly cause the principal amount of
any Global Note so tendered to be adjusted on Schedule A thereof to be equal to
any unpurchased portion of such Global Note which unpurchased portion must be
equal to (Euro)1.00 in principal amount or an integral multiple thereof, and
shall promptly authenticate and mail or deliver to each tendering Holder of a
Definitive Note, a new Definitive Note or Notes equal in principal amount to any
unpurchased portion of the Definitive Note surrendered which unpurchased portion
must be equal to (Euro)1.00 in principal amount or an integral multiple thereof.
The depositary, the Paying Agent or the Company, as the case may be, shall
promptly (but in any case not later than five Business Days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the Offer
Amount of the Notes tendered by such Holder and accepted by the Company for
purchase. Any Notes not so accepted shall be promptly mailed or delivered by or
on behalf of the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer not later than the second Business
Day following the Purchase Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
<PAGE>
55
regulations conflict with the provisions hereunder, the Company will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.17 Limitation on Issuance of Guarantees of Indebtedness by
-------------------------------------------------------
Restricted Subsidiaries. (a) The Company shall not permit any Restricted
- -----------------------
Subsidiary, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of the Company unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee of all of the Company's
obligations under the Notes and this Indenture on terms substantially similar to
the guarantee of such Indebtedness, except that if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such
assumption, Guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to such
Restricted Subsidiary's assumption, Guarantee or other liability with respect to
the Notes substantially to the same extent as such Indebtedness is subordinated
to the Notes and (ii) such Restricted Subsidiary waives, and 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 Guarantee; provided that any Restricted Subsidiary may
guarantee Senior Indebtedness of the Company, including Indebtedness under a
Credit Facility if such Indebtedness is Incurred in accordance with Section 4.4;
and provided further 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.
(b) Notwithstanding the foregoing subsection (a), any Guarantee of all of
the Company's obligations under the Notes and this Indenture by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Equity Interests in, or all or substantially all of the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture), or (ii) the release or discharge of the guarantee
which resulted in the creation of such Guarantee, except a discharge or release
by or as a result of payment under such guarantee.
SECTION 4.18 Business of the Company; Restriction on Transfers of
----------------------------------------------------
Existing Business. The Company will not, and will not permit any Restricted
- -----------------
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary will
not be permitted, directly or indirectly, to transfer to any Unrestricted
Subsidiary (i) any of the licenses, permits or authorizations used in the
Permitted Business of the Company or any Restricted Subsidiary or (ii) any
material portion of the "property and equipment" (as such term is used in the
Company's consolidated financial statements) of the Company or any Restricted
Subsidiary used in the licensed service areas of the Company or any Restricted
Subsidiary.
<PAGE>
56
SECTION 4.19 Limitation on the Issuance and Sale of Capital Stock of
-------------------------------------------------------
Restricted Subsidiaries. The Company will not, and will not permit any
- -----------------------
Restricted Subsidiary, directly or indirectly, to issue, transfer, convey, sell,
lease or otherwise dispose of any shares of Capital Stock (including options,
warrants or other rights to purchase shares of such Capital Stock) of such
Restricted Subsidiary or any other Restricted Subsidiary to any Person (other
than (i) to the Company or a Wholly Owned Restricted Subsidiary and (ii)
issuances of director's qualifying shares of Capital Stock of foreign Restricted
Subsidiaries, in each case, to the extent required by applicable law), unless
(A) the Net Cash Proceeds from such issuance, transfer, conveyance, sale, lease
or other disposition are applied in accordance with the provisions of Section
4.16, (B) immediately after giving effect to such issuance, transfer,
conveyance, sale, lease or other disposition, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and (C) any Investment in such
Person remaining after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition would have been permitted to be made under
Section 4.3 if made on the date of such issuance, transfer, conveyance, sale,
lease or other disposition (valued as provided in the definition of "Investment"
in Section 1.1).
SECTION 4.20 Additional Amounts. At least 10 days prior to the first
------------------
date on which payment of principal, premium, if any, or interest on the Notes is
to be made, and at least 10 days prior to any subsequent such date if there has
been any change with respect to the matters set forth in the Officers'
Certificate described in this Section 4.20, the Company will furnish the Trustee
and the Paying Agent, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and the Paying Agent whether such payment of principal,
premium, if any, or interest on the Notes (whether or not in the form of
Definitive Notes) shall be made to the Holders without withholding for or on
account of any present or future tax, duty, assessment or other governmental
charges of whatever nature (collectively "Taxes") imposed or levied by or on
-----
behalf of The Federal Republic of Germany or any jurisdiction in which the
Company or any Successor Company is organized or is otherwise resident for tax
purposes or any political subdivision thereof or any authority having power to
tax therein or any jurisdiction from or through which payment is made (each a
"Relevant Taxing Jurisdiction"), unless the withholding or deduction of such
----------------------------
Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any payments made by the Company with respect to the Notes,
including payments of principal, redemption price, interest or premium, then
such Officers' Certificate shall specify the amount, if any, required to be
withheld on such payments to such Holders and the Company will pay to the
Trustee or the Paying Agent the additional amounts pursuant to paragraph 3 of
the Notes (the "Additional Amounts") and, if paid to a Paying Agent other than
------------------
the Trustee, shall provide the Trustee with documentation satisfactory to the
Trustee evidencing the payment of such Additional Amounts. Copies of such
documentation shall be made available to the Holders upon request. The Company
shall indemnify the Trustee and the Paying Agent for, and hold them harmless
against, any loss, liability or expense incurred without negligence or bad faith
on their part arising out of or in connection with actions taken or omitted by
any of them in reliance on any Officers' Certificate furnished to them pursuant
to this Section 4.20.
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges. The
-----------------------------------------------
Company will pay any present or future stamp, court or documentary taxes, or any
other excise or property
<PAGE>
57
taxes, charges or similar levies which arise in any jurisdiction from the
execution, delivery or registration of the Notes or any other document or
instrument referred to therein, or the receipt of any payments with respect to
the Notes, excluding any such taxes, charges or similar levies imposed by any
jurisdiction outside of The Federal Republic of Germany, the United States of
America, or any jurisdiction in which a Paying Agent is located, other than
those resulting from, or required to be paid in connection with, the enforcement
of the Notes or any other such document or instrument following the occurrence
of any Event of Default with respect to the Notes.
SECTION 4.22 Limitation on Layering. Notwithstanding the provisions of
----------------------
Section 4.4, the Company shall not Incur any Indebtedness if such Indebtedness
is subordinate or junior in right of payment in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness.
SECTION 4.23 Limitation on Investment Company Activities. The Company
-------------------------------------------
will not, and will not permit any of its Restricted Subsidiaries or controlled
Affiliates to, conduct its business in a fashion that would cause the Company to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act")),
----------------------
or otherwise to become subject to regulation under the Investment Company Act.
For purposes of establishing the Company's compliance with this provision, any
exemption which is or would become available under Section 3(c)(1) or Section
3(c)(7) of the Investment Company Act will be disregarded.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Consolidation, Merger, and Sale of Assets. 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 in a series of
related transactions) to, any Person or permit any Person to merge with or into
the Company and the Company will not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) the Company will be the continuing Person, or the Person (if other
than the Company) (the "Successor Company") formed by such consolidation or into
-----------------
which the Company is merged or that acquired or leased such property and assets
of the Company will be a corporation organized and validly existing under the
laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company with respect to
the Notes and under this Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event
<PAGE>
58
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; (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
(Euro)1.00 of Indebtedness under subsection 4.4(a); (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 Indenture; and (vi) the Company
shall have delivered to the Trustee an opinion of tax counsel reasonably
acceptable to the Trustee stating that (A) Holders will not recognize income,
gain or loss for U.S. federal or German income tax purposes as a result of such
transaction, (B) any payment of principal, redemption price or purchase price
of, premium (if any) and interest on the Notes by the Company to a Holder after
the consolidation, merger, conveyance, transfer or lease of assets will be
exempt from any Taxes and (C) no other taxes on income (including taxable
capital gains) will be payable under the tax laws of the Relevant Taxing
Jurisdiction by a Holder who is or who is deemed to be a non-resident of the
Relevant Taxing Jurisdiction in respect of the acquisition, ownership or
disposition of the Notes, including the receipt of principal of, premium and
interest paid pursuant to such Notes.
SECTION 5.2 Successor Corporation Substituted. Upon any such
---------------------------------
consolidation, merger, assignment, conveyance, lease, transfer or other
disposition in accordance with Section 5.1, the Successor Company will succeed
to, and be substituted for every duty and obligation of, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor Company had been named as the Company herein, and thereafter
(except in the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Notes.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default. Wherever used herein with respect to
-----------------
any series of the Notes, "Event of Default" means any one of the following
events which shall have occurred and be continuing:
(a) a default for 30 days or more in the payment when due of interest on
the Notes or Additional Amounts, if any, or Liquidated Damages, if any,
with respect to the Notes;
<PAGE>
59
(b) 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;
(c) a default in the payment of principal or interest on Notes required
to be purchased pursuant to an Asset Sale Offer as described under Section
4.16 or pursuant to a Change of Control Offer as described under Section
4.15;
(d) a failure to perform or comply with the provisions described in
Article V;
(e) a default in the performance of or breach of any other covenant or
agreement of the Company in this Indenture or under the Notes and such
default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the holders of 25% or more in aggregate
principal amount of the Notes;
(f) a default occurs on any other Indebtedness of the Company or any
Restricted Subsidiary if (i) either (x) such default is a failure to pay
principal of such Indebtedness when due after any applicable grace period
or (y) as a result of such default, the maturity of such Indebtedness has
been accelerated prior to its scheduled maturity and such default has not
been cured within the shorter of 30 days and the applicable grace period,
and such acceleration has not been rescinded and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Restricted Subsidiaries that is also in
default as to principal, or the maturity of which has also been
accelerated, aggregates (Euro)5.0 million or more;
(g) failure to pay final judgments and orders against the Company or any
Restricted Subsidiary (not covered by insurance) aggregating in excess of
(Euro)5.0 million (treating any deductibles, self-insurance or retention
as not so covered), which final judgments remain unpaid, undischarged and
unstayed for a period in excess 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, discharged or stayed to
exceed (Euro)5.0 million;
(h) a court having jurisdiction in the premises enters a decree or order
for (A) relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries or
for all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or (C) the winding up or liquidation of
the affairs of the Company or any of its Significant Subsidiaries and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days; or
(i) the Company or any of its Significant Subsidiaries (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in
<PAGE>
60
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (B) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property and assets of
the Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors.
SECTION 6.2 Acceleration. If an Event of Default (other than an Event
------------
of Default specified in Sections 6.1(h) or (i)) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company, may declare the
premium, if any, interest and other monetary obligations (including Additional
Amounts, if any, and Liquidated Damages, if any) on all the then outstanding
Notes to be immediately due and payable. Upon such a declaration, such premium,
if any, interest and other monetary obligations on the Notes shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in subsection 6.1(f) above 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 subsection 6.1(f) shall be remedied or cured by the Company and/or
the relevant Restricted Subsidiaries or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in subsections 6.1(h) or (i) above
occurs, the premium, if any, accrued interest and other monetary obligations 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.
The Trustee shall have no obligation to accelerate the Notes if in the
best judgment of the Trustee acceleration is not in the best interest of the
Holders of such Notes.
SECTION 6.3 Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or, premium, if any, interest,
Additional Amounts, if any, or Liquidated Damages, if any, on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
SECTION 6.4 The Trustee May Enforce Claims Without Possession of
----------------------------------------------------
Securities. All rights of action and claims under this Indenture or the Notes
- ----------
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto.
SECTION 6.5 Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in Section 2.8, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Notes 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
<PAGE>
61
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent or subsequent assertion or employment of any other appropriate right
or remedy.
SECTION 6.6 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any Holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the Holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders of Notes.
SECTION 6.7 Waiver of Past Defaults. Subject to Sections 6.10 and 9.2,
-----------------------
at any time after a declaration of acceleration with respect to the Notes as
described in Section 6.1, 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 defaults and rescind and annul a declaration of acceleration
and its consequences if (i) all existing Events of Default, other than the
nonpayment of the principal of, premium, if any, interest and other monetary
obligations on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. Such
waiver shall not excuse a continuing Event of Default in the payment of
interest, premium, if any, principal, Additional Amounts, if any, or Liquidated
Damages, if any, on such Note held by a non-consenting Holder, or in respect of
a covenant or a provision which cannot be amended or modified without the
consent of all Holders. In the event of any Event of Default specified in
subsection 6.1(f), such Event of Default and all consequences thereof
(including, without limitation, any acceleration or resulting payment default)
shall be annulled, waived and rescinded, automatically and without any action by
the Trustee or the Holders of the Notes, if within 60 days after such Event of
Default arose (x) the Indebtedness or guarantee that is the basis for such Event
of Default has been discharged, or (y) the holders thereof have rescinded or
waived the acceleration, notice or action (as the case may be) giving rise to
such Event of Default, or (z) if the default that is the basis for such Event of
Default has been cured. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is waived, it is cured and ceases.
SECTION 6.8 Control by Majority. Subject to Section 2.10, the Holders
-------------------
of not less than a majority in principal amount of the outstanding Notes may, by
written notice to the Trustee, 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 it. Subject to Section 7.1, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture
that the Trustee determines may be unduly prejudicial to the rights of another
Holder of Notes, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 6.9 Limitation on Suits. A Holder of Notes may not pursue any
-------------------
remedy with respect to this Indenture or the Notes unless:
<PAGE>
62
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holder or Holders of at least 25% in principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(iv) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(v) during such 30-day period the Holder or Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
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 6.10 Rights of Holders To Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, the right of any Holder to receive payment of
principal of, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, on a Note, on or after the respective due dates
expressed in such Note, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.11 Collection Suit by Trustee. If an Event of Default in
--------------------------
payment of principal, premium, if any, interest, Additional Amounts, if any, or
Liquidated Damages, if any, specified in subsection 6.1(a) or (b) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Notes for the
whole amount of or principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Notes and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.12 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, accountants and experts) and the Holders
allowed in any judicial proceedings relating to the Company, its creditors or
its property or other obligor on the Notes, its creditors and its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the
<PAGE>
63
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agent and counsel, and
any other amounts due the Trustee under Section 7.7. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof out of the estate in any such proceeding, shall be denied for
any reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties which the Holders of the Notes may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
SECTION 6.13 Priorities. If the Trustee collects any money or property
----------
pursuant to this Article VI, it shall pay out the money or property in the
following order:
First: to the Trustee, the Agents and their agents and attorneys for
amounts due under Section 7.7, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and
the costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal,
premium, if any, interest, Additional Amounts, if any, and Liquidated
Damages, if any, respectively; and
Third: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.13; provided
that the failure to give any such notice shall not affect the establishment of
such record date or payment date for Holders pursuant to this Section 6.13.
SECTION 6.14 Restoration of Rights and Remedies. If the Trustee or any
----------------------------------
Holder of any Note has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders of Notes shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders of Notes shall continue as though no
such proceeding had been instituted.
SECTION 6.15 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 the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
<PAGE>
64
costs, including reasonable attorneys' fees and expenses, 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 6.15 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.10, or a suit
by a Holder or Holders of more than 10% in principal amount of the outstanding
Notes.
SECTION 6.16 Compliance Certificate; Notices of Default. The Company is
------------------------------------------
required to deliver to the Trustee annually a statement, in the form of an
Officers' Certificate, regarding compliance with this Indenture, and the Company
is required, within five Business Days, upon becoming aware of any Default or
Event of Default or any default under any document, instrument or agreement
representing Indebtedness of the Company, to deliver to the Trustee a statement,
in the form of an Officers' Certificate, specifying such Default or Event of
Default.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee. (a) If an Event of Default actually known
-----------------
to a Trust Officer of the Trustee has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under this Indenture at the request of any
of the Holders of Notes, unless they shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
(b) Except during the continuance of an Event of Default actually known to
the Trustee:
(i) The Trustee and the Agents will perform only those duties as are
specifically set forth herein and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee or the
Agents.
(ii) In the absence of bad faith on their part, the Trustee and the
Agents may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions and such other documents delivered to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
<PAGE>
65
(i) This paragraph does not limit the effect of subsection (b) of
this Section 7.1.
(ii) Neither the Trustee nor Agent shall be liable for any error of
judgment made in good faith by a Trust Officer of such Trustee or Agent,
unless it is proved that the Trustee or such Agent was negligent in
ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.8.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or to take or omit to take any action under this
Indenture or take any action at the request or direction of Holders if it shall
have reasonable grounds for believing that repayment of such funds is not
assured to it or it does not receive an indemnity satisfactory to it in its sole
discretion against such risk, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to subsections (a),
(b), (c) and (d) of this Section 7.1.
(f) 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.
(g) Any provision hereof relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 7.1 and, upon qualification of this Indenture under the TIA, the
TIA.
SECTION 7.2 Rights of Trustee. Subject to Section 7.1:
-----------------
(a) The Trustee and each Agent may rely conclusively on and shall be
protected from acting or refraining from acting based upon any document
believed by the Trustee or such Agent to be genuine and to have been signed
or presented by the proper person. Neither the Trustee nor any Agent shall
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent order, approval, appraisal, bond, debenture, note, coupon,
security or other paper or document, but the Trustee or Agent, as the case
may be, in its discretion, may make reasonable further inquiry or
investigation into such facts or matters stated in such document and if the
Trustee or Agent, as the case may be, shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, at reasonable times during normal
business hours, personally or by agent or attorney and neither the Trustee
nor any Agent shall incur any liability or additional liability of any kind
by reason of such inquiry or investigation. The Trustee shall not be deemed
to have notice or any knowledge of any matter (including
<PAGE>
66
without limitation Defaults or Events of Default) unless a Trust Officer
assigned to and working in the Trustee's Corporate Trust Administration has
actual knowledge thereof or unless written notice thereof is received by the
Trustee, Attention: Corporate Trust Administration, and such notice references
the Notes generally, the Company or this Indenture;
(b) Any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate or Company Order and
any resolution of the Board of Directors, as the case may be, may be
sufficiently evidenced by a Board Resolution;
(c) Before the Trustee and any Agent acts or refrains from acting, the
Trustee or such Agent may require an Officers' Certificate or an Opinion of
Counsel or both, which shall conform to the provisions of Sections 12.4 and
12.5. Neither the Trustee nor any Agent shall be liable for any action it takes
or omits to take in good faith in reliance on such certificate or opinion.
(d) The Trustee and any Agent may act through its respective attorneys and
agents and shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care.
(e) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers conferred upon it by this Indenture; provided, however, that
the Trustee's conduct does not constitute willful misconduct, negligence or bad
faith.
(f) The Trustee or any Agent may consult with counsel of its selection and
the advice or opinion of such counsel shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(g) Subject to Section 9.2 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver or
approval required by the terms hereof, but shall not without the consent of the
Holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding (i) give any consent, waiver or approval or (ii) agree
to any amendment or modification of this Indenture, in each case, that shall
have a material adverse effect on the interests of any Holder. The Trustee shall
be entitled to request and conclusively rely on an Opinion of Counsel with
respect to whether any consent, waiver, approval, amendment or modification
shall have a material adverse effect on the interests of any Holder.
(h) the rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent,
<PAGE>
67
custodian and other Person employed to act hereunder or in connection with
the transactions contemplated hereby.
SECTION 7.3 Individual Rights of Trustee. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company, its Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same with
like rights. The Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee and the Agents shall
--------------------
not be responsible for and make no representation as to the validity,
effectiveness or adequacy of this Indenture or the Notes; the Trustee and the
Agents shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company or upon the Company's
direction under any provision hereof; the Trustee shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee; and the Trustee and the Agents shall not be responsible for any
statement or recital herein of the Company, or any document issued in connection
with the sale of Notes or any statement in the Notes other than the Trustee's
certificate of authentication.
SECTION 7.5 Notice of Default. If an Event of Default occurs and is
-----------------
continuing and a Trust Officer of the Trustee receives actual notice of such
event, the Trustee shall mail to each Holder, as their names and addresses
appear on the list of Holders described in Section 2.5, notice of the uncured
Default or Event of Default within 90 days after the Trustee receives such
notice. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, interest, Additional Amounts, if any, or
Liquidated Damages, if any, on any Note, including the failure to make payment
on (i) the Change of Control Payment Date pursuant to a Change of Control Offer
or (ii) the Asset Sale Purchase Date pursuant to an Asset Sale Offer, the
Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders.
SECTION 7.6 Report by Trustee to Holders. This Section 7.6 shall not
----------------------------
be operative as a part of this Indenture until this Indenture is qualified under
the TIA, and, until such qualification, this Indenture shall be construed as if
this Section 7.6 were not contained herein.
Within 60 days after each July 15 beginning with July 15, 2000, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and
313(d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each securities
exchange, if any, on which the Notes are listed.
<PAGE>
68
The Company shall promptly notify the Trustee if subsequent to the date
hereof the Notes become listed on any securities exchange or of any delisting
thereof.
SECTION 7.7 Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing for its acceptance of this Indenture and
services hereunder. The Trustee's and the Agents' compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee and the Agents upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for their
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's or any Agent's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's and Agents' accountants, experts and counsel and any taxes or
other expenses incurred by a trust created pursuant to Section 8.4 hereof.
The Company shall indemnify each of the Trustee, any predecessor Trustee
and the Agents for, and hold them harmless against, any and all loss, damage,
claim, expense or liability including taxes (other than taxes based on the
income of the Trustee) incurred by the Trustee or an Agent without negligence,
willful misconduct or bad faith on its part in connection with the acceptance or
administration of this trust and its duties under this Indenture, including the
reasonable expenses and attorneys' fees and expenses of defending itself against
any claim or liability arising hereunder. The Trustee and the Agents shall
notify the Company promptly of any claim asserted against the Trustee or such
Agent for which it may seek indemnity. However, the failure by the Trustee or
the Agent to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee or
such Agent shall cooperate in the defense (and may employ its own counsel
reasonably satisfactory to the Trustee) at the Company's expense. The Trustee or
such Agent may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its written consent, which consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee or such Agent as a result of the
violation of this Indenture by the Trustee or such Agent if such violation arose
from the Trustee's or such Agent's negligence or bad faith.
When the Trustee or an Agent incurs expenses or renders services after the
occurrence of an Event of Default specified in subsection 6.1(h) or (i), the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.7 and any claim arising hereunder shall survive the
termination of this Indenture, the resignation or removal of any Trustee or
Agent, the discharge of the Company's obligations pursuant to Article VIII and
any rejection or termination under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of this
Indenture.
<PAGE>
69
SECTION 7.8 Replacement of Trustee. The Trustee may resign at any time
----------------------
by so notifying the Company in writing. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by so notifying the
Company and the Trustee in writing and may appoint a successor trustee with the
Company's consent. 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. The Company may remove
the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting with respect to its
duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the then outstanding Notes may, with the Company's consent, appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the retiring
Trustee shall transfer, after payment of all sums then owing to the Trustee
pursuant to Section 7.7, all property held by it as Trustee to the successor
Trustee, subject to the Lien provided in Section 7.7, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee and the Company shall pay to any replaced or removed
Trustee all amounts owed under Section 7.7 upon such replacement or removal.
<PAGE>
70
SECTION 7.9 Successor Trustee by Merger, etc. If the Trustee
---------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by consolidation, merger or conversion to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 7.10 Corporate Trustee Required; Eligibility. There shall be at
---------------------------------------
all times a Trustee hereunder which shall be eligible to act as Trustee under
the TIA and shall have a combined capital and surplus of at least $50,000,000
and have its Corporate Trust Office in the Borough of Manhattan, The City of New
York. If such Person publishes reports of condition at least annually, pursuant
to law or to the requirements of a Federal, State or District of Columbia
supervising or examining authority within the United States of America, then for
the purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 7.11 Disqualification; Conflicting Interests. If the Trustee
---------------------------------------
has or shall acquire a conflicting interest within the meaning of the TIA, the
Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the TIA and this
Indenture.
SECTION 7.12 Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee, in its capacity as Trustee hereunder, shall comply with TIA Section
311(a), excluding any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.2 or 8.3 be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article VIII.
SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's
------------------------------
exercise under Section 8.1 of the option applicable to this Section 8.2, the
Company shall be deemed to have been discharged from its obligations with
respect to all outstanding Notes on the date the
<PAGE>
71
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
----------------
this purpose, such Legal Defeasance means that the Company shall be deemed to
have paid and discharged all the Obligations relating to the outstanding Notes
and the Notes shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.6, Section 8.8 and the other Sections of this Indenture
referred to below in this Section 8.2, and to have satisfied all of their other
obligations under such Notes and this Indenture and cured all then existing
Events of Default (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, on such Notes when such payments are due or
on the Redemption Date solely out of the trust created pursuant to this
Indenture; (b) the Company's obligations with respect to Notes concerning
issuing temporary Notes, or, where relevant, registration of such Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust; (c) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith; and (d) this Article VIII and the
obligations set forth in Section 8.6 hereof.
Subject to compliance with this Article VIII, the Company may exercise its
option under Section 8.2 notwithstanding the prior exercise of its option under
Section 8.3 with respect to the Notes.
SECTION 8.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.1 of the option applicable to this Section 8.3, the Company shall be
released from any obligations under the covenants contained in Sections 4.3,
4.4, 4.10, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.22, 4.23 and 5.1
hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
-------------------
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or Event of Default under subsection
6.1(e), nor shall any event referred to in subsection 6.1(f) or (g) thereafter
constitute a Default or Event of Default, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby.
SECTION 8.4 Conditions to Legal or Covenant Defeasance. The following
------------------------------------------
shall be the conditions to the application of either Section 8.2 or Section 8.3
to the outstanding Notes:
<PAGE>
72
(i) the Company must irrevocably deposit, or cause to be
irrevocably deposited, with the Trustee, in trust, for the benefit of the
Holders of the Notes, cash in Euro, Euro Government Securities or a
combination thereof in such amounts as will be sufficient, in the opinion
of an internationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, due on the outstanding Notes on the
stated maturity date or on the applicable Redemption Date, as the case may
be, of such principal, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, due on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, (1) the Company has received from, or there has
been published by, the U.S. Internal Revenue Service a ruling or (2) since
the Issue Date, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the Holders of the outstanding Notes
will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Legal Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred
and (B) an Opinion of Counsel in The Federal Republic of Germany reasonably
acceptable to the Trustee to the effect that (1) Holders will not recognize
income, gain or loss for German income tax purposes as a result of such
Legal Defeasance and will be subject to German income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred and (2) payments from the
defeasance trust will be free and exempt from any and all withholding and
other income taxes of whatever nature imposed or levied by or on behalf of
the German government or any political subdivision thereof or therein
having the power to tax;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to such tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred and (B) an Opinion of
Counsel in The Federal Republic of Germany reasonably acceptable to the
Trustee to the effect that (1) Holders will not recognize income, gain or
loss for German income tax purposes as a result of such Covenant Defeasance
and will be subject to German income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred and (2) payments from the defeasance trust will
be free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the German government
or any political subdivision thereof or therein having the power to tax;
<PAGE>
73
(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of such
deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under any material
agreement or instrument to which the Company is a party or by which the
Company is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable German law or U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which opinion
of counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 8.5 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
will be discharged and will cease to be of further effect as to all Notes issued
thereunder when either (i) all such Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to the Trustee for
cancellation or (ii) (A) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable within one
year and the Company has irrevocably deposited or caused to be deposited with
such Trustee as trust funds in trust an amount of money sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation for principal, premium, if any, and accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
date of maturity or redemption; (B) no Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which it is bound; (C) the Company has paid,
or caused to be paid, all sums payable by it under this Indenture; and (D) the
Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of such Notes at
maturity or the Redemption Date, as the case may be. In addition, the Company
must deliver
<PAGE>
74
an Officers' Certificate and an Opinion of Counsel to the Trustee stating that
all conditions precedent to satisfaction and discharge have been satisfied.
SECTION 8.6 Survival of Certain Obligations. Notwithstanding the
-------------------------------
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 8.1, 8.2, 8.3, 8.4 or 8.5, the respective obligations of the Company and
the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10, 2.11, 2.12, 2.13,
2.14, 4.1, 4.2, 4.5, 4.21, 6.10, Article VII, 8.7, 8.8, 8.9 and 8.10 shall
survive until the Notes are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.7, 8.7, 8.8, 8.9 and
8.10 shall survive. Nothing contained in this Article VIII shall abrogate any of
the obligations or duties of the Trustee under this Indenture.
SECTION 8.7 Acknowledgment of Discharge by Trustee. Subject to Section
--------------------------------------
8.10, after (i) the conditions of Section 8.4 or 8.5 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of all of the Company's
obligations under this Indenture except for those surviving obligations
specified in this Article VIII.
SECTION 8.8 Application of Trust Moneys. All cash in Euro and Euro
---------------------------
Government Securities deposited with the Trustee pursuant to Section 8.4 or 8.5
in respect of Notes shall be held in trust and applied by it, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any Paying Agent as the Trustee may determine, to the Holders of the
Notes of all sums due and to become due thereon for principal, premium, if any,
interest, Additional Amounts, if any, and Liquidated Damages, if any, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Euro Government Securities
deposited pursuant to Section 8.4 or 8.5 or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of outstanding Notes.
SECTION 8.9 Repayment to the Company; Unclaimed Money. The Trustee and
-----------------------------------------
any Paying Agent shall promptly pay or return to the Company upon Company Order
any cash or Euro Government Securities held by them at any time that are not
required for the payment of the principal of, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, on the Notes for
which cash or Euro Government Securities have been deposited pursuant to Section
8.4 or 8.5.
Any money held by the Trustee or any Paying Agent under this Article, in
trust for the payment of the principal of, premium, if any, interest, Additional
Amounts, if any, and Liquidated Damages, if any, on any Note and remaining
unclaimed for two years after such principal, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, has become due and
payable shall be paid to the Company upon Company Order or if then held
<PAGE>
75
by the Company shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company give notice to the Holders or cause to be
published notice once, in a leading newspaper having a general circulation in
New York (which is expected to be The Wall Street Journal) and in Frankfurt
(which is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so
long as the Notes are listed, admitted or eligible for trading on a stock
exchange or trading market, in a newspaper having a general circulation in the
locations which such stock exchange or trading market requires) or in the case
of Definitive Notes, such notice shall be made by first-class mail to Holders,
postage prepaid, at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Notes are
listed, admitted or eligible for trading on a stock exchange or trading market
and the rules of such stock exchange or trading market shall so require, by
publication in a newspaper having a general circulation in the locations which
such stock exchange or trading market requires), that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.10 Reinstatement. If the Trustee or Paying Agent is unable to
-------------
apply any cash or Euro Government Securities, as applicable, in accordance with
Section 8.2, 8.3, 8.4 or 8.5 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 Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2, 8.3, 8.4 or 8.5 until such time as
the Trustee or Paying Agent is permitted to apply all such cash or Euro
Government Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5; provided,
however, that if the Company has made any payment of interest on, premium, if
any, principal, Additional Amounts, if any, and Liquidated Damages, if any, of
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or Euro Government Securities, as applicable, held by the Trustee
or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders of Notes. Notwithstanding
-----------------------------------
Section 9.2 hereof, the Company and the Trustee together may amend or supplement
this Indenture or the Notes without the consent of any Holder of a Note (i) to
cure any ambiguity, omission, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, or to
provide for additional forms of global Notes containing transfer and other
restrictions and which comply with applicable U.S. securities and other laws,
(iii) to comply with the covenant relating to mergers, consolidations and sales
of assets, (iv) to provide for the
<PAGE>
assumption of the Company's obligations to Holders of such Notes, (v) to make
any change that would provide any additional rights or benefits to the Holders
of the Notes or that does not adversely affect the legal rights under this
Indenture of any such Holder, (vi) to add covenants for the benefit of the
Holders or to surrender any right or power conferred upon the Company, or (vii)
to comply with requirements of the Commission in order to effect or maintain the
qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amendment or supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture which adversely affects its own rights, duties
or immunities hereunder or otherwise.
SECTION 9.2 With Consent of Holders of Notes. The Company and the
--------------------------------
Trustee may amend or supplement this Indenture or the Notes or any amended or
supplemental indenture with the written consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes), and
any existing Default or Event of Default and its consequences or compliance with
any provision of this Indenture or the Notes may be waived with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes). However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
nonconsenting Holder of Notes): (i) reduce the principal amount of the Notes
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any such Note or alter or waive
the provisions with respect to the redemption of the Notes, (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default in the payment of principal of, or premium, if any, interest, Additional
Amounts, if any, or Liquidated Damages, if any, on, the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration with respect to the Notes) or in respect of a
covenant or provision contained in this Indenture which cannot be amended or
modified without the consent of all Holders, (v) make any Note payable in money
other than that stated in the Notes, (vi) make any change in the provisions of
this Indenture relating to waivers of past Defaults or the rights of Holders of
the Notes to receive payments of principal of, premium, interest, Additional
Amounts, if any, or Liquidated Damages, if any, on, such Notes, (vii) make any
change in the amendment and waiver provisions contained in this Indenture,
(viii) make any change in paragraph 3 of the Notes that adversely affects the
rights of any Holder of the Notes, (ix) amend the terms of the Notes or this
Indenture in a way that would result in the loss of an exemption from any Taxes
or an exemption from any obligation to withhold or deduct Taxes unless the
Company agrees to pay Additional Amounts, if any, in respect thereof, (x) impair
the right of any Holder of the Notes to receive payment of principal of,
interest and Liquidated Damages, if any, on, such Holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes.
<PAGE>
77
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.6, the Trustee shall join with the Company
in the execution of such amended or supplemental indenture unless such amended
or supplemental indenture adversely affects the Trustee's own rights, duties or
immunities hereunder or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 9.3 Compliance with TIA. From the date on which this Indenture
-------------------
is qualified under the TIA, every amendment, waiver or supplement of this
Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents. Until an amendment,
---------------------------------
supplement or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note.
However, any such Holder of a Note or subsequent Holder of a Note may revoke the
consent as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company fixes
a record date, the record date shall be fixed at (i) the later of 30 days prior
to the first solicitation of such consent or the date of the most recent list of
Holders of Notes furnished to the Trustee prior to such solicitation pursuant to
Section 2.5 or (ii) such other date as the Company shall designate.
SECTION 9.5 Notation on or Exchange of Notes. The Trustee may place an
--------------------------------
appropriate notation about an amendment, supplement or waiver on any Note
thereafter authenticated. The Company in exchange for all Notes may issue and
the Trustee shall authenticate new Notes that reflect the amendment, supplement
or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
<PAGE>
78
SECTION 9.6 Trustee to Sign Amendments, etc. The Trustee shall
--------------------------------
execute any amendment, supplement or waiver authorized pursuant to this Article
IX; provided, however, that the Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which adversely affects the
Trustee's own rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive indemnity reasonably satisfactory to it, and shall
be fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article IX is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
not be an expense of the Trustee.
SECTION 9.7 Senior Indebtedness. Notwithstanding anything in this
-------------------
Article IX to the contrary, no amendment may be made to Article XI hereof or to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any trustee, group or representative thereof authorized
to give a consent) consent to such change.
ARTICLE X
CONVERSION
----------
SECTION 10.1 Right to Convert; Mandatory Conversion. (a) Subject to and
--------------------------------------
upon compliance with the provisions of this Indenture, at any time on or after
365 days after the Issue Date and on or before the Maturity Date, each Holder
shall have the right, at its option, to convert the principal amount of any
Note, or any portion of such principal amount, into that number of validly
issued, fully paid and nonassessable shares of Common Stock (as such shares
shall then be constituted) (the "Conversion Shares") obtained by dividing the
-----------------
aggregate principal amount of the Note or portion thereof surrendered for
conversion (on the date of conversion) by (Euro)25.00, subject to adjustment as
set forth in Section 10.5, below (the "Conversion Ratio").
----------------
(b) Notwithstanding anything in this Section 10.1 to the contrary, the
right to convert with respect to any Note or portion of a Note that shall be
called for redemption or delivered for repurchase, shall terminate at the close
of business on the Trading Day next preceding the Redemption Date, unless the
Company shall default in payment due upon redemption or repurchase thereof.
(c) In addition to the rights of the Holders to convert the Notes as set
forth in Sections 10.1(a) and 10.1(b), above, if the closing price of the Common
Stock on the Neuer Markt during any period (or any portion of a period)
described below has exceeded the price for such period (or any portion of a
period) referred to below for at least 30 consecutive Trading Days ("Market
------
Criteria," with the 30-day period being referred to as the "Market Criteria
- -------- ---------------
Period"), and the Conversion Shelf Registration Statement (as defined in the
- ------
Registration Rights Agreement) is effective and available, then, on the next
succeeding Trading Day, all of the Notes will be automatically converted into
that number of Conversion Shares derived by application of the Conversion Ratio
specified in Section 10.1(a) above; provided, however, that if the Market
Criteria is satisfied
<PAGE>
79
during the first 365 days after the Closing Date, the conversion will not occur
until the one-year anniversary of the Closing Date and will occur only if the
closing price on the Neuer Markt of the Common Stock is at least (Euro)32.00 on
such date:
12 Months Beginning Closing Price
------------------- -------------
August 15, 1999 (Euro)32.00
August 15, 2000 (Euro)38.46
August 15, 2001 (Euro)44.92
August 15, 2002 (Euro)51.37
August 15, 2003 (Euro)57.83
The Company shall promptly take all steps necessary to provide for the issuance
of shares of Common Stock to the Holders of Notes in connection with any such
mandatory conversion of the Notes.
(d) No Holder or holder of any beneficial interest in any Note is entitled
to any rights of a holder of Common Stock (including, without limitation,
receipt of dividends or other distributions, notices of meetings of
stockholders, consents to actions of stockholders or notices of any other
stockholder proceedings) until such Holder has converted his Notes to Common
Stock (or such time as they may have been automatically converted pursuant to
the provisions of Section 10.1(c), as the case may be), and only to the extent
such Notes are deemed to have been converted to Common Stock under this Article
X.
SECTION 10.2 Exercise of Conversion Privilege; Issuance of Common Stock
----------------------------------------------------------
on Conversion; No Adjustment for Interest or Dividends. In order to effect the
- ------------------------------------------------------
conversion of any Note into Conversion Shares pursuant to Section 10.1(a), the
Holder of any Note to be converted in whole or in part shall surrender such
Note, duly endorsed, at an office or agency maintained by the Company pursuant
to Section 2.3, accompanied by the funds, if any, required by the last paragraph
of this Section 10.2, and shall give written notice of conversion in the form
provided on the Notes (or such other notice that is acceptable to the Company)
to the Company at such office or agency that the Holder elects to convert such
Note or the portion thereof specified in such notice, stating the name or names
(with address) in which the certificate or certificates for Conversion Shares
that shall be issuable on such conversion shall be issued. Each Note surrendered
for conversion shall, unless the Conversion Shares are to be issued in the same
name as the registration under such Note, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or his duly authorized attorney, and such instruments shall be
accompanied by amounts sufficient to pay all transfer taxes payable upon
issuance of Conversion Shares in such other name or names. Other than such
transfer taxes, the Company shall pay any and all other taxes (other than taxes
based upon income) that may be payable in respect of any issue or delivery of
Conversion Shares. The Holder may not withdraw its conversion notice after
receipt of the Company's notice of its election regarding conversion.
As promptly as practicable (and in any event no later than ten
Business Days) after the surrender of such Note and the receipt of such notice
and funds, if any, as aforesaid, the Trustee
<PAGE>
80
shall instruct the Company to and the Company shall issue and shall deliver at
such office or agency to such Holder, or on his written order, (i) a certificate
or certificates for the number of full Conversion Shares or portion thereof in
accordance with the provisions of this Article X and (ii) a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion as provided in Section 10.3. In case any Note of a
denomination greater than (Euro)1.00 shall be surrendered for partial
conversion, and subject to Article II, the Company shall execute and the Trustee
shall authenticate and deliver to or upon the written order of the Holder
thereof, without charge to him, a new Note or Notes in authorized denominations
in an aggregate principal amount equal to the unconverted portion of the
surrendered Note.
Each conversion shall be deemed to have been effected on the date on which
such Note shall have been surrendered (accompanied by the funds, if any,
required by the last paragraph of this Section 10.2) and such notice shall have
been received by the Company, as aforesaid, and the person in whose name any
certificate or certificates for Conversion Shares shall be issuable upon such
conversion shall be deemed to have become on said date the holder of record of
the Conversion Shares represented thereby; provided, however, that in the event
of any such surrender on any date when the stock transfer books of the Company
shall be closed, the Person in whose name any certificate or certificates for
Conversion Shares shall be issuable upon such conversion shall be deemed to have
become the holder of record of the Conversion Shares on the next day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such Note shall have been
surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on a Record Date to the opening of business on the
next succeeding Interest Payment Date shall (unless such Note or portion thereof
being converted shall have been called for redemption on a date in such period)
be accompanied by payment, in funds acceptable to the Company, of an amount
equal to the interest otherwise payable on such Interest Payment Date on the
principal amount being converted; provided, however, that no such payment need
be made if there shall exist at the time of conversion a default in the payment
of interest on the Notes. An amount equal to such payment shall be paid by the
Company on such Interest Payment Date to the holder of such Note at the close of
business on such Record Date; provided, however, that if the Company shall
default in the payment of interest on such Interest Payment Date, such amount
shall be paid to the Person who made such required payment. Except as provided
above in this Section 10.2, no adjustment shall be made for interest accrued on
any Note converted or for dividends on any shares on the conversion of such Note
as provided in this Article X. If any Note or portion thereof which has been
called for redemption on a date during the period from the close of business on
a Record Date for any Interest Payment Date to the opening of business on such
Interest Payment Date is surrendered for conversion during such period, no
interest shall be payable to the Holder on account of such Note or portion
thereof.
SECTION 10.3 Cash Payments in Lieu of Fractional Shares. No fractional
------------------------------------------
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted
<PAGE>
81
hereby) so surrendered. If any fractional share of Common Stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment therefor in cash at the current market value thereof. The current
market value of a share of Common Stock shall be the Closing Price on the Neuer
Markt on the last Trading Day prior to the day on which the Notes (or specified
portions thereof) are deemed to have been converted and such Closing Price shall
be determined as provided in subsection (f) of Section 10.5.
SECTION 10.4 Conversion Price. The conversion price shall be as specified
----------------
in the form of Note hereinabove set forth, subject to adjustment as provided in
this Article (the "Conversion Price").
----------------
SECTION 10.5 Adjustment of Conversion Price. (a) In case the Company shall
------------------------------
(i) pay a dividend, or make a distribution, in shares of its Common Stock on its
Common Stock, (ii) subdivide its outstanding Common Stock into a greater number
of shares or (iii) combine its outstanding Common Stock into a smaller number of
shares, the denominator of the Conversion Ratio in effect immediately prior
thereto shall be adjusted so that the Holder of any Note thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common Stock
of the Company that he would have owned or have been entitled to receive after
the happening of any of the events described above had such Note been converted
immediately before the happening of such event. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date in
the case of a dividend and shall become effective immediately after the
effective date in the case of subdivision or combination.
(b) In case the Company shall issue rights or warrants to all holders of
its Common Stock entitling them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase Common Stock at a
price per share less than the Current Market Price per share of Common Stock at
the record date for the determination of stockholders entitled to receive such
rights or warrants, except as provided in subsection (f) below, the denominator
of the Conversion Ratio in effect immediately prior thereto shall be adjusted so
that the same shall equal the price determined by multiplying the denominator of
the Conversion Ratio in effect immediately before the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price
(determined by multiplying the total number of shares by the exercise price of
such rights or warrants and dividing the product so obtained by the Current
Market Price), and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately after such record
date. Except as provided in subsection (f) below, in determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights or
warrants, the value of such consideration, if other than cash, to be determined
in good faith by
<PAGE>
82
the Board of Directors whose determination shall be conclusive and described in
an Officers' Certificate filed with the Trustee. Upon the expiration of any
right or warrant to purchase Common Stock the issuance of which resulted in an
adjustment in the denominator of the Conversion Ratio pursuant to this
subsection (b), if any such right or warrant shall expire and shall not have
been exercised, the denominator of the Conversion Ratio shall immediately upon
such expiration be recomputed to the denominator of the Conversion Ratio which
would have been in effect had the adjustment of the denominator of the
Conversion Ratio made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or warrants
actually exercised. If the Company shall at any time issue two or more
securities as a unit and one or more of such securities shall be rights or
warrants for Common Stock subject to this Section 10.5(b), the consideration
allocated to each such security shall be determined in good faith by the Board
of Directors whose determination shall be conclusive and described in an
Officers' Certificate filed with the Trustee.
(c) In case the Company shall distribute to all holders of its Common Stock
any shares of Capital Stock of the Company (other than Common Stock) or
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any of its securities (including securities but excluding those
rights, warrants, dividends and distributions referred to in subsections (a) and
(b) above and dividends and distributions in connection with the liquidation,
dissolution or winding up of the Company or paid in cash), then, except as
provided in subsection (f) below, in each such case the denominator of the
Conversion Ratio shall be adjusted so that the same shall equal the price
determined by multiplying the denominator of the Conversion Ratio in effect
immediately before the date of such distribution by a fraction of which the
numerator shall be the Current Market Price per share of the Common Stock on the
record date mentioned below less the Fair Market Value on such record date (as
determined by the Board of Directors, whose determination shall be conclusive,
and described in an Officers' Certificate filed with the Trustee) of the portion
of the Capital Stock or assets or evidences of indebtedness so distributed or of
such rights or warrants applicable to one share of Common Stock, and the
denominator shall be the Current Market Price per share of the Common Stock on
such record date. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to received such
distribution, except as provided in subsection (f) below.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (excluding (x) any quarterly
cash dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of (i)
the amount per share of Common Stock of the next preceding quarterly cash
dividend on the Common Stock to the extent not requiring any adjustment of the
denominator of the Conversion Ratio pursuant to this subparagraph (d) (as
adjusted to reflect subdivisions or combinations of the Common Stock) and (ii)
3.75% of the average of the daily Closing Prices on The Neuer Markt of the
Common Stock, for the ten consecutive Trading Days immediately prior to the date
of declaration of such dividend and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case, unless the Company elects
to reserve such cash for distribution to the Holders of the Notes upon the
conversion of the Notes so that any such Holder
<PAGE>
83
converting Notes will receive upon such conversion, in addition to the
Conversion Shares to which such Holder is entitled, the amount of cash which
such Holder would have received if such Holder had, immediately prior to the
record date for such distribution of cash, converted its Notes into Conversion
Shares, the denominator of the Conversion Ratio shall be reduced so that the
same shall be equal to the number determined by multiplying the denominator of
the Conversion Ratio in effect immediately prior to such record date by a
fraction of which the numerator shall be the Current Market Price of the Common
Stock on such record date less the amount of cash so distributed (and not
excluded as provided above) applicable to one share of Common Stock and the
denominator shall be such Current Market Price of the Common Stock, such
reduction to become effective immediately prior to the opening of business on
the day following such record date; provided, however, that in the event the
portion of the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price of the Common Stock on such
record date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder of Notes shall thereafter have the right to receive
upon conversion the amount of cash such Holder would have received had he
converted each Note on such record date. In the event that such dividend or
distribution is not so paid or made, the denominator of the Conversion Ratio
shall again be adjusted to be the denominator of the Conversion Ratio which
would then be in effect if such dividend or distribution had not been declared.
(e) In case a tender or exchange offer made by the Company or any
Subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Company or such Subsidiary of consideration per share of Common Stock having a
Fair Market Value at the last time (the "Expiration Time") tenders or exchanges
---------------
may be made by holders of Common Stock pursuant to such offer (as it shall have
been amended) that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, the denominator of the
Conversion Ratio shall be reduced so that such denominator shall equal the
number determined by multiplying the denominator of the Conversion Ratio in
effect immediately prior to the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) on the Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the Fair Market
Value of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
----------------
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares pursuant to any such
tender or exchange offer, but the Company is permanently prevented by applicable
law from effecting any such purchases or all such purchases are rescinded, the
denominator of the Conversion Ratio shall again be adjusted to be the
denominator of the Conversion Ratio which would then be in effect if such tender
or exchange offer had not been made.
<PAGE>
84
(f) No adjustment in the denominator of the Conversion Ratio shall be
required unless such adjustment would require an increase or decrease of at
least 1.0% in the denominator of the Conversion Ratio then in effect; provided,
however, that any adjustments which by reason of this subparagraph (f) are not
required to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required. Except as
provided in this Section 10.5, the denominator of the Conversion Ratio will not
be adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock or carrying the right to purchase any of the
foregoing.
(g) Whenever the conversion price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the denominator of the
Conversion Ratio after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
denominator of the Conversion Ratio setting forth the adjusted denominator of
the Conversion Ratio and the date on which such adjustment becomes effective and
shall mail or cause to be mailed such notice of such adjustment of the
denominator of the Conversion Ratio to the Holder of each Note at his last
address appearing on the Note register provided for in Section 2.3 of this
Indenture.
(h) In any case in which this Section 10.5 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Note converted after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such Holder any amount in cash in lieu of any fraction pursuant to Section 10.3.
(i) The Company may make such reductions in the denominator of the
Conversion Ratio, in addition to those required by subparagraphs (a), (b), (c),
(d) and (e) of this Section 10.5, as the Board of Directors considers to be
advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or in any event treated as such for income
tax purposes. To the extent permitted by applicable law, the Company from time
to time may reduce the denominator of the Conversion Ratio by any amount for any
period of time if the period is at least 20 days, the reduction is irrevocable
during such period, and the Board of Directors (or, to the extent permitted by
applicable law, a duly authorized committee thereof) shall have made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive. Whenever the denominator of the
Conversion Ratio is reduced pursuant to the preceding sentence, the Company
shall mail to holders of record of the Notes a notice of the reduction at least
15 days prior to the date the reduced denominator of the Conversion Ratio takes
effect, and such notice shall state the reduced denominator of the Conversion
Ratio and the period it will be in effect.
(j) Notwithstanding any other provision of this Section 10.5, no adjustment
to the denominator of the Conversion Ratio shall reduce the denominator of the
Conversion Ratio
<PAGE>
85
below the then par value per share of the Common Stock, and any such purported
adjustment shall instead reduce the denominator of the Conversion Ratio to such
par value. The Company hereby covenants not to take any action (i) to increase
the par value per share of the Common Stock or (ii) that would or does result in
any adjustment in the denominator of the Conversion Ratio that, if made without
giving effect to the previous sentence, would cause the denominator of the
Conversion Ratio to be less than the then par value per share of the Common
Stock, provided, however, that the covenant in this sentence shall be suspended
if within ten days of determining in good faith that such action would result in
such adjustment (but not later than the Business Day next following the
effectiveness of such adjustment), the Company gives notice of redemption of all
outstanding Notes, and effects the redemption referred to in such notice on the
redemption date referred to therein in compliance with Article III, but the
covenant in this sentence shall be retroactively reinstated if such notice is
not given or such redemption does not occur.
(k) In the event that the provisions of this Article X specifying the
methods by which the Conversion Price or other provisions are adjusted would
require an adjustment that is determined in good faith by the Board of Directors
to be inconsistent with the purpose of the provisions hereof providing for
Conversion Price adjustments or other adjustments (generally, to place Holders
in a position equivalent to the position they were in prior to the occurrence of
the event requiring adjustment to the Conversion Price or other adjustment), the
Board of Directors may make an adjustment (in lieu of that required by such
provisions) that it determines in good faith places the Holders in a position at
least equivalent to the position they were in prior to such event, which
determination shall be described in a Board Resolution. If any action of
transaction would require adjustment to any Conversion Price established
hereunder pursuant to more than one paragraph of this Article X, only the
adjustment that would result in the largest reduction of such Conversion Price
shall be made.
SECTION 10.6 Effect of Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------
In the case of (a) any reclassification or change of the Common Stock of the
Company, (b) a consolidation, merger or combination involving the Company or (c)
a sale or conveyance to another corporation of the property and assets of the
Company as an entirety or substantially as an entirety, in each case as a result
of which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, the Holders of the Notes then outstanding will
be entitled thereafter to convert such Notes into the kind and amount of shares
of stock, other securities or other property or assets which they would have
owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Conversion Shares immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming that a
Holder of Notes would not have exercised any rights of election as to the stock,
other securities or other property or assets receivable in connection therewith.
SECTION 10.7 Taxes on Shares Issued. The issue of stock certificates on
----------------------
conversions of Notes shall be made without charge to the converting Holder of
Notes for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be
<PAGE>
86
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Note converted, and the Company
shall not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issue thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 10.8 Reservation of Shares; Shares to be Fully Paid. The
----------------------------------------------
Company shall, at all times, from and after the date hereof, reserve for
issuance and maintain, free from preemptive rights, out of its authorized but
unissued shares or shares held in treasury, sufficient shares of Common Stock to
provide for the conversion of all outstanding Notes. The Company covenants that
all shares of Common Stock which may be issued upon conversion of Notes will
upon issue be validly issued, fully paid and nonassessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
Before taking any action which would cause an adjustment reducing the
denominator of the Conversion Ratio below the then par value, if any, of the
shares of Common Stock issuable upon conversion of the Notes, the Company will
take all corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue shares of such Common
Stock at such adjusted conversion price.
SECTION 10.9 Permanent Reduction of Conversion Ratio upon Certain
----------------------------------------------------
Registration Defaults. In addition to the provisions of this Section 10.5, the
- ---------------------
Conversion Ratio may also be permanently reduced pursuant to and in accordance
with the provisions of the Registration Rights Agreement.
SECTION 10.10 Definition of Closing Price. For purposes of this Article
---------------------------
X, "Closing Price" with respect to any securities on any day means the closing
-------------
sale price regular way on such day or, in case no such sale takes place on such
day, the average of the reported closing bid and asked prices, regular way, in
each case on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
National Association of Securities Dealer member firm selected from time to time
by the Board of Directors for that purpose, or a price determined in good faith
by the Board of Directors or, to the extent permitted by applicable law, a duly
authorized committee thereof, whose determination shall be conclusive.
<PAGE>
87
ARTICLE XI
SUBORDINATION
-------------
SECTION 11.1 Notes Subordinated to Senior Indebtedness. (a) The Company
-----------------------------------------
covenants and agrees, and each Holder by accepting a Note covenants and agrees,
that (i) the Indebtedness evidenced by the Notes, including, but not limited to,
the payment of principal of, premium, if any, interest, Additional Amounts, if
any, and Liquidation Damages, if any, on the Notes, and any other payment
obligation of the Company in respect of the Notes (including any obligation to
repurchase the Notes) is subordinated in right of payment, to the extent and in
the manner provided in this Article, to the prior payment in full in cash or
Cash Equivalents of all Senior Indebtedness of the Company (whether outstanding
on the date hereof or hereafter Incurred) (including, without limitation, the
Company's obligations under the Senior Notes) and (ii) the subordination is for
the benefit of the Holders of Senior Indebtedness. The Notes shall rank in all
respects pari passu with all other Senior Subordinated Indebtedness of the
Company. The Notes shall rank senior in all respects to all existing and future
Indebtedness of the Company that is neither Senior Indebtedness nor Senior
Subordinated Indebtedness and only Indebtedness of the Company that is Senior
Indebtedness shall rank senior to the Notes in accordance with the provisions
set forth herein.
(b) Subject to Section 11.4, if (i) the Company shall default in the
payment of any principal of, premium, if any, or interest, if any, on any Senior
Indebtedness when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration of acceleration or otherwise, or
(ii) any other default shall occur with respect to Senior Indebtedness and the
maturity of such Senior Indebtedness has been accelerated in accordance with its
terms, then, upon written notice of such default to the Company and the Trustee
by the holders of Senior Indebtedness or any trustee or representative therefor,
unless and until, in either case, the default has been cured or waived, or has
ceased to exist, or any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full, no direct or indirect payment (in cash,
property, Notes, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of, premium, if any, interest, Additional Amounts, if
any, or Liquidated Damages, if any, on any of the Notes, or in respect of any
redemption, retirement, purchase or other acquisition of any of the Notes nor
may any deposit in respect of the Notes be made pursuant to the provisions of
Article VIII hereof; provided, however, (A) such payments and deposits may be
made if the Company and the Trustee receive written notice approving such
payment from the holders of such Senior Indebtedness or any trustee or
representative therefor with respect to which either of the events set forth in
clause (i) or (ii) of this sentence has occurred and is continuing and (B) the
Company shall be required to make interest payments in kind of Secondary Notes
unless cash payments are required to be made pursuant to the provisions of this
Indenture and the Notes.
(c) If any default (other than a default described in paragraph (b) of this
Section 11.1) shall occur under Designated Senior Indebtedness, pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods occurs (a "Designated Senior
-----------------
<PAGE>
88
Indebtedness Non-Payment Default"), then, upon the receipt by the Trustee (with
- --------------------------------
a copy to the Company) of written notice thereof (a "Payment Notice") from or on
--------------
behalf of holders of such Designated Senior Indebtedness or any trustee or
representative therefor specifying an election to prohibit such payment and
other action by the Company in accordance with the following provisions of this
paragraph (c), the Company may not make any payment or take any other action
that would be prohibited by paragraph (b) of this 11.1 during the period (the
"Payment Blockage Period") commencing on the date of receipt of such Payment
-----------------------
Notice and ending on the earlier of (i) the date, if any, on which the holders
of such Designated Senior Indebtedness or any trustee or representative therefor
notify the Trustee and the Company in writing that such Designated Senior
Indebtedness Non-Payment Default is cured or waived or ceases to exist or the
Senior Indebtedness to which such Designated Senior Indebtedness Non-Payment
Default relates is discharged or (ii) the 179th day after the date of receipt of
such Payment Notice. Notwithstanding the provisions described in the immediately
preceding sentence, (i) payments and other distributions made from any
defeasance trust created pursuant to Section 8.1 hereof may be used to make
payments on the Notes if the applicable deposit does not violate Article VIII or
this Article XI, (ii) no Designated Senior Indebtedness Non-Payment Default that
existed or was continuing on the date of delivery to the Trustee of a Payment
Notice shall be, or shall be made, the basis for a subsequent Payment Notice
unless such default shall have been cured or waived for a period of no less than
90 days and (iii) the Company may resume payments on the Notes following such
Payment Blockage Period unless the holders of such Designated Senior
Indebtedness or the trustee or representative of such holders has accelerated
the maturity of such Designated Senior Indebtedness. Any number of Payment
Notices may be given; provided, however, that (i) irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period, not
more than one Payment Notice shall be given within a period of any 360
consecutive days and (ii) no default that existed upon the date of such Payment
Notice or the commencement of such Payment Blockage Period (whether or not such
event of default is on the same issue of Senior Indebtedness) shall be made the
basis for the commencement of any other Payment Blockage Period.
(d) In the event of (i) a total or partial liquidation or a dissolution of
the Company, (ii) reorganization, bankruptcy, insolvency, receivership of or
similar proceeding relating to the Company or its property or (iii) an
assignment for the benefit of creditors or marshaling of the Company's assets
and liabilities, then the holders of Senior Indebtedness will be entitled to
receive payment in full in cash or Cash Equivalents in respect of Senior
Indebtedness (including interest accruing after, or which would accrue but for,
the commencement of any proceeding at the rate specified in the applicable
Senior Indebtedness, whether or not a claim for such interest would be allowed)
before the Holders will be entitled to receive any payment or distribution
(except that Holders may receive (i) securities of the Company or any other
company provided for by a plan of reorganization or readjustment that are
subordinated at least to the same extent as the Notes are subordinated to Senior
Indebtedness and (ii) payments made from any defeasance trust created pursuant
to Section 8.1 hereof provided that the applicable deposit does not violate
Article VIII or this Article XI), in the event of any payment or distribution of
the assets or securities of the Company. In addition, until the Senior
Indebtedness is paid in full in cash or Cash Equivalents, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
<PAGE>
89
Indebtedness as their interests may appear. In the event of any proceeding
described in the first sentence of this Section 11.1(d), after payment in full
of all sums owing with respect to Senior Indebtedness, the Holders of the Notes,
together with the holders of any obligations of the Company ranking pari passu
with the Notes, shall be entitled to be paid from the remaining assets of the
Company the amounts at the time due and owing on account of unpaid principal of,
interest, if any, Additional Amounts, if any, and Liquidated Damages, if any, on
the Notes and such other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account of any Capital
Stock or any obligations of the Company ranking junior to the Notes and such
other obligations.
(e) If, notwithstanding the foregoing, any payment or distribution of any
character, whether in cash, Notes or other property (other than securities of
the Company or any other company provided for by a plan of reorganization or
readjustment that are subordinated at least to the same extent as the Notes are
subordinated to Senior Indebtedness), shall be received by the Trustee or any
Holder in contravention of any of the terms hereof, such payment or distribution
of Notes shall be received in trust for the benefit of and shall be paid over or
delivered and transferred to the holders of the Senior Indebtedness then
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all such Senior Indebtedness in full. In the event
of the failure of the Trustee or any Holder to endorse or assign any such
payment, distribution or security, each holder of Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the same. Under the circumstances
described in this Section 11.1, the Company or any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making any
payment or distribution of cash or other property or securities is authorized or
instructed to make any payment or distribution to which the Holders would
otherwise be entitled (other than securities that are subordinated at least to
the same extent as the Notes are subordinated to Senior Indebtedness and
payments made from any defeasance trust created pursuant to Section 8.1 hereof
provided that the applicable deposit does not violate Article VIII or this
Article XI) directly to the holders of the Senior Indebtedness of the Company
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness of the Company held by such holders), or their representatives, or
to any trustee or trustees under any other indenture pursuant to which any such
Senior Indebtedness may have been issued, as their respective interests appear,
to the extent necessary to pay all such Senior Indebtedness in full, in cash or
Cash Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Indebtedness.
(f) To the extent that any payment of Senior Indebtedness (whether on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred. To the extent the obligation to repay such Senior
Indebtedness is declared to be fraudulent, invalid or otherwise set aside under
<PAGE>
90
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not become so affected) shall be deemed to be reinstated and outstanding as
Senior Indebtedness for all purposes of the Indenture as if such declaration,
invalidity or setting aside had not occurred.
(g) No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the Indebtedness evidenced
by the Notes by any act or failure to act on the part of the Company or any
Holder of Notes. Nothing contained herein shall impair, as between the Company
and the Holders of Notes, the obligation of the Company to pay to such Holders
the principal of, interest, premium, if any, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes or prevent the Trustee or the Holder
from exercising all rights, powers and remedies otherwise permitted by
applicable law or hereunder upon a Default or Event of Default hereunder, all
subject to the rights of the holders of the Senior Indebtedness to receive cash,
Notes or other property otherwise payable or deliverable to the Holders.
(h) Upon the payment in full of all Senior Indebtedness, the Holders
(together with holders of any Indebtedness that is pari passu with the Notes and
having an equivalent right of subrogation) shall be subrogated to all rights of
any holders of Senior Indebtedness to receive any further payment or
distributions applicable to the Senior Indebtedness until the Indebtedness
evidenced by the Notes shall have been paid in full and such payments or
distributions received by such Holders, by reason of such subrogation, of cash,
Notes or other property which otherwise would be paid or distributed to the
holders of Senior Indebtedness, shall, as between the Company and its creditors
other than the holders of Senior Indebtedness, on the one hand, and such
Holders, on the other hand, be deemed to be a payment by the Company on account
of Senior Indebtedness, and not on account of the Notes.
(i) The provisions of this Section 11.1 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Company in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
(j) The securing of any obligations of the Company, otherwise ranking pari
passu with the Notes or ranking junior to the Notes, shall not be deemed to
prevent such obligations from constituting, respectively, obligations ranking
pari passu with the Notes or ranking junior to the Notes.
SECTION 11.2 Reliance on Certificate of Liquidating Agent; Further
-----------------------------------------------------
Evidence as to Ownership of Senior Indebtedness. Upon any payment or
- -----------------------------------------------
distribution of assets of the Company, the Trustee and the Holders shall be
entitled to rely upon an order or decree issued by any court of competent
jurisdiction in which such dissolution or winding up or liquidation or
reorganization or arrangement proceedings are pending or upon a certificate of
the bankruptcy trustee, receiver, assignee for the benefit of creditors or other
Person making such payment or distribution, delivered to the Trustee or to the
Holders, for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or
<PAGE>
91
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article XI. In the absence of any such bankruptcy trustee, receiver,
assignee or other Person, the Trustee shall be entitled to rely upon written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a trustee or representative on behalf of such holder) as evidence that such
Person is a holder of Senior Indebtedness (or is such a trustee or
representative). If the Trustee determines, in good faith, that further evidence
is required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distributions pursuant to this
Article XI, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, as to the extent to which such Person is entitled to
participate in such payment or distribution, and to other facts pertinent to the
rights of such Person under this Article XI, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 11.3 Payment Permitted If No Default. Nothing contained in this
-------------------------------
Article XI or elsewhere in this Indenture, or in any of the Notes, shall prevent
(a) the Company at any time, except during the pendency of any default with
respect to Senior Indebtedness described in Section 11.1(b) or Section 11.1(c)
or of any of the events described in Section 11.1(d), from making payments of
the principal of, interest, premium, if any, Additional Amounts, if any, or
Liquidated Damages, if any, on the Notes, or (b) the application by the Trustee
or any Paying Agent of any moneys deposited with it hereunder to make payments
of the principal of, interest, premium, if any, Additional Amounts, if any, or
Liquidated Damages, if any, on the Notes, if, at the time of such deposit, the
Trustee or such Paying Agent, as the case may be, did not have the written
notice provided for in Section 11.4 of any event prohibiting the making of such
deposit, or if, at the time of such deposit (whether or not in trust) by the
Company with the Trustee or Paying Agent (other than the Company) such payment
would not have been prohibited by the provisions of this Article XI, and the
Trustee or any paying agent shall not be affected by any notice to the contrary
received by it on or after such date.
SECTION 11.4 Disputes with Holders of Certain Senior Indebtedness. Any
----------------------------------------------------
failure by the Company to make any payment on or under any Senior Indebtedness,
other than any Senior Indebtedness as to which the provisions of this Section
11.4 shall have been waived by the Company in the instrument or instruments by
which the Company Incurred such Senior Indebtedness, shall not be deemed a
default under Section 11.1 hereof if (i) the Company shall be disputing its
obligation to make such payment or perform such obligation and (ii) either (A)
no final judgment relating to such dispute shall have been issued against the
Company which is in full force and effect and is not subject to further review,
including a judgment that has become final by reason of the expiration of the
time within which a party may seek further appeal or review, or (B) if a
judgment that is subject to further review or appeal has been issued, the
Company shall in good faith be prosecuting an appeal or other proceeding for
review, and a stay of execution shall have been obtained pending such appeal or
review.
SECTION 11.5 Trustee Not Charged with Knowledge of Prohibition. Anything
-------------------------------------------------
in this Article XI or elsewhere in this Indenture contained to the contrary
notwithstanding, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would
<PAGE>
92
prohibit the making of any payment of moneys to or by the Trustee and shall be
entitled to assume conclusively that no such facts exist and that no event
specified in clauses (b) and (c) of Section 11.1 has happened unless and until
the Trustee shall have received an Officers' Certificate to that effect or
notice in writing to that effect signed by or on behalf of the holder or holders
of Senior Indebtedness or any trustee or representative therefor who shall have
been certified by the Company or otherwise established to the reasonable
satisfaction of the Trustee to be such holder or holders or trustee or
representative; provided, however, that, if the Trustee shall not have received
the Officers' Certificate or notice provided for in this Section 11.5 at least
three Business Days preceding the date upon which by the terms hereof any moneys
become payable for any purpose, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
moneys and apply the same to the purpose for which they were received and shall
not be affected by any notice to the contrary that may be received by it within
three Business Days preceding such date. The Company shall give prompt written
notice to the Trustee and to each paying agent of any facts that would prohibit
any payment of moneys to or by the Trustee or any paying agent, and the Trustee
shall not be charged with knowledge of the curing of any default or the
elimination of any other fact or condition preventing such payment or
distribution unless and until the Trustee shall have received an Officers'
Certificate to such effect.
SECTION 11.6 Trustee to Effectuate Subordination. Each Holder of Notes
-----------------------------------
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as between such Holder and holders of Senior Indebtedness as
provided in this Article XI and appoints the Trustee its attorney-in-fact for
any and all such purposes.
SECTION 11.7 Rights of Trustee as Holder of Senior Indebtedness. The
--------------------------------------------------
Trustee shall be entitled to all the rights set forth in this Article XI with
respect to any Senior Indebtedness which may at the time be held by it, to the
same extent as any other holder of Senior Indebtedness and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
Nothing in this Article XI shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 7.7.
SECTION 11.8 Article Applicable to Paying Agents. In case at any time
-----------------------------------
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article XI
shall in such case (unless the context shall otherwise require) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if the Paying Agent were named in this Article XI in
addition to or in place of the Trustee; provided, however, that Sections 11.5
and 11.7 shall not apply to the Company if it acts as Paying Agent.
SECTION 11.9 Subordination Rights Not Impaired by Acts or Omissions of
---------------------------------------------------------
the Company or Holders of Senior Indebtedness. No right of any present or
- ---------------------------------------------
future holders of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with
<PAGE>
93
the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
The holders of Senior Indebtedness may, at any time or from time to time and in
their absolute direction, change the manner, place or terms of payment, change
or extend the time of payment of, or renew or alter, any such Senior
Indebtedness, or amend or supplement any instrument pursuant to which any such
Senior Indebtedness is issued or by which it may be secured, or release any
security therefor, or exercise or refrain from exercising any other of their
rights under such Senior Indebtedness, including, without limitation, the waiver
of default thereunder, all without notice to or assent from the Holders of the
Notes or the Trustee and without affecting the obligations of the Company, the
Trustee or the Holders of Notes under this Article XI.
SECTION 11.10 Trustee Not Fiduciary for Holders of Senior Indebtedness.
--------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the holders of the
Senior Indebtedness, and shall not be liable to any such holders if it shall
mistakenly pay over or distribute money or assets to securityholders or the
Company. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article XI and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 11.11 Notice of Acceleration. If payment of the Notes is
----------------------
accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness or the trustee
or representative of such holders of the acceleration. The Company may not make
any payment on the Notes that would be prohibited by paragraph (b) of Section
11.1 until five Business Days after such holders, trustee or representative of
the Designated Senior Indebtedness receives notice of such acceleration and,
thereafter, may make such payment on the Notes only if the subordination
provisions hereof otherwise permit payment at such time.
SECTION 11.12 Relative Rights. This Article XI defines the relative
---------------
rights of Holders of Notes and holders of Senior Indebtedness. Nothing in this
Indenture shall (i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms, (ii) affect the
relative rights of Holders of Notes and creditors of the Company other than
their rights in relation to holders of Senior Indebtedness or (iii) prevent the
Trustee or any Holder from exercising its available remedies upon a Default or
Event of Default, subject to the rights of holders and owners of Senior
Indebtedness to receive distributions and payments otherwise payable to Holders
of Notes. If the Company fails because of this Article XI to pay principal of,
interest, premium, if any, Additional Amounts, if any, or Liquidated Damages, if
any, on a Note on the due date, the failure is still a Default or Event of
Default.
<PAGE>
94
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1 TIA Controls. If any provision of this Indenture limits,
------------
qualifies, or conflicts with the duties imposed by operation of Section 3.18(c)
of the TIA, the imposed duties shall control.
SECTION 12.2 Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or first-class mail, postage prepaid, addressed
as follows:
if to the Company:
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
D-81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +202-624-7222
Attention: Joseph M. Berl, Esq.
if to the Trustee:
The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Each of the Company and the Trustee by written notice to each other such
Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, must be in
writing and shall be deemed to have been given or made as of the date so
delivered if personally delivered; when receipt is acknowledged, if telecopied;
and upon actual receipt if sent by first class mail, postage prepaid (except
that a notice of change of address and a Notice to the Trustee shall not be
deemed to have been given until actually received by the addressee).
<PAGE>
95
Any notice or communication mailed to a Holder shall be mailed to such
Person by first-class mail or other equivalent means at such Person's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Notices regarding the Notes in global form will be published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and, if and so long as the Notes are listed, admitted or
eligible for trading on a stock exchange or trading market and the rules of such
stock exchange or trading market shall so require, a newspaper having a general
circulation in the locations which the stock exchange or trading market
requires). Notices regarding the Definitive Notes will be mailed to Holders by
first-class mail at their respective addresses as they appear on the
registration books of the Registrar and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, such notices
will be published in a newspaper having a general circulation in the locations
which such stock exchange or trading market requires. Notices given by
publication will be deemed given on the first date on which publication is made
and notices given by first-class mail, postage prepaid, will be deemed given
five calendar days after mailing.
SECTION 12.3 Communications by Holders with Other Holders. Holders may
--------------------------------------------
communicate pursuant to Section 312(b) of the TIA with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other person shall have the protection of Section
312(c) of the TIA.
SECTION 12.4 Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Company to the Trustee or an Agent to take any
action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5), stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied or complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee or such Agent (which shall include the
statements set forth in Section 12.5) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been satisfied or
complied with.
<PAGE>
96
SECTION 12.5 Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of 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 12.6 Rules by Trustee, Paying Agent, Registrar. The Trustee,
-----------------------------------------
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.7 Legal Holidays. If a payment date is not a Business Day,
--------------
payment may be made on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
SECTION 12.8 Governing Law. This Indenture and the Notes shall be
-------------
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
SECTION 12.9 Submission to Jurisdiction; Appointment of Agent for
----------------------------------------------------
Service; Waiver. To the fullest extent permitted by applicable law, the
- ---------------
Company irrevocably submits to the non-exclusive jurisdiction of any federal or
state court in the Borough of Manhattan in The City of New York, County and
State of New York, United States of America, in any suit or proceeding based on
or arising under this Indenture and the Notes, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints Corporation Services Company (the "Authorized Agent"), for a period of
----------------
ten years from the date hereof or until such time as no Notes are outstanding,
as its authorized agent upon whom process may be served in any such suit or
proceeding. The Company represents that it has notified the Authorized Agent of
such designation and appointment and that the Authorized Agent has accepted the
same in writing. The Company hereby irrevocably authorizes and directs its
Authorized Agent to accept such service. The
<PAGE>
97
Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner. Notwithstanding the
foregoing, any action against the Company arising out of or based on this
Indenture, the Notes or the transactions contemplated hereby may also be
instituted in any competent court in Germany, and the Company expressly accepts
the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law, any
immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Indenture, the Notes or the transactions
contemplated hereby.
To the extent permitted by applicable law, the Company and the Trustee each
waive any right to have a jury participate in resolving any dispute, whether
sounding in contract, tort, or otherwise arising out of, connected with, related
to or incidental to the relationship established between them in connection with
this agreement. Instead, any disputes resolved in court will be resolved in a
bench trial without a jury.
The provisions of this Section 12.9 are intended to be effective upon the
execution of this Indenture and the Notes without any further action by the
Company or the Trustee and the introduction of a true copy of this Indenture
into evidence shall be conclusive and final evidence as to such matters.
SECTION 12.10 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of any of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.11 No Personal Liability of Directors, Officers, Employees,
-------------------------------------------------------
Stockholders or Incorporators. No director, officer, employee, incorporator or
- -----------------------------
stockholder of the Company shall have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes.
SECTION 12.12 Currency Indemnity. Euro is the sole currency of account
------------------
and payment for all sums payable by the Company under or in connection with the
Notes, including damages. Any amount received or recovered in a currency other
than Euro (whether as a result of, or the enforcement of, a judgment or order of
a court of any jurisdiction, in the winding-up or dissolution of the Company or
otherwise) by any Holder of a Note, the Trustee or the Agents in
<PAGE>
98
respect of any sum expressed to be due to it from the Company shall only
constitute a discharge to the Company to the extent of the Euro amount which the
recipient is able to purchase with the amount so received or recovered in that
other currency on the date of that receipt or recovery (or, if it is not
practicable to make that purchase on that date, on the first date on which it is
practicable to do so). If that Euro amount is less than the Euro amount
expressed to be due to the recipient, the Company shall indemnify it against any
loss sustained by it as a result. If the Euro amount is greater than the Euro
amount expressed to be due to the recipient under this Agreement, the Company
shall be entitled to the amount of such excess. In any event, the Company shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this subsection, it will be sufficient for the Trustee or any Holder
of a Note to certify in a satisfactory manner (indicating the sources of
information used) that it would have suffered a loss had an actual purchase of
Euro been made with the amount so received in that other currency on the date of
receipt or recovery (or, if a purchase of Euro on such date had not been
practicable, on the first date on which it would have been practicable, it being
required that the need for a change of date be certified in the manner mentioned
above). These indemnities constitute a separate and independent obligation from
the Company's other obligations, shall give rise to a separate and independent
cause of action, shall apply irrespective of any indulgence granted by the
Trustee or any Holder of a Note and shall continue in full force and effect
despite any other judgment, order, claim or proof for a liquidated amount in
respect of any sum due under any Note.
SECTION 12.13 Successors. All agreements of the Company in this Indenture
----------
and the Notes shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 12.14 Counterpart Originals All parties hereto may sign any
------------------------------------------------------
number of copies of this Indenture. Each signed copy or counterpart shall be
- ----------------------------------
an original, but all of them together shall represent one and the same
agreement.
SECTION 12.15 Severability. In case any one or more of the provisions in
------------
this Indenture or in the Notes shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 12.16 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 of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, as of the date first written above.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By: /s/ Andreas Eder
------------------------------
Name: Andreas Eder
Title: President and Chief Executive
Officer
By: /s/ Robert Eckert
------------------------------
Name: Robert Eckert
Title: Chief Financial Officer and
Treasurer
THE BANK OF NEW YORK, as Trustee,
Registrar and Paying Agent
By: /s/ Mike Hellmuth
------------------------------
Name: Mike Hellmuth
Title: Assistant Vice President
<PAGE>
EXHIBIT A
TO THE INDENTURE
[FORM OF FACE OF GLOBAL NOTE]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUER AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF ANY
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
A-1
<PAGE>
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
THIS NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS
NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.7 OF THE
INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.6 OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND
(4) THIS GLOBAL NOTE MAY BE DELIVERED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUER.
A-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Pay-In-Kind Note due 2009
CUSIP No.:
No. (Euro)25,000,000
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay The Bank of New York Depository (Nominees) Limited or registered
assigns upon surrender hereof the principal sum indicated on Schedule A hereof,
on August 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2005
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:_____________________________
Name:
Title:
Dated: August 26, 1999
A-4
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Pay-In-Kind Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below. The Notes will accrue
interest at a rate per annum of 13.0% on the principal amount then outstanding,
and be payable to the Holder hereof semi-annually in arrears on each February 15
and August 15, or if any such day is not a Business Day on the next succeeding
Business Day. Notwithstanding any exchange of this Note for a Definitive Note
during the period starting on a Record Date relating to such Definitive Note and
ending on the immediately succeeding Interest Payment Date, the interest due on
such Interest Payment Date shall be payable to the Person in whose name this
Global Note is registered at the close of business on the Record Date for such
interest. 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 the date hereof.
Interest is payable through and including the interest payment due on August 15,
2004 (or the next succeeding Business Day, if required as set forth above)
solely in Secondary Notes which, upon issuance, shall become Notes for all
purposes governed by the Indenture. Thereafter, interest shall be payable
solely in cash. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
No payments, in cash or otherwise, will be made in respect of any
fractional denomination amounts to which Holders would otherwise be entitled
(including, without limitation, in respect of interest paid in the form of
Secondary Notes); provided, however, that a Holder's entitlement to such
Secondary Notes in denominations of (Euro)1.00 or integral multiples thereof
shall be calculated on the basis of the aggregate principal amount of Notes
registered in such Holder's name on the relevant Record Date.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein. Amounts payable pursuant to this
paragraph shall be payable through and including August 15, 2004, in Secondary
Notes and thereafter only in cash.
If the Company issues Secondary Notes in lieu of cash payment of interest
due on any Interest Payment Date pursuant to this paragraph 1, it shall give
notice to the Trustee not less than five Business Days prior to the relevant
Interest Payment Date, and shall instruct the Trustee upon Company Order given
not less than five or more than 45 days prior to such Interest Payment Date to
authenticate Secondary Notes, dated such Interest Payment Date, in a principal
A-5
<PAGE>
amount equal to the amount of interest not paid in cash in respect of this Note
on such Interest Payment Date. Each issuance of Secondary Notes in lieu of cash
payments of interest on the Notes shall be made pro rata with respect to the
outstanding Notes. Any such Secondary Notes shall be subject to the same terms
(including maturity date and rate of interest from time to time payable thereon)
as this Note except, as the case may be, with respect to the title, issuance
date and aggregate principal amount.
2. Liquidated Damages; Adjustment of Conversion Ratio. Pursuant to the
--------------------------------------------------
Registration Rights Agreement, the Company has agreed to file a shelf
registration statement (the "Resale Shelf Registration Statement") with the
Commission with respect to resales of the Notes (including Secondary Notes)
(which Resale Shelf Registration Statement shall also register the sale of the
underlying Common Stock issuable upon conversion thereof) and use its best
efforts to (i) cause such Resale Shelf Registration Statement to be declared
effective by the Commission and (ii) keep such Resale Shelf Registration
Statement continuously effective, supplemented and amended to ensure that it is
available for resales of Notes by holders entitled to this benefit and to ensure
that such Resale Shelf Registration Statement conforms and continues to conform
with the requirements of the Registration Rights Agreement, the Securities Act
and the policies, rules and regulations of the Commission, as announced from
time to time, until, subject to certain exceptions specified in the Registration
Rights Agreement, such time as no Notes remain as Transfer Restricted Securities
(as defined below). The Holders shall be entitled to receive payment of
additional interest in the form of Liquidated Damages in the event such Resale
Shelf Registration Statement is not declared effective and in certain other
events, subject, in each case, to certain conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement. Liquidated
Damages which may be payable pursuant to the Registration Rights Agreement shall
be payable in the same manner as set forth herein with respect to the stated
interest. The provisions of the Registration Rights Agreement relating to such
Liquidated Damages are incorporated herein by reference and made a part hereof
as if set forth herein in full. The Company shall provide written notice to the
Trustee of the accrual and amount of Liquidated Damages, if any, not less than
ten (10) Business Days prior to each Interest Payment Date. Absent such notice,
the Trustee shall be conclusively entitled to presume that no Liquidated Damages
have accrued and are owing. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note and the Common Stock issuable upon conversion
thereof until (i) the date on which such Note (and the Common Stock issuable
upon conversion thereof) has been effectively registered under the Securities
Act and disposed of in accordance with the Resale Shelf Registration Statement,
(ii) the date on which such Note (and the Common Stock issuable upon conversion
thereof) is distributed to the public pursuant to Rule 144 under the Securities
Act (or any similar provision then in effect) or is saleable pursuant to Rule
144(k) under the Act (or any similar provision then in effect) or (iii) the date
on which such Note (and the Common Stock issuable upon the conversion thereof)
ceases to be outstanding.
The Company has also agreed with the Initial Purchaser, for the benefit of
the Holders of the Notes, that it will use its best efforts to cause to become
effective no later than one year after the Closing Date, a shelf registration
statement with respect to the issuance of the Conversion Shares upon conversion
of the Notes, or if the Company determines that, notwithstanding its best
A-6
<PAGE>
efforts, the Commission will not declare such registration statement effective,
a shelf registration statement with respect to the resale of the Conversion
Shares (either of such shelf registration statements, a "Conversion Shelf
Registration Statement"). The Company is required to use its best efforts, at
its cost, to maintain the effectiveness of the Conversion Shelf Registration
Statement until the earlier of (i) such time as all Notes (including all
Secondary Notes that have been or could be issued pursuant to the terms hereof)
have been converted or redeemed and (ii) August 15, 2009, or in the case of a
Conversion Shelf Registration Statement with respect to the resale of Conversion
Shares, until the earlier of (i) the date on which all Notes (including all
Secondary Notes that have been or could be issued pursuant to the terms hereof)
can be resold by holders thereof without restriction and without registration
under the Securities Act and (ii) such time as all the Conversion Shares covered
by such registration statement have been resold pursuant to such registration
statement. Holders of Notes will not be named as selling security holders in a
Conversion Shelf Registration Statement covering the issuance of the Conversion
Shares, but would be named in a Conversion Shelf Registration Statement covering
resale of the Conversion Shares, if applicable. If such a Conversion Shelf
Registration Statement is not declared effective on or prior to the date that is
one year after the Closing Date, the denominator of the Conversion Ratio will be
decreased by 2.04%. Holders of Notes will be able to convert their Notes only
if a registration statement relating to the Conversion Shares underlying the
Notes is then effective and available, or the conversion of the Notes is exempt
from the registration requirements of the Securities Act, and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states or other jurisdictions in which the various
holders of the Notes reside. The provisions of the Registration Rights
Agreement relating to the Conversion Shelf Registration Statement and the
decrease of the Conversion Ratio are incorporated herein by reference and made a
part hereof as if set forth herein in full.
3. Additional Amounts. All payments made by the Company on the Notes will
------------------
be made without withholding or deduction for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of Germany or any
jurisdiction in which the Company or any Successor Company is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
A-7
<PAGE>
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (a) to (d) inclusive
above.
4. Method of Payment. The Company shall pay interest on the Notes (except
-----------------
defaulted interest) to the Person in whose name this Note is registered at the
close of business on the Record Date for such interest. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in Euro or in such other coin or currency of the European
Monetary Union that at the time of payment which is legal tender for payment of
public and private debts. Immediately available funds for the payment of the
principal of (and premium, if any), interest, Additional Amounts, if any, and
Liquidated Damages, if any, on this Note due on any Interest Payment Date,
Maturity Date, Redemption Date or other repurchase date will be made available
to the Paying Agent to permit the Paying Agent to pay such funds to the Holders
on such respective dates.
5. Paying Agent and Registrar. Initially, The Bank of New York will act
--------------------------
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
A-8
<PAGE>
6. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of August 26, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] [Secondary] Notes (as defined in the Indenture) of the Company
designated as its 13.0% Convertible Senior Subordinated Pay-In-Kind Notes due
2009 (together with the [Original] [Additional] [Secondary] Notes, the "Notes").
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 of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the TIA for a
statement of them. The Notes are not secured by any of the assets of the
Company. The Notes are limited in aggregate principal amount to
(Euro)100,000,000 subject to the terms of the Indenture. Each Holder, by
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
7. Ranking and Subordination. The Notes will be general unsecured
-------------------------
obligations of the Company and will rank in all respects pari passu with all
other senior subordinated Indebtedness of the Company. The Notes will rank
senior to all existing and future Indebtedness of the Company that is neither
Senior Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness
of the Company that is Senior Indebtedness shall rank senior to the Notes in
accordance with the Indenture. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Notes may be paid by the
Company. The Company agrees, and each Holder by accepting a Note agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give effect to such provisions, and each Holder appoints the Trustee his
attorney-in-fact for any and all such purposes.
8. Optional Redemption. The Notes will be redeemable, at the Company's
-------------------
option, in whole or in part, on and after August 15, 2004 upon not less than 30
nor more than 60 days' prior notice published in a leading newspaper having a
general circulation in New York (which is expected to be The Wall Street
Journal) and in Frankfurt (which is expected to be the Frankfurter Allgemeine
Zeitung) (and if, and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules of such stock
exchange or trading market shall so require, published in a newspaper having a
general circulation in the locations which such stock exchange or trading market
shall require) at the redemption prices (expressed as a percentage of principal
amount) set forth below (each, a "Redemption Price"), plus accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of each of the years indicated below:
A-9
<PAGE>
<TABLE>
<CAPTION>
Redemption
Year Price
---- ---------------
<S> <C>
2004..................................................... 106.500%
2005..................................................... 104.333%
2006..................................................... 102.167%
2007 and thereafter...................................... 100.000%
</TABLE>
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of (Euro)1.00
in original principal amount or less shall be redeemed in part. If any Note is
to be redeemed in part only, the notice of redemption relating to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
and delivered to the Depositary upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
9. Special Tax Redemption. The Notes may be redeemed, at the option of
----------------------
the Company in whole but not in part, at any time upon giving not less than 30
nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price (each, a "Redemption Price") equal to the
principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the date fixed by the Company for redemption (a
"Tax Redemption Date"), and, all Additional Amounts, if any, and Liquidated
Damages, if any, then due and which will become due on the Tax Redemption Date
as a result of the redemption or otherwise, if the Company determines that, as a
result of (i) any change in, or amendment to, the laws or treaties (or any
regulations or rulings promulgated thereunder) of The Federal Republic of
Germany (or any political subdivision or taxing authority thereof) affecting
taxation which becomes effective on or after the Issue Date, or (ii) any change
in or new or different position regarding the application, administration or
interpretation of such laws, treaties, regulations or rulings (including a
holding, judgment or order by a court of competent jurisdiction), which change,
amendment, application or interpretation becomes effective on or after the Issue
Date, the Company is, or on the next Interest Payment Date would be, required to
pay Additional Amounts, and the Company determines that such payment obligation
cannot be avoided by the Company taking reasonable measures. Notwithstanding the
foregoing, no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to make such
payment or withholding if a payment in respect of the Notes were then due.
Prior to the publication or, where relevant, mailing of any notice of redemption
of the Notes pursuant to the foregoing, the Company will deliver to the Trustee
an opinion of an
A-10
<PAGE>
independent tax counsel of recognized international standing to the effect that
the circumstances referred to above exist. The Trustee shall accept such opinion
as sufficient evidence of the satisfaction of the conditions precedent described
above, in which event it shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at least 30
--------------------
days but not more than 60 days before the redemption date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, a newspaper
having a general circulation in the location which such stock exchange or
trading market shall require). Notes in denominations of (Euro)1.00 principal
amount at maturity may be redeemed only in whole. The Trustee may select for
redemption portions (equal to (Euro)1.00 or any integral multiple thereof) of
the principal amount at maturity of Notes that have denominations larger than
(Euro)1.00.
Except as set forth in the Indenture, from and after any redemption date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest, Additional Amounts, if any,
or Liquidated Damages, if any, and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price.
11. Conversion. Subject to the provisions of the Indenture, unless
----------
previously redeemed, the Notes are convertible (in denominations of (Euro)1.00
principal amount at maturity or integral multiples thereof), at the option of
the holder thereof, into Capital Stock of the Company at any time after 365 days
following the Issue Date and prior to the maturity date. The number of shares
of Capital Stock of the Company ("Conversion Shares") issuable upon conversion
of the Notes is equal to the principal amount of the Notes being converted (on
the date of conversion) divided by (Euro)25.00, subject to adjustment as
provided in the Indenture (the "Conversion Ratio"). Except as described below,
no adjustment will be made on conversion of any Notes for interest accrued
thereon or for dividends paid on outstanding Capital Stock of the Company. If
Notes not called for redemption are converted (including pursuant to the
mandatory conversion feature described below) after a record date for the
payment of interest and prior to the next succeeding interest payment date, such
Notes must be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the principal amount so converted. The
Company is not required to issue fractional shares upon conversion of Notes
(including pursuant to the mandatory conversion feature described below) and, in
lieu thereof, will pay a cash adjustment based upon the Closing Price on the
Neuer Markt of the Common Stock on the last Trading Day prior to the day of
conversion. In the case of Notes called for redemption, conversion rights will
expire at the close of business on the Trading Day next preceding the date fixed
for redemption, unless the Company defaults in payment of the redemption price.
A-11
<PAGE>
In addition, if the closing price on the Neuer Markt of the Common Stock
during any period described below has exceeded the price for such period
referred to below for at least 30 consecutive Trading Days ("Market Criteria,"
with the 30-day period being referred to as the "Market Criteria Period"), and
the Conversion Shelf Registration Statement described in paragraph 2 hereof is
effective and available, all of the Notes will be automatically converted into
that number of Conversion Shares derived by application of the Conversion Ratio;
provided, however, that if the Market Criteria is satisfied during the first
year after the Closing Date, the conversion will not occur until the one-year
anniversary of the Closing Date and will occur only if the closing price on the
Neuer Markt of the Common Stock is at least (Euro)32.00 on such date:
<TABLE>
<CAPTION>
Closing
-------
12 Months Beginning Price
-------------------- -----
<S> <C>
August 15, 1999 (Euro)32.00
August 15, 2000 (Euro)38.46
August 15, 2001 (Euro)44.92
August 15, 2002 (Euro)51.37
August 15, 2003 (Euro)57.83
</TABLE>
The denominator of the Conversion Ratio is subject to adjustment as
provided in Section 10.5 of the Indenture.
12. Change of Control Offer. Upon the occurrence of a Change of Control,
-----------------------
the Company will be required to make an offer to purchase all or any part (equal
to (Euro)1.00 in principal amount at maturity and integral multiples thereof) of
the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase. Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
13. Limitation on Disposition of Assets. When the aggregate amount of
-----------------------------------
Excess Proceeds from Asset Sales exceeds (Euro)5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to all Holders
and to the extent required by the terms thereof, to all holders of Pari Passu
Notes to purchase on a pro rata basis the maximum principal amount of Notes and
the maximum principal amount (or accreted value, as the case may be) of any such
Pari Passu Notes to which the Asset Sale Offer applies, that is an integral
multiple of (Euro)1,000 (or $1,000, as the case may be) that may be purchased
out of the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the outstanding principal amount thereof, plus accrued and unpaid interest
thereon plus Additional Amounts and Liquidated Damages, if any, to the date
fixed for the closing of such offer. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, subject to
applicable law, the Trustee shall select the Notes to be redeemed in accordance
with the Indenture; provided, however, that
A-12
<PAGE>
no Notes of or less (Euro)1.00 shall be purchased in part. Holders of Notes that
are the subject of an offer to purchase will receive an Asset Sale Offer from
the Company prior to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holders to Elect Purchase"
appearing below.
14. Denominations; Form. The Global Notes (including any Secondary Notes)
-------------------
are in registered global form, without coupons, in denominations of (Euro)1.00
and integral multiples of (Euro)1.00 and in no event shall Notes (including
Secondary Notes and Notes issued upon registration of transfer of such Secondary
Notes) be issued in denominations of less than (Euro)1.00.
15. Persons Deemed Owners. The registered Holder of this Note shall be
---------------------
treated as the owner of it for all purposes, subject to the terms of the
Indenture.
16. Unclaimed Funds. If funds for the payment of principal, interest,
---------------
Additional Amounts or Liquidated Damages remain unclaimed for two years, the
Trustee and the Paying Agents will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agents with
respect to such funds shall cease.
17. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
18. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
19. Restrictive Covenants. The Indenture imposes certain covenants that,
---------------------
among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
20. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
A-13
<PAGE>
21. Defaults and Remedies. If an Event of Default (other than an Event of
---------------------
Default specified in subsections 6.1(h) or (i) of the Indenture) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount at maturity of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal, premium, interest,
Additional Amounts, if any, and Liquidated Damages, if any, including an
accelerated payment) if it determines that withholding notice is in their
interest.
22. Trustee Dealings with Company. The Trustee under the Indenture, in
-----------------------------
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
23. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
24. Authentication. This Note shall not be valid until the Trustee or
--------------
authenticating agent signs the certificate of authentication on this Note.
25. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Note 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). Unless otherwise defined herein, terms
defined in the Indenture are used herein as defined therein.
26. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
27. Governing Law. The Indenture and the Notes shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
A-14
<PAGE>
A-15
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
(Euro)25,000,000.00. The following decreases/increases in the principal amount
at maturity of this Note have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________
</TABLE>
A-16
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [_] Section 4.16 [_]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
(Euro)__________
Date:_____________
Your Signature:________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:_____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
A-17
<PAGE>
EXHIBIT B
TO THE INDENTURE
[FORM OF FACE OF DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE
B-1
<PAGE>
ISSUER AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF ANY
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
B-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Conversion Senior Subordinated Pay-In-Kind Note due 2009
CUSIP No.: __________
No.____ (Euro)25,000,000
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay ______________________, or registered assigns, upon surrender
hereof the principal sum of (Euro)________, on August 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2005
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:_____________________________
Name:
Title:
B-4
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Pay-In-Kind Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below. The Notes will accrue
interest at a rate per annum of 13.0% on the principal amount then outstanding,
and be payable to the Holder hereof semi-annually in arrears on each February 15
and August 15, or if any such day is not a Business Day on the next succeeding
Business Day. 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 the date
hereof. Interest is payable through and including the interest payment due on
August 15, 2004 (or the next succeeding Business Day, if required as set forth
above) solely in Secondary Notes which, upon issuance, shall become Notes for
all purposes governed by the Indenture. Thereafter, interest shall be payable
solely in cash. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
No payments, in cash or otherwise, will be made in respect of any
fractional denomination amounts to which Holders would otherwise be entitled
(including, without limitation, in respect of interest paid in the form of
Secondary Notes); provided, however, that a Holder's entitlement to such
Secondary Notes in denominations of (Euro)1.00 or integral multiples thereof
shall be calculated on the basis of the aggregate principal amount of Notes
registered in such Holder's name on the relevant Record Date.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein. Amounts payable pursuant to this
paragraph shall be payable through and including August 15, 2004, in Secondary
Notes and thereafter only in cash.
If the Company issues Secondary Notes in lieu of cash payment of interest
due on any Interest Payment Date pursuant to this paragraph 1, it shall give
notice to the Trustee not less than five Business Days prior to the relevant
Interest Payment Date, and shall instruct the Trustee upon Company Order given
not less than five or more than 45 days prior to such Interest Payment Date to
authenticate Secondary Notes, dated such Interest Payment Date, in a principal
amount equal to the amount of interest not paid in cash in respect of this Note
on such Interest Payment Date. Each issuance of Secondary Notes in lieu of cash
payments of interest on the Notes shall be made pro rata with respect to the
outstanding Notes. Any such Secondary Notes shall be subject to the same terms
(including maturity date and rate of interest from time to time
B-5
<PAGE>
payable thereon) as this Note except, as the case may be, with respect to the
title, issuance date and aggregate principal amount.
2. Liquidated Damages; Adjustment of Conversion Ratio. Pursuant to the
--------------------------------------------------
Registration Rights Agreement, the Company has agreed to file a shelf
registration statement (the "Resale Shelf Registration Statement") with the
Commission with respect to resales of the Notes (which Resale Shelf Registration
Statement shall also register the sale of the underlying Common Stock issuable
upon conversion thereof) and use its best efforts to (i) cause such Resale Shelf
Registration Statement to be declared effective by the Commission and (ii) keep
such Resale Shelf Registration Statement continuously effective, supplemented
and amended to ensure that it is available for resales of Notes by holders
entitled to this benefit and to ensure that such Resale Shelf Registration
Statement conforms and continues to conform with the requirements of the
Registration Rights Agreement, the Securities Act and the policies, rules and
regulations of the Commission, as announced from time to time, until, subject to
certain exceptions specified in the Registration Rights Agreement, such time as
no Notes remain as Transfer Restricted Securities (as defined below). The
Holders shall be entitled to receive payment of additional interest in the form
of Liquidated Damages in the event such Resale Shelf Registration Statement is
not declared effective and in certain other events, subject, in each case, to
certain conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. Liquidated Damages which may be payable pursuant
to the Registration Rights Agreement shall be payable in the same manner as set
forth herein with respect to the stated interest. The provisions of the
Registration Rights Agreement relating to such Liquidated Damages are
incorporated herein by reference and made a part hereof as if set forth herein
in full. The Company shall provide written notice to the Trustee of the accrual
and amount of Liquidated Damages, if any, not less than ten (10) Business Days
prior to each Interest Payment Date. Absent such notice, the Trustee shall be
conclusively entitled to presume that no Liquidated Damages have accrued and are
owing. For purposes of the foregoing, "Transfer Restricted Securities" means
each Note and the Common Stock issuable upon conversion thereof until (i) the
date on which such Note (and the Common Stock issuable upon conversion thereof)
has been effectively registered under the Securities Act and disposed of in
accordance with the Resale Shelf Registration Statement, (ii) the date on which
such Note (and the Common Stock issuable upon conversion thereof) is distributed
to the public pursuant to Rule 144 under the Securities Act (or any similar
provision then in effect) or is saleable pursuant to Rule 144(k) under the Act
(or any similar provision then in effect) or (iii) the date on which such Note
(and the Common Stock issuable upon the conversion thereof) ceases to be
outstanding.
The Company has also agreed with the Initial Purchaser, for the benefit of
the Holders of the Notes, that it will use its best efforts to cause to become
effective no later than one year after the Closing Date, a shelf registration
statement with respect to the issuance of the Conversion Shares upon conversion
of the Notes, or if the Company determines that, notwithstanding its best
efforts, the Commission will not declare such registration statement effective,
a shelf registration statement with respect to the resale of the Conversion
Shares (either of such shelf registration statements, a "Conversion Shelf
Registration Statement"). The Company is required to use its
B-6
<PAGE>
best efforts, at its cost, to maintain the effectiveness of the Conversion Shelf
Registration Statement until the earlier of (i) such time as all Notes
(including all Secondary Notes that have been or could be issued pursuant to the
terms hereof) have been converted or redeemed and (ii) August 15, 2009, or in
the case of a Conversion Shelf Registration Statement with respect to the resale
of Conversion Shares, until the earlier of (i) the date on which all Notes
(including all Secondary Notes that have been or could be issued pursuant to the
terms hereof) can be resold by holders thereof without restriction and without
registration under the Securities Act and (ii) such time as all the Conversion
Shares covered by such registration statement have been resold pursuant to such
registration statement. Holders of Notes will not be named as selling security
holders in a Conversion Shelf Registration Statement covering the issuance of
the Conversion Shares, but would be named in a Conversion Shelf Registration
Statement covering resale of the Conversion Shares, if applicable. If such a
Conversion Shelf Registration Statement is not declared effective on or prior to
the date that is one year after the Closing Date, the denominator of the
Conversion Ratio will be decreased by 2.04%. Holders of Notes will be able to
convert their Notes only if a registration statement relating to the Conversion
Shares underlying the Notes is then effective and available, or the conversion
of the Notes is exempt from the registration requirements of the Securities Act,
and such securities are qualified for sale or exempt from qualification under
the applicable securities laws of the states or other jurisdictions in which the
various holders of the Notes reside. The provisions of the Registration Rights
Agreement relating to the Conversion Shelf Registration Statement and the
decrease of the Conversion Ratio are incorporated herein by reference and made a
part hereof as if set forth herein in full.
3. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of Germany or any jurisdiction in
which the Company or any Successor Company is organized or is otherwise resident
for tax purposes or any political subdivision thereof or any authority having
power to tax therein or any jurisdiction from or through which payment is made
(each a "Relevant Taxing Jurisdiction"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any payments made by the Company with respect to the Notes,
including payments of principal, redemption price, interest or premium, the
Company will pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments by
the Holders of the Notes or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a
B-7
<PAGE>
citizen or resident or national of, or carrying on a business or
maintaining a permanent establishment in, or being physically present in,
the Relevant Taxing Jurisdiction) other than by the mere holding of such
Note or enforcement of rights thereunder or the receipt of payments in
respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (a) to (d) inclusive
above.
4. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Person in whose name this Note is registered
at the close of business on the Record Date for such interest. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in Euro or in such other coin or currency of
the European Monetary Union that at the time of payment which is legal tender
for payment of public and private debts. Immediately available funds for the
payment of the principal of (and premium, if any), interest, Additional Amounts,
if any, and Liquidated Damages, if any, on this Note due on any Interest Payment
Date, Maturity Date, Redemption Date or other repurchase date will be made
available to the Paying Agent to permit the Paying Agent to pay such funds to
the Holders on such respective dates.
5. Paying Agent and Registrar. Initially, The Bank of New York will
--------------------------
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated
---------
as of August 26, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] [Secondary] Notes (as defined in
B-8
<PAGE>
the Indenture) of the Company designated as its 13.0% Convertible Senior
Subordinated Pay-In-Kind Notes due 2009 (together with the [Original]
[Additional] [Secondary] Notes, the "Notes"). 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 of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of the Company. The Notes are limited in
aggregate principal amount to (Euro)100,000,000 subject to the terms of the
Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
7. Ranking and Subordination. The Notes will be general unsecured
-------------------------
obligations of the Company and will rank in all respects pari passu with all
other senior subordinated Indebtedness of the Company. The Notes will rank
senior to all existing and future Indebtedness of the Company that is neither
Senior Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness
of the Company that is Senior Indebtedness shall rank senior to the Notes in
accordance with the Indenture. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Notes may be paid by the
Company. The Company agrees, and each Holder by accepting a Note agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give effect to such provisions, and each Holder appoints the Trustee his
attorney-in-fact for any and all such purposes.
8. Optional Redemption. The Notes will be redeemable, at the Company's
-------------------
option, in whole or in part, on and after August 15, 2004 upon not less than 30
nor more than 60 days' prior notice published in a leading newspaper having a
general circulation in New York (which is expected to be The Wall Street
Journal) and in Frankfurt (which is expected to be the Frankfurter Allgemeine
Zeitung) (and if, and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules of such stock
exchange or trading market shall so require, published in a newspaper having a
general circulation in the locations which such stock exchange or trading market
shall require) and mailed by first-class mail to each Holder's registered
address, at the redemption prices (expressed as a percentage of principal
amount) set forth below (each, a "Redemption Price"), plus accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date (and, subject to the rights of Holders of record on
the relevant record date to receive interest and Additional Amounts, if any, and
Liquidated Damages, if any, due on the relevant interest payment date in respect
thereof), if redeemed during the twelve-month period beginning on August 15 of
each of the years indicated below:
B-9
<PAGE>
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
2004.................................... 106.500%
2005.................................... 104.333%
2006.................................... 102.167%
2007 and thereafter..................... 100.000%
</TABLE>
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of (Euro)1.00
in original principal amount or less shall be redeemed in part. If any Note is
to be redeemed in part only, the notice of redemption relating to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption.
9. Special Tax Redemption. The Notes may be redeemed, at the option of the
----------------------
Company in whole but not in part, at any time upon giving not less than 30 nor
more than 60 days' notice to the Holders (which notice shall be irrevocable), at
a redemption price equal to the principal amount thereof, together with accrued
and unpaid interest and Liquidated Damages, if any, to the date fixed by the
Company for redemption (a "Tax Redemption Date"), and, all Additional Amounts,
if any, and Liquidated Damages, if any, then due and which will become due on
the Tax Redemption Date as a result of the redemption or otherwise, if the
Company determines that, as a result of (i) any change in, or amendment to, the
laws or treaties (or any regulations or rulings promulgated thereunder) of The
Federal Republic of Germany (or any political subdivision or taxing authority
thereof) affecting taxation which becomes effective on or after the Issue Date,
or (ii) any change in or new or different position regarding the application,
administration or interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent jurisdiction),
which change, amendment, application or interpretation becomes effective on or
after the Issue Date, the Company is, or on the next Interest Payment Date would
be, required to pay Additional Amounts, and the Company determines that such
payment obligation cannot be avoided by the Company taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to make such payment or withholding if a payment in respect of the
Notes were then due. Prior to the publication or, where relevant, mailing of any
notice of redemption of the Notes pursuant to the foregoing, the Company will
deliver to the Trustee an opinion of an independent tax counsel of
B-10
<PAGE>
recognized international standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at least 30
--------------------
days but not more than 60 days before the redemption date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, a newspaper
having a general circulation in the locations which such stock exchange or
trading market shall require) and mailed to Holders by first-class mail at their
respective addresses as they appear on the registration books of the Registrar.
Notes in denominations of (Euro)1.00 principal amount at maturity may be
redeemed only in whole. The Trustee may select for redemption portions (equal to
(Euro)1.00 or any integral multiple thereof) of the principal amount at maturity
of Notes that have denominations larger than (Euro)1.00.
Except as set forth in the Indenture, from and after any redemption date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest, Additional Amounts, if any,
or Liquidated Damages, if any, and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price.
11. Conversion. Subject to the provisions of the Indenture, unless
----------
previously redeemed, the Notes are convertible (in denominations of (Euro)1.00
principal amount at maturity or integral multiples thereof), at the option of
the holder thereof, into Capital Stock of the Company at any time after 365 days
following the Issue Date and prior to the maturity date. The number of shares of
Capital Stock of the Company ("Conversion Shares") issuable upon conversion of
the Notes is equal to the principal amount of the Notes being converted (on the
date of conversion) divided by (Euro)25.00, subject to adjustment as provided in
the Indenture (the "Conversion Ratio"). Except as described below, no adjustment
will be made on conversion of any Notes for interest accrued thereon or for
dividends paid on outstanding Capital Stock of the Company. If Notes not called
for redemption are converted (including pursuant to the mandatory conversion
feature described below) after a record date for the payment of interest and
prior to the next succeeding interest payment date, such Notes must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount so converted. The Company is not required
to issue fractional shares upon conversion of Notes (including pursuant to the
mandatory conversion feature described below) and, in lieu thereof, will pay a
cash adjustment based upon the Closing Price on the Neuer Markt of the Common
Stock on the last Trading Day prior to the day of conversion. In the case of
Notes called for redemption, conversion rights will expire at the close of
business on the Trading Day next preceding the date fixed for redemption, unless
the Company defaults in payment of the redemption price.
B-11
<PAGE>
In addition, if the closing price on the Neuer Markt of the Common Stock
during any period described below has exceeded the price for such period
referred to below for at least 30 consecutive Trading Days ("Market Criteria,"
with the 30-day period being referred to as the "Market Criteria Period"), and
the Conversion Shelf Registration Statement described in paragraph 2 hereof is
effective and available, all of the Notes will be automatically converted into
that number of Conversion Shares derived by application of the Conversion Ratio;
provided, however, that if the Market Criteria is satisfied during the first
year after the Closing Date, the conversion will not occur until the one-year
anniversary of the Closing Date and will occur only if the closing price on the
Neuer Markt of the Common Stock is at least (Euro)32.00 on such date:
<TABLE>
<CAPTION>
Closing
-----------
12 Months Beginning Price
------------------- -----------
<S> <C>
August 15, 1999 (Euro)32.00
August 15, 2000 (Euro)38.46
August 15, 2001 (Euro)44.92
August 15, 2002 (Euro)51.37
August 15, 2003 (Euro)57.83
</TABLE>
The denominator of the Conversion Ratio is subject to adjustment as
provided in Section 10.5 of the Indenture.
12. Change of Control Offer. Upon the occurrence of a Change of Control,
-----------------------
the Company will be required to make an offer to purchase all or any part (equal
to (Euro)1.00 in principal amount at maturity and integral multiples thereof) of
the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase. Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
13. Limitation on Disposition of Assets. When the aggregate amount of
-----------------------------------
Excess Proceeds from Asset Sales exceeds (Euro)5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to all Holders
and to the extent required by the terms thereof, to all holders of Pari Passu
Notes to purchase on a pro rata basis the maximum principal amount of Notes and
the maximum principal amount (or accreted value, as the case may be) of any such
Pari Passu Notes to which the Asset Sale Offer applies, that is an integral
multiple of (Euro)1,000 (or $1,000, as the case may be) that may be purchased
out of the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the outstanding principal amount thereof, plus accrued and unpaid interest
thereon plus Additional Amounts and Liquidated Damages, if any, to the date
fixed for the closing of such offer. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, subject to
applicable law, the Trustee
B-12
<PAGE>
shall select the Notes to be redeemed in accordance with the Indenture;
provided, however, that no Notes of or less (Euro)1.00 shall be purchased in
part. Holders of Notes that are the subject of an offer to purchase will receive
an Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holders to Elect Purchase" appearing below.
14. Denominations; Form. The Global Notes (including any Secondary Notes)
-------------------
are in registered global form, without coupons, in denominations of (Euro)1.00
and integral multiples of (Euro)1.00 and in no event shall Notes (including
Secondary Notes and Notes issued upon registration of transfer of such Secondary
Notes) be issued in denominations of less than (Euro)1.00.
15. Persons Deemed Owners. The registered Holder of this Note shall be
---------------------
treated as the owner of it for all purposes, subject to the terms of the
Indenture.
16. Unclaimed Funds. If funds for the payment of principal, interest,
---------------
Additional Amounts or Liquidated Damages remain unclaimed for two years, the
Trustee and the Paying Agents will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agents with
respect to such funds shall cease.
17. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
18. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
19. Restrictive Covenants. The Indenture imposes certain covenants that,
---------------------
among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
B-13
<PAGE>
20. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
21. Defaults and Remedies. If an Event of Default (other than an Event of
---------------------
Default specified in subsections 6.1(h) or (i) of the Indenture) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount at maturity of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal, premium, interest, Additional
Amounts, if any, and Liquidated Damages, if any, including an accelerated
payment) if it determines that withholding notice is in their interest.
22. Trustee Dealings with Company. The Trustee under the Indenture, in
-----------------------------
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
23. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
24. Authentication. This Note shall not be valid until the Trustee or
--------------
authenticating agent signs the certificate of authentication on this Note.
25. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Note 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). Unless otherwise defined herein, terms
defined in the Indenture are used herein as defined therein.
26. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such
B-14
<PAGE>
numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
27. Governing Law. The Indenture and the Notes shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
B-15
<PAGE>
--------------------------------------------------
ASSIGNMENT FORM
To assign this Note fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
--------------------------------------------------------------
Date:__________________ Your Signature:_______________________
--------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
B-16
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
(Euro)__________
Date:_____________
Your Signature:________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:_____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
B-17
<PAGE>
EXHIBIT C
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM
RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.7(b) of the Indenture)
Cybernet Internet Services International, Inc.
c/o The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
RE: 13.0% Convertible Senior Subordinated Pay-In-Kind Notes due
2009 (the "Notes") of Cybernet Internet Services
International, Inc.
Reference is hereby made to the Indenture dated as of August 26, 1999
(the "Indenture") between Cybernet Internet Services International, Inc. and The
Bank of New York, as Trustee, Registrar and Paying Agent. Capitalized terms used
but not defined herein shall have the meanings given them in the Indenture.
This letter relates to (Euro)_________ (being any integral multiple of
(Euro)1.00) principal amount at maturity of Notes beneficially held through
interests in the Rule 144A Global Note (CUSIP No. _________) with the Depositary
in the name of ________(the "Transferor") account number ________. The
Transferor hereby requests that on [INSERT DATE] such beneficial interest in the
Rule 144A Global Note be transferred or exchanged for an interest in the
Regulation S Global Note (CUSIP (CINS) No. _________) in the same principal
denomination and transfer to (account no. ________). If this is a partial
transfer, a minimum amount of (Euro)1.00 and any integral multiple of (Euro)1.00
in excess thereof of the Rule 144A Global Note will remain outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or 904 of Regulation S
under the Securities Act, and accordingly the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a person in the United
States;
C-1
<PAGE>
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
the Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States,
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or 904(b) of Regulation S, as
applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
OR
--
(B) such transfer is being made in accordance with Rule 144 under the
Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
Dated: _____________, ____
[Name of Transferor]
By:________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number) _________________
_________________
_________________
C-3
<PAGE>
EXHIBIT D
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM
REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.7(c) of the Indenture)
Cybernet Internet Services International, Inc.
c/o The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
RE: 13.0% Convertible Senior Subordinated Pay-In-Kind Notes due
2009 (the "Notes") of Cybernet Internet Services
International, Inc.
Reference is hereby made to the Indenture dated as of August 26, 1999
(the "Indenture") between Cybernet Internet Services International, Inc. and The
Bank of New York, as Trustee, Registrar and Paying Agent. Capitalized terms used
but not defined herein shall have the meanings given them in the Indenture.
This letter relates to (Euro)__________ (being any integral multiple
of (Euro)1.00) principal amount at maturity of Notes beneficially held through
interests in the Regulation S Global Note (CUSIP (CINS) No. _________) with
[Euroclear] [Cedel] (Common Code No. _______) in the name of _______________
(the "Transferor") [Euroclear] [Cedel] account number _________ . The Transferor
hereby requests that on [INSERT DATE] such beneficial interest in the Regulation
S Global Note be transferred or exchanged for an interest in the Rule 144A
Global Note (CUSIP No. _________) in the same principal denomination and
transfer to ______________ (account no. ________). If this is a partial
transfer, a minimum of (Euro)1.00 and any integral multiple of (Euro)1.00 in
excess thereof of the Regulation S Global Note will remain outstanding.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act to a transferee that the
Transfer or reasonably believes is purchasing the Notes for its own account or
an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
D-1
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated:_______________, ____
[Name of Transferor]
By:___________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number) ______________
______________
______________
D-2
<PAGE>
EXHIBIT 10.26
CONFORMED COPY
$35,000,000
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Discount Notes due 2009
Registration Rights Agreement
-----------------------------
Dated as of August 26, 1999
Between
Cybernet Internet Services International, Inc.
and
Morgan Stanley & Co. International Limited
<PAGE>
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into
as of August 26, 1999, between Cybernet Internet Services International, Inc.
(the "Company") and Morgan Stanley & Co. International Limited (the "Initial
Purchaser"), who has agreed to purchase the Company's 13.0% Convertible Senior
Subordinated Discount Notes due 2009 (the "Notes") pursuant to the Purchase
Agreement dated as of August 19, 1999 between the Company and the Initial
Purchaser (the "Purchase Agreement"). This Agreement is being executed pursuant
to Section 6(j) of the Purchase Agreement. The Notes are convertible into
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), under the terms and conditions set forth in an Indenture, dated as of
August 26, 1999, between the Company and The Bank of New York, as trustee (the
"Indenture").
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
Broker-Dealer. Any broker or dealer registered under the Exchange Act.
Business Day. A day other than a Saturday or Sunday or other day on
which commercial banking institutions are authorized or required by law to
close in New York City or Munich.
Closing Date. The date of this Agreement.
Commission. The United States Securities and Exchange Commission.
Common Stock. As defined in the preamble hereto.
Company. As defined in the preamble hereto.
Conversion Ratio. As defined in the Indenture.
Conversion Shelf Registration Statement. As defined in Section 2(b).
Conversion Shares. The shares of Common Stock issuable upon conversion
of Notes at the rate and in the manner described in the Indenture.
Damages Payment Date. Each February 15 and August 15 after a Resale
Registration Default, until the cure of such Resale Registration Default.
Effectiveness Target Date. As defined in Section 3 hereof.
Exchange Act. The United States Securities Exchange Act of 1934, as
amended.
First Conversion Date. As defined in Section 2(b) hereof.
Holder. A Person who owns, beneficially or otherwise, Notes or
Conversion Shares.
<PAGE>
2
Indemnified Holder. As defined in Section 6(a) hereof.
Indenture. As defined in the preamble hereto.
Initial Purchaser. As defined in the preamble hereto.
Liquidated Damages. As defined in Section 3 hereof.
Majority Holders. The holders of a majority of the aggregate
principal amount of Notes or a majority of the Conversion Shares, as
applicable; provided, that for purposes of Section 10(c), any Notes or
Conversion Shares held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the
Initial Purchaser or subsequent Holders of Notes or Conversion Shares if
such subsequent Holders are deemed to be affiliates of the Company solely
by reason of their holding Notes or Conversion Shares) shall not be counted
in determining whether any consent was given.
NASD. National Association of Securities Dealers, Inc.
Notes. As defined in the preamble hereto.
Person. An individual, trustee, partnership, corporation, limited
liability company, unincorporated organization, trust, joint venture, firm
or other legal entity or a government or agency or political subdivision
thereof.
Prospectus. The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Purchase Agreement. As defined in the preamble hereto.
Record Holder. Each Person who is a Holder of Transfer Restricted
Securities on February 1 and August 1 immediately preceding each Damages
Payment Date.
Registrable Shares. Each Conversion Share until the registration of
such Conversion Share under the Securities Act (pursuant to the Conversion
Shelf Registration Statement or otherwise).
Registration Statement. The Conversion Shelf Registration Statement
and the Resale Shelf Registration Statement including, in each case, all
amendments and supplements to such registration statement, the Prospectus
included therein, all exhibits thereto and all material incorporated by
reference therein.
Resale Registration. A shelf registration under the Securities Act
effected pursuant to the Resale Shelf Registration Statement or, in the
case of a resale of Conversion Shares, pursuant to the Conversion Shelf
Registration Statement.
<PAGE>
3
Resale Registration Default. As defined in Section 3(a) hereof.
Resale Shelf Registration Statement. As defined in Section 2(a)
hereof.
Resale Shelf Filing Deadline. As defined in Section 2 hereof.
Securities Act. The Securities Act of 1933, as amended.
TIA. The United States Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities. Each Note and the Common Stock
issuable upon conversion thereof until the earliest of (a) the date on
which such Note (and the Common Stock issuable upon conversion thereof) has
been effectively registered under the Securities Act and disposed of in
accordance with the Resale Shelf Registration Statement, (b) the date on
which such Note (and the Common Stock issuable upon conversion thereof) is
distributed to the public pursuant to Rule 144 under the Securities Act (or
any similar provision then in effect) or is saleable pursuant to Rule
144(k) under the Securities Act (or any similar provision then in effect)
or (c) the date on which such Note (and the Common Stock issuable upon
conversion thereof) ceases to be outstanding.
Underwritten Registration or Underwritten Offering. A registration in
which securities of the Company are sold to an underwriter for reoffering
to the public.
2. Shelf Registration.
(a) The Company shall: (i) as soon as practicable, but not later than
90 days after the date hereof (the "Resale Shelf Filing Deadline"), cause to be
filed a shelf registration statement pursuant to Rule 415 under the Securities
Act (the "Resale Shelf Registration Statement"), which Resale Shelf Registration
Statement shall provide for resales of all Transfer Restricted Securities held
by Holders that have provided the information required pursuant to Section 2(c)
hereof; (ii) use its best efforts to cause such Resale Shelf Registration
Statement to be declared effective by the Commission on or before 150 days after
the date hereof; and (iii) use its best efforts to keep such Resale Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 4(b) hereof to the extent necessary to
ensure that it is available for resales by the Holders of Transfer Restricted
Securities entitled to the benefit of this Agreement, and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, until, subject to the provisions of Section 4(b)(i) hereof, such time as
no Notes remain Transfer Restricted Securities.
(b) The Company shall: (i) cause to be filed a registration statement
(the "Conversion Shelf Registration Statement") covering the issuance of the
Conversion Shares upon conversion of the Notes prior to the one year anniversary
of the Closing Date, (ii) use its best efforts to cause such Conversion Shelf
Registration Statement to become effective by the date that is one year after
the Closing Date (the "First Conversion Date") and (iii)
<PAGE>
4
use its best efforts to keep such Conversion Shelf Registration Statement
continuously effective until the earlier of (A) such time as all Notes have been
converted into Conversion Shares or redeemed and (B) August 15, 2009; provided,
that if the Company determines that, notwithstanding its best efforts, the
Commission will not declare such Conversion Shelf Registration Statement
effective, the Company shall (i) file a registration statement (also, a
"Conversion Shelf Registration Statement") with respect to the resale of
Conversion Shares before the one year anniversary of the Closing Date, (ii) use
its best efforts to cause such registration statement to become effective by the
First Conversion Date and (iii) use its best efforts to keep such registration
statement continuously effective until the earlier of (A) the date on which all
Notes can be resold by holders thereof without restrictions and without
registration under the Securities Act and (B) such time as all Conversion Shares
covered by such registration statement have been resold pursuant thereto. The
Company further agrees to supplement and amend the Conversion Shelf Registration
Statement, as required by the applicable provisions of Section 4(b) hereof.
(c) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in any Resale Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 10 Business Days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with
such Resale Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein and in any application to be filed with or under state
securities laws. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 3 hereof unless and until such Holder
shall have provided all such reasonably requested information. Each Holder as to
which any Resale Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
3. Liquidated Damages; Conversion Ratio Adjustment.
(a) If the Resale Shelf Registration Statement required by this
Agreement (i) is not filed with the Commission on or before the date specified
for such filing in Section 2(a)(i) hereof, (ii) has not been declared effective
by the Commission on or before the date specified for such effectiveness in
Section 2(a)(ii) hereof (the "Effectiveness Target Date"), or (iii) subject to
the provisions of Section 4(b)(i) below, is filed and declared effective but,
during the period specified in Section 2(a)(ii) hereof, shall thereafter cease
to be effective or fail to be usable for its intended purpose without being
succeeded within 15 Business Days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in foregoing clauses (i) through
(iii), a "Resale Registration Default"), the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes with respect
to any period during which a Resale Registration Default shall have occurred and
be continuing, in an amount equal to (i) for the first 90-day period during
which there exists a Resale Registration Default, one half of one percent (50
basis points) per annum per $1,000 principal amount of Notes held by such
Holder; and (ii) for each subsequent 90-day period, an additional one half of
one percent (50 basis points) per annum per $1,000 principal amount of Notes
held by such Holder; provided, however, that Liquidated Damages may
<PAGE>
5
not at any time exceed one and one half percent (150 basis points) per annum per
$1,000 principal amount of Notes.
(b) All accrued Liquidated Damages shall be paid to Record Holders by
the Company on each Damages Payment Date by wire transfer of immediately
available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Note, the accrual of Liquidated
Damages with respect to such Note shall cease.
(c) If a Conversion Shelf Registration Statement required by this
Agreement covering all Conversion Shares is not declared effective on or prior
to the First Conversion Date, the denominator of the Conversion Ratio will be
decreased by 2.04%.
4. Registration Procedures.
(a) In connection with each of the Resale Shelf Registration
Statement and the Conversion Shelf Registration Statement, the Company shall
comply with all applicable provisions of Section 4(b) below and shall use its
best efforts to effect such registration in accordance with the intended method
or methods of distribution of the Transfer Restricted Securities or Registrable
Shares, as the case may be, and the Company will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act.
(b) In connection with each Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted
Securities or the issuance of Conversion Shares, the Company shall:
(i) Use its best efforts to keep such Registration Statement
continuously effective; upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) to not be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its reasonable best efforts to cause such amendment
to be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as
practicable thereafter. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in its reasonable judgment that there
is a valid business purpose for the Company to suspend the effectiveness of
either Registration Statement, and the Company gives notice of such
determination to Holders, the Company may allow such Registration Statement
to fail to be effective and usable for two consecutive 30-day periods
(except for the 30 consecutive-day period prior to August 15, 2009) in any
365-day period; provided, that in no event shall the Company be required to
disclose the business purpose for such suspension of effectiveness if the
Company determines in good faith that such business purpose must remain
confidential.
<PAGE>
6
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statements as may be
necessary to keep the applicable Registration Statement effective for the
periods set forth in Section 2(a)(iii) and 2(b)(iii) hereof, as the case
may be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution set forth in such Registration Statement or supplement to the
Prospectus.
(iii) Advise the underwriter(s), if any, and Holders of Transfer
Restricted Securities and Registrable Shares promptly (but in any event
within two Business Days) and, if requested by such Persons, to confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Securities Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities or the Registrable Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in a Registration
Statement, a Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in any Registration Statement or any
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of a Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities or Registrable Shares under state securities or Blue
Sky laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(iv) Furnish to each of the Holders of Transfer Restricted
Securities or Registrable Shares, as the case may be, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including, upon request in writing, all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of such Holders
and any underwriter(s), for a period of at least three Business Days, and
the Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which a
<PAGE>
7
Holder of Transfer Restricted Securities or Registrable Shares covered by
such Registration Statement or any underwriter(s) shall reasonably object
within three Business Days after the receipt thereof. A Holder of Transfer
Restricted Securities or Registrable Shares or any underwriter shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission.
(v) Promptly before the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus after
the initial filing of such Registration Statement, (A) provide copies of
such document to the Holders of Transfer Restricted Securities or
Registrable Shares, as the case may be, and to any underwriter, (B) make
the Company's representatives available for discussion of such document and
other customary due diligence matters, and (C) include such information in
such document before the filing thereof as such Holders or underwriter(s),
if any, reasonably may request.
(vi) In the case of a Resale Registration, make available at
reasonable times for inspection by the selling Holders, any underwriter
participating in any distribution pursuant to such Registration Statement,
and any attorney or accountant retained by such selling Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement after the filing thereof and
before its effectiveness.
(vii) In the case of a Resale Registration, if requested by any
selling Holders or the underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement or post-
effective amendment if necessary, such information as such selling Holders
and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities or Registrable
Shares, information with respect to the principal amount of Transfer
Restricted Securities or the number of Registrable Shares being sold to
such underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities or Registrable
Shares to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(viii) In the case of a Resale Registration, furnish to each
selling Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including, if requested in
writing, all documents incorporated by reference therein and, if requested
in writing, all exhibits (including exhibits incorporated therein by
reference).
<PAGE>
8
(ix) In the case of a Resale Registration, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities or Registrable Shares, as the case may be,
covered by the Prospectus or any amendment or supplement thereto.
(x) In the case of a Resale Registration, whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company shall: (A) upon request,
furnish to each selling Holder and each underwriter, if any, in such
substance and scope as they may reasonably request and as are customarily
made by issuers to underwriters in primary underwritten offerings, upon the
date of effectiveness of the Registration Statement: (1) a certificate,
dated the date of effectiveness of such Registration Statement, signed by
(y) the President and (z) the Chief Financial Officer of the Company
confirming, as of the date thereof, the matters set forth in Section 1 of
the Purchase Agreement and such other matters as such parties may
reasonably request; (2) an opinion, dated the date of effectiveness of such
Registration Statement, of counsel for the Company covering the matters set
forth in Sections 6(c) and 6(d) of the Purchase Agreement; and (3)
customary comfort letters, dated as of the date of effectiveness of such
Registration Statement from the Company's independent accountants, in the
customary form and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary underwritten
offerings; (B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of section 6 hereof with respect to all parties to be
indemnified pursuant to said section; and (C) deliver such other documents
and certificates as may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by
the selling Holders pursuant to this clause (x).
(xi) Cooperate with the Holders of Transfer Restricted
Securities or Registrable Shares, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities or the Registrable Shares, as the case
may be, under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s), if any, may reasonably request and do
any and all other acts or things necessary or advisable to enable the
disposition or transfer in such jurisdictions of the Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement;
provided, however, that the Company shall not be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process, in any
jurisdiction where it is not now so subject.
(xii) In the case of a Resale Registration, cooperate with the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and
<PAGE>
9
delivery of certificates representing Transfer Restricted Securities or
Registrable Shares, as the case may be, to be sold; and enable such
Transfer Restricted Securities or Registrable Shares to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two Business Days before any
sale of Transfer Restricted Securities or Registrable Shares made by such
underwriter(s).
(xiii) Use its reasonable best efforts to cause the Transfer
Restricted Securities or the Registrable Shares covered by the Registration
Statement to be registered with or approved by such other U.S. governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities or the transfer of the Registrable
Shares.
(xiv) Subject to Section 4(b)(i) above, if any fact or event
contemplated by Section 4(b)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(xv) Cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter that is required to be retained in accordance with the
rules and regulations of the NASD.
(xvi) Otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158 (which
need not be audited) for each twelve-month period beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the first Registration Statement effected pursuant to this
Agreement.
(xvii) Cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the trustee
and the holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its reasonable best efforts to cause the
trustee thereunder to execute all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable the Indenture to be so qualified in a timely
manner.
(xviii) Upon the request of the Initial Purchaser, cause all
Transfer Restricted Securities or Registrable Shares, as the case may be,
covered by a Registration Statement to be listed on an internationally
recognized stock exchange.
<PAGE>
10
(xix) Provide promptly to each Holder upon written request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act after the Effective Date of each
Registration Statement.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities or
Registrable Shares pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiv) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities or Registrable Shares, as the case
may be, that was current at the time of receipt of such notice.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by the Initial Purchaser or any Holders with the NASD (and, if applicable,
the fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of Transfer
Restricted Securities or Registrable Shares and determination of the eligibility
of Transfer Restricted Securities and Registrable Shares for investment under
the laws of such jurisdictions where (x) the Holders of Transfer Restricted
Securities are located and (y) the selling Holders or underwriters, if any, may
request pursuant to Section 4(b)(xi) hereof; (iii) fees and expenses in
connection with the obtaining of any approval from any relevant authority in the
Federal Republic of Germany; (iv) all expenses of printing (including printing
of Prospectuses); (v) all reasonable fees and disbursements of counsel for the
Company and, subject to Section 5(b) below, the Holders of Transfer Restricted
Securities; (vi) all application, admission and filing fees in connection with
listing or admission on an internationally recognized stock exchange of any
Transfer Restricted Securities or Registrable Shares; (vii) all fees and
disbursements of independent certified public accountants of the Company
(including, without limitation, the expenses of any special audit and comfort
letters required by or incident to such performance); (viii) rating agency fees,
if any, and any fees associated with making the Transfer Restricted Securities,
Registrable Shares and Conversion Shares eligible for trading through The
Depository Trust Company; (ix) Securities Act liability insurance, if the
Company desires such insurance, (x) reasonable fees and expenses of all other
Persons retained by the Company, (xi) internal expenses of the Company
(including, without limitation, all salaries and
<PAGE>
11
expenses of officers and employees of the Company performing legal or accounting
duties); (xii) the expenses of any annual audit; and (xiii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Holders of Transfer Restricted
Securities or Registrable Shares being registered pursuant to such Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority in principal amount of
Notes and in number of Registrable Shares for whose benefit such Registration
Statement is being prepared.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless: (i) each
Holder; (ii) each person, if any, who controls (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being referred to as a "controlling
person"); and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii), or (iii) hereinafter being referred to as an
"Indemnified Holder"), against any losses, claims, damages or liabilities, joint
or several, or any action in respect thereof to which such Indemnified Holder
may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages, liabilities or actions arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement or Prospectus or any
amendment or supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Notes and the Conversion Shares under the state
securities or "Blue Sky" laws or filed with the Commission or any securities
association or securities exchange (each an "Application"); (ii) the omission or
alleged omission to state, in such Registration Statement or Prospectus or any
amendment or supplement thereto, or in any Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
(iii) any act or failure to act, or any alleged act or failure to act, by any
Indemnified Holder in connection with, or relating in any manner to, the
Transfer Restricted Securities or Registrable Shares or the registration
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable in the case of any matter covered by this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such
act or failure to act undertaken or omitted to be taken by such Indemnified
Holder through its gross negligence or wilful misconduct), and shall reimburse
each Indemnified Holder promptly upon demand for any legal or other expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, the
Company will not be liable in any such case
<PAGE>
12
to the extent that any such loss, claim, damage, liability or action is finally
judicially determined to arise out of or be based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or Prospectus or amendment or supplement thereto or
Application in reliance upon and in conformity with written information
furnished to the Company through the Holders by or on behalf of any Holder (or
its related Indemnified Holder) specifically for use therein. The foregoing
indemnity agreement is in addition to any liability that the Company may
otherwise have to the Indemnified Holders.
(b) In the case of a Resale Registration, each Holder, severally and
not jointly, will indemnify and hold harmless each of the Company, its officers
and employees, each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or other controlling person may become subject under the
Securities Act, the Exchange Act, or otherwise, insofar as such losses, claims,
damages, liabilities or action arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement or Prospectus or any amendment or supplement thereto or
any Application or (ii) the omission or the alleged omission to state therein
any material fact required to be stated therein, or necessary to make the
statements therein not misleading, but in each case only to the extent, that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through the Holders by or on behalf of any Holder or its related
Indemnified Holder specifically for use therein; and each such Holder shall
reimburse the Company or any director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Holder may otherwise have to the Company or any such
director, officer or controlling person. No Holder shall be liable under this
Section 6 for any settlement of any claim or action effected without its
consent, which shall not be unreasonably withheld. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of Transfer
Restricted Securities or Registrable Securities giving rise to such
indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure; and provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes,
<PAGE>
13
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time (in addition to one
separate firm constituting local counsel, if appropriate) for all such
indemnified parties, which firm shall be designated in writing by the Holders,
if the indemnified parties under this Section 6 consist of any of the Holders,
or by the Company, if the indemnified parties under this Section 6 consist of
the Company. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use its reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss of
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 6(a) or 6(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party
<PAGE>
14
as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and any Holder on the other
from such Holder's sale of Transfer Restricted Securities or Registrable Shares,
as the case may be, or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Holders on the other with
respect to statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Holder, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of Transfer Restricted Securities or Registrable
Shares agree that it would not be just and equitable if contributions pursuant
to this Section 6(d) were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purposes of this Section 6(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no Holder
(or any of their related Indemnified Holders) shall be required to contribute
any amount in excess of the amount by which proceeds received by such Holder
from an offering of Transfer Restricted Securities or Registrable Shares, as the
case may be, exceeds the amount of any damages which such Holder has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Holder's obligations to contribute as provided
in this Section 6(d) are several in proportion to their respective purchase
obligations and not joint. For purposes of this paragraph (d), each person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Holder, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
7. Rule 144A. The Company hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder's Transfer Restricted Securities or Registrable
Shares on the basis provided in
<PAGE>
15
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements, lockup
letters and other documents required under the terms of such underwriting
arrangements.
9. Selection of Underwriters. The Holders of Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement who desire
to do so may sell such Transfer Restricted Securities or Registrable Shares in
an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Majority Holders wishing to sell in such
offering; provided, that such investment bankers and managers must be reasonably
satisfactory to the Company.
10. Miscellaneous.
(a) Remedies. The Company agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement (other than with respect to Registration Defaults) and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to
their securities to any Person which rights conflict with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to the Company:
Cybernet Internet Services
International, Inc.
Stefan-George-Ring 19-23
81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
<PAGE>
16
with a copy to:
Powell, Goldstein, Frazer
& Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +1-202-624-7222
Attention: Joseph M. Berl, Esq.
(ii) if to the Initial Purchaser:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile No: +1-212-761-0192
Attention: Syndicate Department
with a copy to:
Simpson Thacher & Bartlett
99 Bishopsgate
London EC2M 3YH
Facsimile: +44-171-422-4022
Attention: William R. Dougherty, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered, five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities and Registrable Shares;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities or Registrable
Shares from such Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
17
(h) Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities and Registrable Shares. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Submission to Jurisdiction; Appointment of Agent for Service;
Waiver. To the fullest extent permitted by applicable law, the Company
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement, and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in any such court. The Company, to
the fullest extent permitted by applicable law, irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
and hereby irrevocably designates and appoints Corporation Services Company (the
"Authorized Agent"), for a period of ten years or until such time as no Transfer
Restricted Securities are outstanding, as its authorized agent upon whom process
may be served in any such suit or proceeding. The Company represents that it has
notified the Authorized Agent of such designation and appointment and that the
Authorized Agent has accepted the same in writing. The Company hereby
irrevocably authorizes and directs its Authorized Agent to accept such service.
The Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner. Notwithstanding the
foregoing, any action against the Company arising out of or based on this
Agreement or the transactions contemplated hereby may also be instituted by any
of the Holders, their officers and employees or any person who controls any of
the Holders within the meaning of the Securities Act in any competent court in
the Federal Republic of Germany, and the Company expressly accepts the
jurisdiction of any such court in any such action.
<PAGE>
18
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 10(k) are intended to be effective upon
the execution of this Agreement without any further action by the Company, the
Initial Purchaser or any Holder and the introduction of a true copy of this
Agreement into evidence shall be conclusive and final evidence as to such
matters.
(l) Currency Indemnity. The Company shall indemnify each Holder
against any loss incurred by it as a result of any judgment or order being given
or made and expressed and paid in a currency (the "Judgment Currency") other
than U.S. dollars and as a result of any variation as between (i) the rate of
exchange at which the U.S. dollar amount is converted into the Judgment Currency
for the purpose of such judgment or order and (ii) the spot rate of exchange in
New York, New York at which such Holder on the date of payment of such judgment
or order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by such Holder. If the U.S. dollars so purchased are
greater than the amount originally due to such Holder hereunder, such Holder
agrees to pay to the Company an amount equal to the excess of the U.S. dollars
so purchased over the amount originally due to such Holder hereunder. The
foregoing shall constitute a separate and independent obligation of the Company
and the Holder, as the case may be, and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, U.S. dollars.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
By: /s/ Andreas Eder
--------------------------------------------
Name: Andreas Eder
Title: President and Chief Executive Officer
By: /s/ Robert Eckert
--------------------------------------------
Name: Robert Eckert
Title: Chief Financial Officer and Treasurer
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By: /s/ Jorg Mohaupt
--------------------------------------------
Name: Jorg Mohaupt
Title: Vice President
<PAGE>
EXHIBIT 10.27
$15,002,183
Cybernet Internet Services International, Inc.
13.0% Convertible Senior Subordinated Discount Notes due 2009
Registration Rights Agreement
-----------------------------
Dated as of August 26, 1999
Between
Cybernet Internet Services International, Inc.
and
Morgan Stanley & Co. International Limited
<PAGE>
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into
as of August 26, 1999, between Cybernet Internet Services International, Inc.
(the "Company") and Morgan Stanley & Co. International Limited (the "Initial
Purchaser"), who has agreed to purchase an additional $15,002,183 initial
accreted value of the Company's 13.0% Convertible Senior Subordinated Discount
Notes due 2009 (the "Notes") pursuant to the Purchase Agreement dated as of
August 23, 1999 between the Company and the Initial Purchaser (the "Purchase
Agreement"). This Agreement is being executed pursuant to Section 6(j) of the
Purchase Agreement. The Notes are convertible into shares of the Company's
common stock, par value $.001 per share (the "Common Stock"), under the terms
and conditions set forth in an Indenture, dated as of August 26, 1999, between
the Company and The Bank of New York, as trustee (the "Indenture").
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
Broker-Dealer. Any broker or dealer registered under the Exchange
Act.
Business Day. A day other than a Saturday or Sunday or other day on
which commercial banking institutions are authorized or required by law to
close in New York City or Munich.
Closing Date. The date of this Agreement.
Commission. The United States Securities and Exchange Commission.
Common Stock. As defined in the preamble hereto.
Company. As defined in the preamble hereto.
Conversion Ratio. As defined in the Indenture.
Conversion Shelf Registration Statement. As defined in Section 2(b).
Conversion Shares. The shares of Common Stock issuable upon
conversion of Notes at the rate and in the manner described in the
Indenture.
Damages Payment Date. Each February 15 and August 15 after a Resale
Registration Default, until the cure of such Resale Registration Default.
Effectiveness Target Date. As defined in Section 3 hereof.
Exchange Act. The United States Securities Exchange Act of 1934, as
amended.
First Conversion Date. As defined in Section 2(b) hereof.
Holder. A Person who owns, beneficially or otherwise, Notes or
Conversion Shares.
<PAGE>
2
Indemnified Holder. As defined in Section 6(a) hereof.
Indenture. As defined in the preamble hereto.
Initial Purchaser. As defined in the preamble hereto.
Liquidated Damages. As defined in Section 3 hereof.
Majority Holders. The holders of a majority of the aggregate
principal amount of Notes or a majority of the Conversion Shares, as
applicable; provided, that for purposes of Section 10(c), any Notes or
Conversion Shares held by the Company or any of its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the
Initial Purchaser or subsequent Holders of Notes or Conversion Shares if
such subsequent Holders are deemed to be affiliates of the Company solely
by reason of their holding Notes or Conversion Shares) shall not be counted
in determining whether any consent was given.
NASD. National Association of Securities Dealers, Inc.
Notes. As defined in the preamble hereto.
Person. An individual, trustee, partnership, corporation, limited
liability company, unincorporated organization, trust, joint venture, firm
or other legal entity or a government or agency or political subdivision
thereof.
Prospectus. The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Purchase Agreement. As defined in the preamble hereto.
Record Holder. Each Person who is a Holder of Transfer Restricted
Securities on February 1 and August 1 immediately preceding each Damages
Payment Date.
Registrable Shares. Each Conversion Share until the registration of
such Conversion Share under the Securities Act (pursuant to the Conversion
Shelf Registration Statement or otherwise).
Registration Statement. The Conversion Shelf Registration Statement
and the Resale Shelf Registration Statement including, in each case, all
amendments and supplements to such registration statement, the Prospectus
included therein, all exhibits thereto and all material incorporated by
reference therein.
Resale Registration. A shelf registration under the Securities Act
effected pursuant to the Resale Shelf Registration Statement or, in the
case of a resale of Conversion Shares, pursuant to the Conversion Shelf
Registration Statement.
<PAGE>
3
Resale Registration Default. As defined in Section 3(a) hereof.
Resale Shelf Registration Statement. As defined in Section 2(a)
hereof.
Resale Shelf Filing Deadline. As defined in Section 2 hereof.
Securities Act. The Securities Act of 1933, as amended.
TIA. The United States Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities. Each Note and the Common Stock
issuable upon conversion thereof until the earliest of (a) the date on
which such Note (and the Common Stock issuable upon conversion thereof) has
been effectively registered under the Securities Act and disposed of in
accordance with the Resale Shelf Registration Statement, (b) the date on
which such Note (and the Common Stock issuable upon conversion thereof) is
distributed to the public pursuant to Rule 144 under the Securities Act (or
any similar provision then in effect) or is saleable pursuant to Rule
144(k) under the Securities Act (or any similar provision then in effect)
or (c) the date on which such Note (and the Common Stock issuable upon
conversion thereof) ceases to be outstanding.
Underwritten Registration or Underwritten Offering. A registration in
which securities of the Company are sold to an underwriter for reoffering
to the public.
2. Shelf Registration.
(a) The Company shall: (i) as soon as practicable, but not later
than 90 days after the date hereof (the "Resale Shelf Filing Deadline"), cause
to be filed a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Resale Shelf Registration Statement"), which Resale Shelf
Registration Statement shall provide for resales of all Transfer Restricted
Securities held by Holders that have provided the information required pursuant
to Section 2(c) hereof; (ii) use its best efforts to cause such Resale Shelf
Registration Statement to be declared effective by the Commission on or before
150 days after the date hereof; and (iii) use its best efforts to keep such
Resale Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 4(b) hereof to the extent
necessary to ensure that it is available for resales by the Holders of Transfer
Restricted Securities entitled to the benefit of this Agreement, and to ensure
that it conforms with the requirements of this Agreement, the Securities Act and
the policies, rules and regulations of the Commission as announced from time to
time, until, subject to the provisions of Section 4(b)(i) hereof, such time as
no Notes remain Transfer Restricted Securities.
(b) The Company shall: (i) cause to be filed a registration statement
(the "Conversion Shelf Registration Statement") covering the issuance of the
Conversion Shares upon conversion of the Notes prior to the one year anniversary
of the Closing Date, (ii) use its best efforts to cause such Conversion Shelf
Registration Statement to become effective by the date that is one year after
the Closing Date (the "First Conversion Date") and (iii)
<PAGE>
4
use its best efforts to keep such Conversion Shelf Registration Statement
continuously effective until the earlier of (A) such time as all Notes have been
converted into Conversion Shares or redeemed and (B) August 15, 2009; provided,
that if the Company determines that, notwithstanding its best efforts, the
Commission will not declare such Conversion Shelf Registration Statement
effective, the Company shall (i) file a registration statement (also, a
"Conversion Shelf Registration Statement") with respect to the resale of
Conversion Shares before the one year anniversary of the Closing Date, (ii) use
its best efforts to cause such registration statement to become effective by the
First Conversion Date and (iii) use its best efforts to keep such registration
statement continuously effective until the earlier of (A) the date on which all
Notes can be resold by holders thereof without restrictions and without
registration under the Securities Act and (B) such time as all Conversion Shares
covered by such registration statement have been resold pursuant thereto. The
Company further agrees to supplement and amend the Conversion Shelf Registration
Statement, as required by the applicable provisions of Section 4(b) hereof.
(c) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in any Resale Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 10 Business Days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with
such Resale Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein and in any application to be filed with or under state
securities laws. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 3 hereof unless and until such Holder
shall have provided all such reasonably requested information. Each Holder as to
which any Resale Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
3. Liquidated Damages; Conversion Ratio Adjustment.
(a) If the Resale Shelf Registration Statement required by this
Agreement (i) is not filed with the Commission on or before the date specified
for such filing in Section 2(a)(i) hereof, (ii) has not been declared effective
by the Commission on or before the date specified for such effectiveness in
Section 2(a)(ii) hereof (the "Effectiveness Target Date"), or (iii) subject to
the provisions of Section 4(b)(i) below, is filed and declared effective but,
during the period specified in Section 2(a)(ii) hereof, shall thereafter cease
to be effective or fail to be usable for its intended purpose without being
succeeded within 15 Business Days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in foregoing clauses (i) through
(iii), a "Resale Registration Default"), the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes with respect
to any period during which a Resale Registration Default shall have occurred and
be continuing, in an amount equal to (i) for the first 90-day period during
which there exists a Resale Registration Default, one half of one percent (50
basis points) per annum per $1,000 principal amount of Notes held by such
Holder; and (ii) for each subsequent 90-day period, an additional one half of
one percent (50 basis points) per annum per $1,000 principal amount of Notes
held by such Holder; provided, however, that Liquidated Damages may
<PAGE>
5
not at any time exceed one and one half percent (150 basis points) per annum per
$1,000 principal amount of Notes.
(b) All accrued Liquidated Damages shall be paid to Record Holders by
the Company on each Damages Payment Date by wire transfer of immediately
available funds or by federal funds check. Following the cure of all
Registration Defaults relating to any particular Note, the accrual of Liquidated
Damages with respect to such Note shall cease.
(c) If a Conversion Shelf Registration Statement required by this
Agreement covering all Conversion Shares is not declared effective on or prior
to the First Conversion Date, the denominator of the Conversion Ratio will be
decreased by 2.04%.
4. Registration Procedures.
(a) In connection with each of the Resale Shelf Registration
Statement and the Conversion Shelf Registration Statement, the Company shall
comply with all applicable provisions of Section 4(b) below and shall use its
best efforts to effect such registration in accordance with the intended method
or methods of distribution of the Transfer Restricted Securities or Registrable
Shares, as the case may be, and the Company will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Securities Act.
(b) In connection with each Registration Statement and any Prospectus
required by this Agreement to permit the sale or resale of Transfer Restricted
Securities or the issuance of Conversion Shares, the Company shall:
(i) Use its best efforts to keep such Registration Statement
continuously effective; upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) to not be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its reasonable best efforts to cause such amendment
to be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as
practicable thereafter. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in its reasonable judgment that there
is a valid business purpose for the Company to suspend the effectiveness of
either Registration Statement, and the Company gives notice of such
determination to Holders, the Company may allow such Registration Statement
to fail to be effective and usable for two consecutive 30-day periods
(except for the 30 consecutive-day period prior to August 15, 2009) in any
365-day period; provided, that in no event shall the Company be required to
disclose the business purpose for such suspension of effectiveness if the
Company determines in good faith that such business purpose must remain
confidential.
<PAGE>
6
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statements as may be
necessary to keep the applicable Registration Statement effective for the
periods set forth in Section 2(a)(iii) and 2(b)(iii) hereof, as the case
may be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution set forth in such Registration Statement or supplement to the
Prospectus.
(iii) Advise the underwriter(s), if any, and Holders of Transfer
Restricted Securities and Registrable Shares promptly (but in any event
within two Business Days) and, if requested by such Persons, to confirm
such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Securities Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities or the Registrable Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in a Registration
Statement, a Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in any Registration Statement or any
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of a Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities or Registrable Shares under state securities or Blue
Sky laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(iv) Furnish to each of the Holders of Transfer Restricted
Securities or Registrable Shares, as the case may be, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including, upon request in writing, all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of such Holders
and any underwriter(s), for a period of at least three Business Days, and
the Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which a
<PAGE>
7
Holder of Transfer Restricted Securities or Registrable Shares covered by
such Registration Statement or any underwriter(s) shall reasonably object
within three Business Days after the receipt thereof. A Holder of Transfer
Restricted Securities or Registrable Shares or any underwriter shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission.
(v) Promptly before the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus after
the initial filing of such Registration Statement, (A) provide copies of
such document to the Holders of Transfer Restricted Securities or
Registrable Shares, as the case may be, and to any underwriter, (B) make
the Company's representatives available for discussion of such document and
other customary due diligence matters, and (C) include such information in
such document before the filing thereof as such Holders or underwriter(s),
if any, reasonably may request.
(vi) In the case of a Resale Registration, make available at
reasonable times for inspection by the selling Holders, any underwriter
participating in any distribution pursuant to such Registration Statement,
and any attorney or accountant retained by such selling Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors, managers and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement after the filing thereof and
before its effectiveness.
(vii) In the case of a Resale Registration, if requested by
any selling Holders or the underwriter(s), if any, promptly incorporate in
any Registration Statement or Prospectus, pursuant to a supplement or post-
effective amendment if necessary, such information as such selling Holders
and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities or Registrable
Shares, information with respect to the principal amount of Transfer
Restricted Securities or the number of Registrable Shares being sold to
such underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities or Registrable
Shares to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(viii) In the case of a Resale Registration, furnish to each
selling Holder and each of the underwriter(s), if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including, if requested in
writing, all documents incorporated by reference therein and, if requested
in writing, all exhibits (including exhibits incorporated therein by
reference).
<PAGE>
8
(ix) In the case of a Resale Registration, deliver to each
selling Holder and each of the underwriter(s), if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities or Registrable Shares, as the case may
be, covered by the Prospectus or any amendment or supplement thereto.
(x) In the case of a Resale Registration, whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company shall: (A) upon request,
furnish to each selling Holder and each underwriter, if any, in such
substance and scope as they may reasonably request and as are customarily
made by issuers to underwriters in primary underwritten offerings, upon the
date of effectiveness of the Registration Statement: (1) a certificate,
dated the date of effectiveness of such Registration Statement, signed by
(y) the President and (z) the Chief Financial Officer of the Company
confirming, as of the date thereof, the matters set forth in Section 1 of
the Purchase Agreement and such other matters as such parties may
reasonably request; (2) an opinion, dated the date of effectiveness of
such Registration Statement, of counsel for the Company covering the
matters set forth in Sections 6(c) and 6(d) of the Purchase Agreement; and
(3) customary comfort letters, dated as of the date of effectiveness of
such Registration Statement from the Company's independent accountants, in
the customary form and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary underwritten
offerings; (B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of section 6 hereof with respect to all parties to be
indemnified pursuant to said section; and (C) deliver such other documents
and certificates as may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by
the selling Holders pursuant to this clause (x).
(xi) Cooperate with the Holders of Transfer Restricted
Securities or Registrable Shares, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities or the Registrable Shares, as the case
may be, under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s), if any, may reasonably request and do
any and all other acts or things necessary or advisable to enable the
disposition or transfer in such jurisdictions of the Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement;
provided, however, that the Company shall not be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process, in any
jurisdiction where it is not now so subject.
(xii) In the case of a Resale Registration, cooperate with the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and
<PAGE>
9
delivery of certificates representing Transfer Restricted Securities or
Registrable Shares, as the case may be, to be sold; and enable such
Transfer Restricted Securities or Registrable Shares to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two Business Days before any
sale of Transfer Restricted Securities or Registrable Shares made by such
underwriter(s).
(xiii) Use its reasonable best efforts to cause the Transfer
Restricted Securities or the Registrable Shares covered by the Registration
Statement to be registered with or approved by such other U.S. governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities or the transfer of the Registrable
Shares.
(xiv) Subject to Section 4(b)(i) above, if any fact or event
contemplated by Section 4(b)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading.
(xv) Cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter that is required to be retained in accordance with the
rules and regulations of the NASD.
(xvi) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for each twelve-month period beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
first Registration Statement effected pursuant to this Agreement.
(xvii) Cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the trustee
and the holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its reasonable best efforts to cause the
trustee thereunder to execute all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable the Indenture to be so qualified in a timely
manner.
(xviii) Upon the request of the Initial Purchaser, cause all
Transfer Restricted Securities or Registrable Shares, as the case may be,
covered by a Registration Statement to be listed on an internationally
recognized stock exchange.
<PAGE>
10
(xix) Provide promptly to each Holder upon written request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act after the Effective Date of each
Registration Statement.
(c) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 4(b)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities or
Registrable Shares pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(b)(xiv) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities or Registrable Shares, as the case
may be, that was current at the time of receipt of such notice.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by the Initial Purchaser or any Holders with the NASD (and, if applicable,
the fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of Transfer
Restricted Securities or Registrable Shares and determination of the eligibility
of Transfer Restricted Securities and Registrable Shares for investment under
the laws of such jurisdictions where (x) the Holders of Transfer Restricted
Securities are located and (y) the selling Holders or underwriters, if any, may
request pursuant to Section 4(b)(xi) hereof; (iii) fees and expenses in
connection with the obtaining of any approval from any relevant authority in the
Federal Republic of Germany; (iv) all expenses of printing (including printing
of Prospectuses); (v) all reasonable fees and disbursements of counsel for the
Company and, subject to Section 5(b) below, the Holders of Transfer Restricted
Securities; (vi) all application, admission and filing fees in connection with
listing or admission on an internationally recognized stock exchange of any
Transfer Restricted Securities or Registrable Shares; (vii) all fees and
disbursements of independent certified public accountants of the Company
(including, without limitation, the expenses of any special audit and comfort
letters required by or incident to such performance); (viii) rating agency fees,
if any, and any fees associated with making the Transfer Restricted Securities,
Registrable Shares and Conversion Shares eligible for trading through The
Depository Trust Company; (ix) Securities Act liability insurance, if the
Company desires such insurance, (x) reasonable fees and expenses of all other
Persons retained by the Company, (xi) internal expenses of the Company
(including, without limitation, all salaries and
<PAGE>
11
expenses of officers and employees of the Company performing legal or accounting
duties); (xii) the expenses of any annual audit; and (xiii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Registration Statement required by this
Agreement, the Company will reimburse the Holders of Transfer Restricted
Securities or Registrable Shares being registered pursuant to such Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority in principal amount of
Notes and in number of Registrable Shares for whose benefit such Registration
Statement is being prepared.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless: (i) each
Holder; (ii) each person, if any, who controls (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being referred to as a "controlling
person"); and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii), or (iii) hereinafter being referred to as an
"Indemnified Holder"), against any losses, claims, damages or liabilities, joint
or several, or any action in respect thereof to which such Indemnified Holder
may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages, liabilities or actions arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement or Prospectus or any
amendment or supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Notes and the Conversion Shares under the state
securities or "Blue Sky" laws or filed with the Commission or any securities
association or securities exchange (each an "Application"); (ii) the omission or
alleged omission to state, in such Registration Statement or Prospectus or any
amendment or supplement thereto, or in any Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
(iii) any act or failure to act, or any alleged act or failure to act, by any
Indemnified Holder in connection with, or relating in any manner to, the
Transfer Restricted Securities or Registrable Shares or the registration
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable in the case of any matter covered by this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such
act or failure to act undertaken or omitted to be taken by such Indemnified
Holder through its gross negligence or wilful misconduct), and shall reimburse
each Indemnified Holder promptly upon demand for any legal or other expenses
reasonably incurred by such Indemnified Holder in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, the
Company will not be liable in any such case
<PAGE>
12
to the extent that any such loss, claim, damage, liability or action is finally
judicially determined to arise out of or be based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or Prospectus or amendment or supplement thereto or
Application in reliance upon and in conformity with written information
furnished to the Company through the Holders by or on behalf of any Holder (or
its related Indemnified Holder) specifically for use therein. The foregoing
indemnity agreement is in addition to any liability that the Company may
otherwise have to the Indemnified Holders.
(b) In the case of a Resale Registration, each Holder, severally and
not jointly, will indemnify and hold harmless each of the Company, its officers
and employees, each of its directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or other controlling person may become subject under the
Securities Act, the Exchange Act, or otherwise, insofar as such losses, claims,
damages, liabilities or action arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement or Prospectus or any amendment or supplement thereto or
any Application or (ii) the omission or the alleged omission to state therein
any material fact required to be stated therein, or necessary to make the
statements therein not misleading, but in each case only to the extent, that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through the Holders by or on behalf of any Holder or its related
Indemnified Holder specifically for use therein; and each such Holder shall
reimburse the Company or any director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Holder may otherwise have to the Company or any such
director, officer or controlling person. No Holder shall be liable under this
Section 6 for any settlement of any claim or action effected without its
consent, which shall not be unreasonably withheld. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of Transfer
Restricted Securities or Registrable Securities giving rise to such
indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been materially prejudiced by such failure; and provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes,
<PAGE>
13
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time (in addition to one
separate firm constituting local counsel, if appropriate) for all such
indemnified parties, which firm shall be designated in writing by the Holders,
if the indemnified parties under this Section 6 consist of any of the Holders,
or by the Company, if the indemnified parties under this Section 6 consist of
the Company. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use its reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss of
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 6 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 6(a) or 6(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party
<PAGE>
14
as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and any Holder on the other
from such Holder's sale of Transfer Restricted Securities or Registrable Shares,
as the case may be, or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Holders on the other with
respect to statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Holder, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders of Transfer Restricted Securities or Registrable
Shares agree that it would not be just and equitable if contributions pursuant
to this Section 6(d) were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include, for
purposes of this Section 6(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6(d), no Holder
(or any of their related Indemnified Holders) shall be required to contribute
any amount in excess of the amount by which proceeds received by such Holder
from an offering of Transfer Restricted Securities or Registrable Shares, as the
case may be, exceeds the amount of any damages which such Holder has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Holder's obligations to contribute as provided
in this Section 6(d) are several in proportion to their respective purchase
obligations and not joint. For purposes of this paragraph (d), each person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Holder, and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
7. Rule 144A. The Company hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make available
to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
8. Participation in Underwritten Registrations. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder's Transfer Restricted Securities or Registrable
Shares on the basis provided in
<PAGE>
15
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements, lockup
letters and other documents required under the terms of such underwriting
arrangements.
9. Selection of Underwriters. The Holders of Transfer Restricted
Securities or Registrable Shares covered by a Registration Statement who desire
to do so may sell such Transfer Restricted Securities or Registrable Shares in
an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the Majority Holders wishing to sell in such
offering; provided, that such investment bankers and managers must be reasonably
satisfactory to the Company.
10. Miscellaneous.
(a) Remedies. The Company agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement (other than with respect to Registration Defaults) and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to
their securities to any Person which rights conflict with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to the Company:
Cybernet Internet Services
International, Inc.
Stefan-George-Ring 19-23
81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
<PAGE>
16
with a copy to:
Powell, Goldstein, Frazer
& Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +1-202-624-7222
Attention: Joseph M. Berl, Esq.
(ii) if to the Initial Purchaser:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Facsimile No: +1-212-761-0192
Attention: Syndicate Department
with a copy to:
Simpson Thacher & Bartlett
99 Bishopsgate
London EC2M 3YH
Facsimile: +44-171-422-4022
Attention: William R. Dougherty, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered, five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities and Registrable Shares;
provided, however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities or Registrable
Shares from such Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
17
(h) Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities and Registrable Shares. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Submission to Jurisdiction; Appointment of Agent for Service;
Waiver. To the fullest extent permitted by applicable law, the Company
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement, and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in any such court. The Company, to
the fullest extent permitted by applicable law, irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
and hereby irrevocably designates and appoints Corporation Services Company (the
"Authorized Agent"), for a period of ten years or until such time as no Transfer
Restricted Securities are outstanding, as its authorized agent upon whom process
may be served in any such suit or proceeding. The Company represents that it
has notified the Authorized Agent of such designation and appointment and that
the Authorized Agent has accepted the same in writing. The Company hereby
irrevocably authorizes and directs its Authorized Agent to accept such service.
The Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner. Notwithstanding the
foregoing, any action against the Company arising out of or based on this
Agreement or the transactions contemplated hereby may also be instituted by any
of the Holders, their officers and employees or any person who controls any of
the Holders within the meaning of the Securities Act in any competent court in
the Federal Republic of Germany, and the Company expressly accepts the
jurisdiction of any such court in any such action.
<PAGE>
18
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 10(k) are intended to be effective upon
the execution of this Agreement without any further action by the Company, the
Initial Purchaser or any Holder and the introduction of a true copy of this
Agreement into evidence shall be conclusive and final evidence as to such
matters.
(l) Currency Indemnity. The Company shall indemnify each Holder
against any loss incurred by it as a result of any judgment or order being given
or made and expressed and paid in a currency (the "Judgment Currency") other
than U.S. dollars and as a result of any variation as between (i) the rate of
exchange at which the U.S. dollar amount is converted into the Judgment Currency
for the purpose of such judgment or order and (ii) the spot rate of exchange in
New York, New York at which such Holder on the date of payment of such judgment
or order is able to purchase U.S. dollars with the amount of the Judgment
Currency actually received by such Holder. If the U.S. dollars so purchased are
greater than the amount originally due to such Holder hereunder, such Holder
agrees to pay to the Company an amount equal to the excess of the U.S. dollars
so purchased over the amount originally due to such Holder hereunder. The
foregoing shall constitute a separate and independent obligation of the Company
and the Holder, as the case may be, and shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, U.S. dollars.
<PAGE>
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By: /s/ Andreas Eder
--------------------------------------------
Name: Andreas Eder
Title: President and Chief Executive Officer
By: /s/ Robert Eckert
--------------------------------------------
Name: Robert Eckert
Title: Chief Financial Officer and Treasurer
<PAGE>
20
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By: /s/ Jorg Mohaupt
--------------------------------------------
Name: Jorg Mohaupt
Title: Vice President
<PAGE>
EXHIBIT 10.28
EXECUTION COPY
================================================================================
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
as Company,
and
THE BANK OF NEW YORK
as Trustee, Registrar and
Paying Agent
___________
INDENTURE
Dated as of August 26, 1999
___________
$50,002,183 aggregate accreted value of 13.0% Convertible Senior Subordinated
Discount Notes due 2009
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE................................................... 1
------------------------------------------
1.1 Definitions............................................................................ 1
1.2 Incorporation by Reference of TIA...................................................... 23
1.3 Rules of Construction.................................................................. 23
ARTICLE II
THE NOTES.................................................................................... 24
---------
2.1 Form and Dating........................................................................ 24
2.2 Execution and Authentication........................................................... 25
2.3 Registrar and Paying Agent............................................................. 26
2.4 Paying Agent To Hold Assets in Trust................................................... 26
2.5 List of Holders........................................................................ 26
2.6 Book-Entry Provisions for Global Notes................................................. 27
2.7 Registration of Transfer and Exchange.................................................. 28
2.8 Replacement Notes...................................................................... 33
2.9 Outstanding Notes...................................................................... 33
2.10 Treasury Notes......................................................................... 34
2.11 Temporary Notes........................................................................ 34
2.12 Cancellation........................................................................... 34
2.13 Defaulted Interest..................................................................... 35
2.14 CUSIP, ISIN and Common Code Numbers.................................................... 35
2.15 Deposit of Moneys...................................................................... 35
2.16 Certain Matters Relating to Global Notes............................................... 35
ARTICLE III
REDEMPTION................................................................................... 36
----------
3.1 Optional Redemption.................................................................... 36
3.2 Notices to Trustee..................................................................... 36
3.3 Selection of Notes to Be Redeemed...................................................... 36
3.4 Notice of Redemption................................................................... 36
3.5 Effect of Notice of Redemption......................................................... 38
3.6 Deposit of Redemption Price............................................................ 38
3.7 Notes Redeemed in Part................................................................. 38
ARTICLE IV
COVENANTS.................................................................................... 39
---------
4.1 Payment of Notes........................................................................ 39
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.2 Maintenance of Office or Agency.................................................................. 39
4.3 Limitation on Restricted Payments................................................................ 40
4.4 Limitation on Indebtedness....................................................................... 42
4.5 Corporate Existence.............................................................................. 46
4.6 Payment of Taxes and Other Claims................................................................ 46
4.7 Maintenance of Properties and Insurance.......................................................... 46
4.8 Compliance Certificate; Notice of Default........................................................ 47
4.9 Compliance with Laws............................................................................. 47
4.10 Reports.......................................................................................... 48
4.11 Waiver of Stay; Extension or Usury Laws.......................................................... 49
4.12 Limitation on Transactions with Shareholders and Affiliates...................................... 49
4.13 Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.......... 49
4.14 Limitation on Liens.............................................................................. 51
4.15 Change of Control................................................................................ 51
4.16 Limitation on Asset Sales........................................................................ 52
4.17 Limitation on Issuance of Guarantees of Indebtedness by Restricted Subsidiaries.................. 56
4.18 Business of the Company; Restriction on Transfers of Existing Business........................... 57
4.19 Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries.................. 57
4.20 Additional Amounts............................................................................... 57
4.21 Payment of Non-Income Taxes and Similar Charges.................................................. 58
4.22 Limitation on Layering........................................................................... 58
4.23 Limitation on Investment Company Activities...................................................... 58
ARTICLE V
SUCCESSOR CORPORATION.................................................................................. 59
---------------------
5.1 Consolidation, Merger, and Sale of Assets........................................................ 59
5.2 Successor Corporation Substituted................................................................ 60
ARTICLE VI
DEFAULT AND REMEDIES................................................................................... 60
--------------------
6.1 Events of Default................................................................................ 60
6.2 Acceleration..................................................................................... 61
6.3 Other Remedies................................................................................... 62
6.4 The Trustee May Enforce Claims Without Possession of Securities.................................. 62
6.5 Rights and Remedies Cumulative................................................................... 62
6.6 Delay or Omission Not Waiver..................................................................... 62
6.7 Waiver of Past Defaults.......................................................................... 62
6.8 Control by Majority.............................................................................. 63
6.9 Limitation on Suits.............................................................................. 63
6.10 Rights of Holders To Receive Payment............................................................. 64
6.11 Collection Suit by Trustee....................................................................... 64
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.12 Trustee May File Proofs of Claim....................................................... 64
6.13 Priorities............................................................................. 64
6.14 Restoration of Rights and Remedies..................................................... 65
6.15 Undertaking for Costs.................................................................. 65
6.16 Compliance Certificate; Notices of Default............................................. 65
ARTICLE VII
TRUSTEE...................................................................................... 66
-------
7.1 Duties of Trustee...................................................................... 66
7.2 Rights of Trustee...................................................................... 67
7.3 Individual Rights of Trustee........................................................... 68
7.4 Trustee's Disclaimer................................................................... 68
7.5 Notice of Default...................................................................... 69
7.6 Report by Trustee to Holders........................................................... 69
7.7 Compensation and Indemnity............................................................. 69
7.8 Replacement of Trustee................................................................. 70
7.9 Successor Trustee by Merger, etc....................................................... 71
7.10 Corporate Trustee Required; Eligibility................................................ 71
7.11 Disqualification; Conflicting Interests................................................ 72
7.12 Preferential Collection of Claims Against Company...................................... 72
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE...................................................... 72
---------------------------------------
8.1 Option to Effect Legal Defeasance or Covenant Defeasance............................... 72
8.2 Legal Defeasance and Discharge......................................................... 72
8.3 Covenant Defeasance.................................................................... 73
8.4 Conditions to Legal or Covenant Defeasance............................................. 73
8.5 Satisfaction and Discharge of Indenture................................................ 75
8.6 Survival of Certain Obligations........................................................ 75
8.7 Acknowledgment of Discharge by Trustee................................................. 75
8.8 Application of Trust Moneys............................................................ 76
8.9 Repayment to the Company; Unclaimed Money.............................................. 76
8.10 Reinstatement.......................................................................... 77
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS.......................................................... 77
-----------------------------------
9.1 Without Consent of Holders of Notes.................................................... 77
9.2 With Consent of Holders of Notes....................................................... 78
9.3 Compliance with TIA.................................................................... 79
9.4 Revocation and Effect of Consents...................................................... 79
9.5 Notation on or Exchange of Notes....................................................... 79
9.6 Trustee to Sign Amendments, etc........................................................ 79
9.7 Senior Indebtedness.................................................................... 80
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE X
CONVERSION............................................................................................................... 80
----------
10.1 Right to Convert; Mandatory Conversion............................................................................ 80
10.2 Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends. 81
10.3 Cash Payments in Lieu of Fractional Shares........................................................................ 82
10.4 Conversion Price.................................................................................................. 82
10.5 Adjustment of Conversion Price.................................................................................... 82
10.6 Effect of Reclassification, Consolidation, Merger or Sale......................................................... 87
10.7 Taxes on Shares Issued............................................................................................ 87
10.8 Reservation of Shares; Shares to be Fully Paid.................................................................... 87
10.9 Permanent Reduction of Conversion Ratio upon Certain Registration Defaults........................................ 87
10.10 Definition of Closing Price....................................................................................... 87
ARTICLE XI
SUBORDINATION............................................................................................................ 88
-------------
11.1 Notes Subordinated to Senior Indebtedness......................................................................... 88
11.2 Reliance on Certificate of Liquidating Agent; Further Evidence as to Ownership of Senior Indebtedness............. 92
11.3 Payment Permitted If No Default................................................................................... 92
11.4 Disputes with Holders of Certain Senior Indebtedness.............................................................. 92
11.5 Trustee Not Charged with Knowledge of Prohibition................................................................. 93
11.6 Trustee to Effectuate Subordination............................................................................... 93
11.7 Rights of Trustee as Holder of Senior Indebtedness................................................................ 93
11.8 Article Applicable to Paying Agents............................................................................... 93
11.9 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Indebtedness........... 94
11.10 Trustee Not Fiduciary for Holders of Senior Indebtedness.......................................................... 94
11.11 Notice of Acceleration............................................................................................ 94
11.12 Relative Rights................................................................................................... 94
ARTICLE XII
MISCELLANEOUS............................................................................................................ 95
-------------
12.1 TIA Controls...................................................................................................... 95
12.2 Notices........................................................................................................... 95
12.3 Communications by Holders with Other Holders...................................................................... 96
12.4 Certificate and Opinion as to Conditions Precedent................................................................ 96
12.5 Statements Required in Certificate or Opinion..................................................................... 97
12.6 Rules by Trustee, Paying Agent, Registrar......................................................................... 97
12.7 Legal Holidays.................................................................................................... 97
12.8 Governing Law..................................................................................................... 97
12.9 Submission to Jurisdiction; Appointment of Agent for Service; Waiver.............................................. 97
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
12.10 No Adverse Interpretation of Other Agreements........................................................... 98
12.11 No Personal Liability of Directors, Officers, Employees, Stockholders or Incorporators.................. 98
12.12 Currency Indemnity...................................................................................... 99
12.13 Successors.............................................................................................. 99
12.14 Counterpart Originals All parties hereto may sign any number of copies of this Indenture............... 99
12.15 Severability............................................................................................ 99
12.16 Table of Contents, Headings, etc........................................................................ 99
</TABLE>
v
<PAGE>
EXHIBITS
Exhibit A - Form of Global Note
Exhibit B - Form of Definitive Note
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
part of this Indenture.
vi-
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
<S> <C>
310(a)(1)...................................................................... 7.10
(a)(2)...................................................................... 7.10
(a)(3)...................................................................... NA
(a)(4)...................................................................... NA
(a)(5)...................................................................... 7.8; 7.11
(b)......................................................................... 7.8; 7.11
(c)......................................................................... NA
311(a)......................................................................... 7.12
(b)......................................................................... 7.12
(c)......................................................................... NA
312(a)......................................................................... 2.5
(b)......................................................................... 11.3
(c)......................................................................... 11.3
313(a)......................................................................... 7.6
(b)(1)...................................................................... 11.3
(b)(2)...................................................................... 7.6
(c)......................................................................... 7.6; 11.2
(d)......................................................................... 7.6
314(a)......................................................................... 4.8; 4.10; 11.2; 11.4
(b)......................................................................... 11.2
(c)(1)...................................................................... 7.2; 11.4
(c)(2)...................................................................... 7.2; 11.4
(c)(3)...................................................................... NA
(d)......................................................................... 11.3;11.4; 11.5
(e)......................................................................... 11.5
(f)......................................................................... NA
315(a)......................................................................... 7.1(c)
(b)......................................................................... 7.5; 11.2
(c)......................................................................... 7.1(a)
(d)......................................................................... 6.8; 7.1(c)
(e)......................................................................... 6.15
316(a)(last sentence).......................................................... 2.9
(a)(1)(A)................................................................... 6.8
(a)(1)(B)................................................................... 6.7
(a)(2)...................................................................... NA
(b)......................................................................... 6.10
317(a)(1)...................................................................... 6.11
(a)(2)...................................................................... 6.12
(b)......................................................................... 2.4
</TABLE>
vii-
<PAGE>
<TABLE>
<S> <C>
318(a)............................................................... 11.1
(c)............................................................... 11.1
</TABLE>
- ----------------------
NA means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
viii-
<PAGE>
INDENTURE, dated as of August 26, 1999, between Cybernet Internet Services
International, Inc., a Delaware corporation (the "Company"), and The Bank of New
-------
York, a New York banking corporation, as Trustee, Registrar and Paying Agent.
The Company has duly authorized the creation and issuance of (i) its 13.0%
Convertible Senior Subordinated Discount Notes due 2009 issued on the date
hereof (the "Original Notes") and (ii) Additional Notes (as defined herein) that
--------------
may be issued on any Issue Date (all such notes referred to in (i) and(ii) being
referred to as the "Notes"); and, to provide therefor, the Company has duly
-----
authorized the execution and delivery of this Indenture. Except as otherwise
provided herein, the Notes shall be limited to $100,000,000 in aggregate
principal amount outstanding, of which $93,500,000 in aggregate principal amount
shall be initially issued on the date hereof. Subject to the conditions and
compliance with the covenants set forth herein, the Company may issue up to
$6,500,000 aggregate principal amount of Additional Notes.
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions. For purposes of this Indenture, unless otherwise
-----------
specifically indicated herein, the term "consolidated" with respect to any
Person refers to such Person consolidated with its Restricted Subsidiaries, and
excludes from such consolidation any Unrestricted Subsidiary as if such
Unrestricted Subsidiary were not an Affiliate of such Person. In addition, for
purposes of the following definitions and this Indenture generally, all
calculations and determinations shall be made in accordance with U.S. GAAP and
shall be based upon the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with U.S. GAAP. As used in this Indenture,
the following terms shall have the following meanings:
"Accreted Value" is defined to mean, for any Specified Date, the amount
provided for each $1,000 principal amount at maturity of the Notes:
(a) if the Specified Date occurs on one of the following dates (each, a
"Semi-Annual Accrual Date"), the Accreted Value will equal the amount set forth
------------------------
below for such Semi-Annual Accrual Date:
<PAGE>
2
<TABLE>
<CAPTION>
Semi-Annual
Accrual Date Accreted Value
------------ --------------
<S> <C>
February 15, 2000 $ 567.35
August 15, 2000 $ 604.23
February 15, 2001 $ 643.50
August 15, 2001 $ 685.33
February 15, 2002 $ 729.88
August 15, 2002 $ 777.32
February 15, 2003 $ 827.84
August 15, 2003 $ 881.65
February 15, 2004 $ 938.96
August 15, 2004 $1,000.00
</TABLE>
(b) if the Specified Date occurs before the first Semi-Annual Accrual Date,
the Accreted Value will equal the sum of (a) the original issue price and (b) an
amount equal to the product of (1) the Accreted Value for the first Semi-Annual
Accrual Date less the original issue price multiplied by (2) a fraction, the
numerator of which is the number of days from the Issue Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator of which
is the number of days elapsed from the Issue Date to the first Semi-Annual
Accrual Date, using a 360-day year of twelve 30-day months;
(c) if the Specified Date occurs between two Semi-Annual Accrual Dates, the
Accreted Value will equal the sum of (a) the Accreted Value for the Semi-Annual
Accrual Date immediately preceding such Specified Date and (b) an amount equal
to the product of (1) the Accreted Value for the immediately following Semi-
Annual Accrual Date less the Accreted Value for the immediately preceding Semi-
Annual Accrual Date multiplied by (2) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual Accrual Date to the
Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; or
(d) if the Specified Date occurs after the last Semi-Annual Accrual Date,
the Accreted Value will equal $1000.
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted Subsidiary or assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary, such merger or consolidation or such Asset
<PAGE>
3
Acquisition; provided that Indebtedness of such Person which is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon the
consummation of the transactions by which such Person becomes a Restricted
Subsidiary or is merged or consolidated with or into the Company or any
Restricted Subsidiary or such Asset Acquisition shall not be Indebtedness.
"Additional Amounts" shall have the meaning set forth in Section 4.20.
"Additional Notes" means up to $6,500,000 aggregate principal amount of
13.0% Senior Subordinated Discount Notes due 2009 issued under the terms of this
Indenture after the Closing Date.
"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" is defined to mean any Registrar, Paying Agent, Authenticating
Agent or co-Registrar.
"Agent Members" shall have the meaning set forth in Section 2.16.
"Asset Acquisition" is defined to mean (i) any capital contribution (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise) by the Company or
any Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary 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 an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any property or
asset and awards of compensation for any asset taken by condemnation, eminent
domain or similar proceedings). For the purposes of this definition, the term
"Asset Sale" shall not include (a) any transaction consummated in compliance
with Section
<PAGE>
4
5.1 and the creation of any Lien not prohibited by Section 4.14; provided,
however, that any transaction consummated in compliance with such Section 5.1,
involving a sale, conveyance, assignment, transfer, lease or other disposal of
less than all of the properties or assets of the Company and the Restricted
Subsidiaries shall be deemed to be an Asset Sale with respect to the properties
or assets of the Company and Restricted Subsidiaries that are not so sold,
conveyed, assigned, transferred, leased or otherwise disposed of in such
transaction; (b) sales of property or equipment that has become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be; (c)
sales of telecommunications network capacity of the Company or any Restricted
Subsidiary including sales of indefeasible rights of use of or transfers of dark
fiber optic transmission cable, in each case in the ordinary course of business;
and (d) any transaction consummated in compliance with Section 4.3. In addition,
solely for purposes of Section 4.16, any sale, conveyance, transfer, lease or
other disposition of any property or asset, whether in one transaction or a
series of related transactions, involving assets with a Fair Market Value not in
excess of (Euro)1.0 million in any fiscal year shall be deemed not to be an
"Asset Sale."
"Asset Sale Offer" shall have the meaning set forth in Section 4.16.
"Authenticating Agent" shall have the meaning set forth in Section 2.2.
"Bankruptcy Law" is defined to mean Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of creditors.
"Board of Directors" is defined to mean the Board of Directors of the
Company.
"Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.
"Business Day" is defined to mean a day other than a Saturday, Sunday or
other day on which commercial banking institutions in New York City and Munich,
Germany are authorized or required by law to close.
"Capital Stock" is defined to mean, 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, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Capitalized Lease" is defined to mean, 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 US GAAP, is required to be capitalized and reflected as a liability on the
balance sheet of such Person; and "Capitalized Lease Obligation" is defined to
mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.
<PAGE>
5
"Cash Equivalents" is defined to mean, (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof or by the German government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) overnight bank deposits or certificates of deposit,
eurodollar time deposits and bankers' acceptances with maturities of 360 days or
less from the date of acquisition, in each case with any commercial bank having
capital and surplus in excess of $500 million and outstanding debt rated at
least "A" or the equivalent thereof by S&P or Moody's; (c) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (a) and (b) entered into with any financial
institution meeting the qualifications specified in clause (b) above; (d)
commercial paper rated at least A-1 or P-1, or the equivalent thereof, by S&P or
Moody's, respectively, and in each case maturing within 360 days after the date
of acquisition; and (e) direct obligations of, or obligations fully and
unconditionally guaranteed by, any member of the European Community rated at
least "AAA" or the equivalent thereof by both S&P and Moody's.
"Cedel" is defined to mean Cedelbank, societe anonyme.
"Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes 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 then outstanding Voting Stock of the Company on a fully
diluted basis, provided that the relevant threshold in the case of Cybermind
Interactive Europe and Holger Timm shall be 40%; (ii) individuals who at the
beginning of any period of two consecutive calendar years constituted the Board
of Directors (together with any directors who are members of the Board of
Directors on the date hereof and any new directors whose election by the Board
of Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then still in office who either were members of the Board of Directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of such Board of Directors then in office; (iii) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company to any such "person" or "group"
(other than to a Restricted Subsidiary); or (iv) the merger or consolidation of
the Company with or into another corporation or the merger of another
corporation with or into the Company with the effect that immediately after such
transaction any such "person" or "group" of persons or entities shall have
become the beneficial owner of securities of the surviving corporation of such
merger or consolidation representing a majority of the total voting power of the
then outstanding Voting Stock of the surviving corporation.
"Change of Control Offer" shall have the meaning set forth in Section 4.15.
"Change of Control Payment" shall have the meaning set forth in Section
4.15.
"Change of Control Payment Date" shall have the meaning set forth in
Section 4.15.
<PAGE>
6
"Closing Date" is defined to mean the date of this Indenture.
"Commission" is defined to mean the United States Securities and Exchange
Commission, as from time to time constituted, or, if at any time after the
execution of the Indenture such commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" is defined to mean the authorized common Capital Stock of
the Company, par value $0.001 per share.
"Company" is defined to mean the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Company Order" is defined to mean a written order or request signed in the
name of the Company by two officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company or any other officer so
authorized and delivered to the Trustee.
"Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication), Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (iii) any amount attributable
to depreciation and amortization expense and (iv) all other non-cash items
reducing Consolidated Net Income (excluding any non-cash charge to the extent
that it requires or represents an accrual of, or reserve for, cash charges in
any future period), less all non-cash items increasing Consolidated Net Income
(excluding any items which represent the reversal of an accrual of, or reserve
for, anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with US GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.
"Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
"Consolidated Interest Expense" is defined to mean with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with US GAAP; 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 such Person or any
of its Restricted Subsidiaries, less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued
<PAGE>
7
or scheduled to be paid or to be accrued by such Person and its Restricted
Subsidiaries during such period; excluding, however, any amount of such interest
of any Restricted Subsidiary to the extent the net income of such Restricted
Subsidiary is excluded in the calculation of Consolidated Net Income pursuant to
the last proviso of such definition.
"Consolidated Net Income" is defined to mean, for any period, the net
income (or loss) of the Company and its consolidated Restricted Subsidiaries
determined in accordance with US GAAP; provided, however, that there will not be
included in such Consolidated Net Income: (i) any net income (loss) of any
Person if such Person is not a Restricted Subsidiary, except that (a) subject to
the limitations contained in clauses (iv), (v) and (vi) below, the Company's
equity in the net income of any such Person for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (b) the Company's equity in a net loss of
any such Person (other than an Unrestricted Subsidiary) for such period will be
included in determining such Consolidated Net Income to the extent such loss has
been funded with cash from the Company or a Restricted Subsidiary; (ii) any net
income (loss) of any Person acquired by the Company or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (a) subject to the limitations
contained in clauses (iv), (v) and (vi) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period will be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary as a dividend (subject, in the case of a
dividend to another Restricted Subsidiary, to the limitation contained in this
clause) and (b) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such Consolidated Net
Income; (iv) any gain (loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated Restricted
Subsidiaries which is not sold or otherwise disposed of in the ordinary course
of business and any gain (loss) realized upon the sale or other disposition of
any Capital Stock of any Person; (v) any extraordinary gain or loss; and (vi)
the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with US GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Conversion Price" has the meaning set forth in Section 10.4.
<PAGE>
8
"Conversion Shares" shall have the meaning set forth in Section 10.1.
"Conversion Ratio" shall have the meaning set forth in Section 10.1.
"Corporate Trust Office" is defined to mean the address of the Trustee
specified in Section 12.2.
"Covenant Defeasance" shall have the meaning set forth in Section 8.3.
"Credit Facilities" is defined to mean one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with US GAAP.
"Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with US GAAP.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
"Current Market Price" is defined to mean (i) if the security is not
registered under the Exchange Act, the fair market value of the security
(without any discount for lack of liquidity, the amount of such security offered
to be purchased or the fact that such securities may represent a minority
interest in a private company or a company under the control of another Person)
as determined in good faith by the Board of Directors and certified in a board
resolution that is delivered to the Trustee, and determined to be fair, from a
financial point of view, to the holders of such security or another security
exercisable for such security, by an Independent Financial Expert (as set forth
in such Independent Financial Expert's written fairness opinion); or (ii) if the
security is registered under the Exchange Act, the average of the last reported
sale price of the security on the principal exchange on which it trades (or the
equivalent in an over-the-counter market) for each Business Day during the
period commencing 15 Business Days before such date and ending on the date one
day prior to such date, or if the security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date, the
average of the daily closing bid prices (or such equivalent) for all of the
Business Days before such date for
<PAGE>
9
which daily closing bid prices are available (provided, however, that if the
closing bid price is not determinable for at least 10 Business Days in such
period, the "Current Market Price" of the security shall be determined as if the
security were not registered under the Exchange Act). The Company shall pay the
fees and expenses of any Independent Financial Expert in the determination of
Current Market Price.
"Custodian" is defined to mean any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Default Interest Payment Date" shall have the meaning set forth in Section
2.13.
"Definitive Notes" is defined to mean Notes in definitive registered form
substantially in the form of Exhibit B.
"Designated Senior Indebtedness" under the Notes is defined to mean the
Senior Notes and any Indebtedness constituting Senior Indebtedness that, at the
date of determination, has an aggregate principal amount of, or under which the
holders thereof are committed to lend up to, (Euro)20.0 million and that is
specifically designated by the Company in the instrument creating or evidencing
such Senior Indebtedness as "Designated Senior Indebtedness."
"DTC" is defined to mean The Depository Trust Company or its successors.
"DWAC" is defined to mean the Depositary/Deposit Withdraw at Custodian
system.
"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with US
GAAP) of any Person that are not more than 60 days past their due date and that
were entered into in the ordinary course of business on normal payment terms as
shown on the most recent consolidated balance sheet of such Person filed with
the Commission, all in accordance with US GAAP.
"Equity Interests" is defined to mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" is defined to mean Morgan Guaranty Trust Company of New York
(Brussels office), as operator of the Euroclear System.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Excess Proceeds" shall have the meaning set forth in Section 4.16.
"Exchange Act" is defined to mean the United States Securities Exchange Act
of 1934, as amended, or any successor statute, and the rules and regulations
thereunder.
<PAGE>
10
"Fair Market Value" is defined to mean, with respect to any asset or
property, the price (after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction; provided, however,
that the Fair Market Value of any such asset or assets shall be determined
conclusively by the Board of Directors acting in good faith, which determination
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee and, when required by the express provisions hereof, an Officers'
Certificate filed with the Trustee.
"Global Notes" is defined to mean the Rule 144A Global Note and the
Regulation S Global Note.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; 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" is defined to mean a Person in whose name a Note is registered on
the Registrar's books.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that none of the accrual of interest, the payment of interest in the form of
additional Indebtedness or the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the 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, (D)
representing Capitalized Lease Obligations, (ii) 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, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of determination
and (v) 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
<PAGE>
11
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 that (x) the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with US GAAP, (y) money
borrowed and set aside at the time of the Incurrence of any Indebtedness for the
sole purpose of prefunding the payment of interest on such Indebtedness (and
which is pledged in favor of the holders of such Indebtedness pending such
application) shall not be deemed to be "Indebtedness" so long as such money is
held to secure the payment of such interest and (z) Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Indenture" is defined to mean this Indenture, as amended, modified or
supplemented from time to time in accordance with the terms hereof.
"Independent Financial Expert" is defined to mean an internationally
recognized investment bank that does not (and the directors, executive officers
and 5% stockholders of which do not) have a direct or indirect financial
interest in the Company or any of its Subsidiaries or Affiliates, which has not
been for at least five years, and at the time it is called upon to give
independent financial advice to the Company is not (and none of its directors,
executive officers or 5% stockholders is), a promoter, director, or officer of
the Company or any of its Subsidiaries or Affiliates. The Independent Financial
Expert may be compensated and indemnified by the Company for opinions or
services it provides as an Independent Financial Expert.
"Initial Purchaser" is defined to mean Morgan Stanley & Co. International
Limited.
"Interest Payment Date" is defined to mean the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
"Investment" in any Person is defined to mean 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 US GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to another Person or any payment for any
property or services for the account or use of another Person), or any purchase
or acquisition of Equity Interests, bonds, notes, debentures, or other similar
instruments issued by any other Person. For purposes of the definition of
"Unrestricted Subsidiary" and Sections 4.3 and 4.19, (i) "Investment" shall
include (a) the Fair Market Value of the assets (net of liabilities) of any
Restricted Subsidiary of the Company at the time that such Restricted Subsidiary
of the Company is designated an Unrestricted Subsidiary and shall exclude the
Fair Market Value of the assets (net of liabilities) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
<PAGE>
12
Restricted Subsidiary of the Company and (b) the Fair Market Value, in the case
of a sale of Equity Interests in accordance with Section 4.19 such that a Person
no longer constitutes a Restricted Subsidiary, of the remaining assets (net of
liabilities) of such Person after such sale, and shall exclude the Fair Market
Value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Company and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.
"Issue Date" is defined to mean the date on which the Notes are originally
issued under the Indenture.
"Legal Defeasance" shall have the meaning set forth in Section 8.2.
"Legal Holiday" is defined to mean a Saturday, a Sunday or a day on which
banking institutions in the City of Munich, Germany or The City of New York or a
place of payment are authorized or required by law, regulation or executive
order to remain closed. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
"Liquidated Damages" shall have the meaning set forth in the Registration
Rights Agreement.
"Market Criteria" shall have the meaning set forth in Section 10.1.
"Market Criteria Period" shall have the meaning set forth in Section 10.1.
"Maturity Date" is defined to mean August 15, 2009.
"Moody's" is defined to mean Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (iii) payments made to repay
Indebtedness or any
<PAGE>
13
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
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 US GAAP;
provided that such amounts which cease to be held as reserves shall be deemed
Net Cash Proceeds; and (b) with respect to any issuance or sale of Equity
Interests (other than Redeemable 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 (1) such obligations are financed, directly or
indirectly, with money borrowed from the Company or any Restricted Subsidiary or
otherwise financed or sold with recourse to the Company or any Restricted
Subsidiary or (2) the purchase of the Equity Interests is otherwise financed,
directly or indirectly, by the Company or any Restricted Subsidiary, including
through funds contributed, extended, guaranteed or otherwise advanced by the
Company or any Affiliate) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of attorneys' 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.
"Neuer Markt" is defined to mean the Neuer Markt of the Frankfurt Stock
Exchange.
"Notes" shall have the meaning set forth in the preamble of this Indenture.
"Offer Amount" shall have the meaning set forth in Section 4.16.
"Offer Period" shall have the meaning set forth in Section 4.16.
"Officer" is defined to mean, with respect to any Person (other than any
Agent), the Chairman of the Board, any Director, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Assistant Treasurer, the Controller or the Secretary of such Person.
"Officers' Certificate" is defined to mean a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Sections 12.4 and 12.5 of the Indenture.
"Opinion of Counsel" is defined to mean a written opinion from legal
counsel which and who are reasonably acceptable to, and addressed to, the
Trustee complying with the requirements of Sections 11.4 and 11.5. Unless
otherwise required by the TIA, the legal counsel may be an employee of or
counsel to the Company.
"Original Notes" shall have the meaning set forth in the preamble to this
Indenture.
<PAGE>
14
"Paying Agent" shall have the meaning set forth in Section 2.3.
"Permitted Assets" is defined to mean, with respect to any Person, assets
used in the Permitted Business (or Equity Interests of a Person that becomes a
Restricted Subsidiary, the assets of which consist principally of such Permitted
Assets) that are purchased or acquired by the Company or a Restricted Subsidiary
after the Issue Date.
"Permitted Business" is defined to mean the business of (i) operating an
Internet connectivity or internet enhancement service as it may exist from time
to time, including, without limitation, providing dial up or dedicated internet
service, web hosting or co-location services, security solutions, configuration
services, electronic commerce, intranet solutions, data backup and restoral,
business content and collaboration or consulting services with respect to the
foregoing (including, without limitation, any business conducted by the Company
or any Restricted Subsidiary on the Issue Date), (ii) transmitting or providing
services relating to the transmission of, voice, video or data through owned or
leased transmission facilities, (iii) constructing, creating, developing,
providing or marketing communications-related network equipment, products,
software and other devices for use in an Internet or telecommunications
business, or (iv) evaluating, participating in or pursuing any other activity or
opportunity that is primarily related to those identified in clause (i), (ii) or
(iii) above. A good faith determination by a majority of the Board of Directors
as to whether a business meets the requirements of this definition shall be
conclusive, absent manifest error.
"Permitted Holder" is defined to mean Andreas Eder, Alessandro Giacalone
and any Affiliate of the foregoing Persons.
"Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with US GAAP; (iii) stock, obligations or securities received (a) in
satisfaction of judgments or (b) in settlement of debts, or as a result of
foreclosure, perfection or enforcement of any Lien, in each case under this
clause (b) arising in the ordinary course of business and not in contemplation
of the acquisition of such stock, obligations or securities; (iv) Investments in
Cash Equivalents; (v) Investments made as a result of the receipt of noncash
consideration from any Asset Sale made in compliance with Section 4.16; (vi)
Investments in negotiable instruments held for collection, lease, utility and
workers' compensation, performance and other similar pledges or deposits, and
other pledges or deposits permitted under Section 4.14; (vii) obligations under
Interest Rate Agreements or Currency Agreements; provided that such agreements
(a) are designed solely to protect the Company or the Restricted Subsidiary, as
the case may be, 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; (viii) Investments made in the ordinary course
of business and on ordinary business terms in the Permitted Business in
consortia formed to construct transmission infrastructure for use primarily in
the Permitted Business, provided such Investment
<PAGE>
15
entitles the Company to rights of way or rights of use on such transmission
infrastructure; and (ix) any Investment purchased by the Company and deposited
in an escrow account established in connection with the issuance of any Senior
Indebtedness of the Company that is pari passu with the Senior Notes.
"Permitted Liens" is defined to mean (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 US GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with US 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 or other
similar legislation and other insurance-related obligations (including, without
limitation, pledges or deposits securing liability to insurance carriers under
insurance or self-insurance arrangements); (iv) 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; (v)
Liens (including extensions and renewals thereof) upon real or personal property
of a Restricted Subsidiary purchased or leased after the Issue Date; provided
that (a) such Lien is created solely for the purpose of securing Indebtedness
Incurred by such Restricted Subsidiary in compliance with Sections 4.4 and 4.17
(1) to finance the cost 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 and the Incurrence of such Indebtedness or (2) to
refinance any Indebtedness of a Restricted Subsidiary previously so secured, (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; (vi) any interest
or title of a lessor in the property subject to any Capitalized Lease or
operating lease of a Restricted Subsidiary which, in each case, is permitted
under this Indenture; (vii) Liens on property of, or on Equity Interests in or
Indebtedness of, any Person existing at the time such Person becomes, or becomes
a part of, any Restricted Subsidiary; provided that such Liens were not created,
incurred or assumed in contemplation of such transaction and do not extend to or
cover any property or assets of the Company or any Restricted Subsidiary other
than the property or assets so acquired; (viii) Liens arising from the rendering
of a final judgment or order against the Company or any Restricted Subsidiary of
the Company that does not give rise to an Event of Default; (ix) Liens
encumbering customary initial deposits and margin deposits and other Liens that
are either within the general parameters customary in the industry or incurred
in the ordinary course of business, in each case, securing Indebtedness under
Interest Rate Agreements and Currency Agreements; (x) 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 Issue Date; (xi) Liens
existing on the Issue Date or securing the Notes or any Guarantee of the Notes;
(xii) Liens granted after the Issue Date on any assets or Equity
<PAGE>
16
Interests in the Company or its Restricted Subsidiaries created in favor of the
holders; (xiii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or another Restricted
Subsidiary to secure Indebtedness owing to the Company or such Restricted
Subsidiary and Incurred in compliance with clause (ii) of paragraph (b) of
Section 4.4; (xiv) Liens created in connection with the incurrence of any
Indebtedness permitted to be Incurred under clause (iii) of paragraph (b) of
Section 4.4; provided that the Indebtedness which it refinances is secured by
similar Liens; (xv) Liens securing Indebtedness under Credit Facilities incurred
in compliance with clause (viii) of paragraph (b) of Section 4.4; (xvi) Liens
securing other Senior Indebtedness of the Company; (xvii) Liens incurred or
deposits made to secure the performance of tenders, bids, leases, subleases,
licenses, sublicenses, obligations for utilities, statutory or regulatory
obligations, bankers' acceptances, letters of credit, surety and appeal bonds,
government or other contracts, completion guarantees, 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);
(xviii) 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; and (xix) Liens with respect to an escrow account established in
connection with the issuance of any Senior Indebtedness which are pari passu
with the Senior Notes.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PIK Notes" is defined to mean the 13.0% Convertible Senior Subordinated
Pay-In-Kind Notes due 2009 of the Company that are being offered simultaneously
herewith, if any are issued.
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
"Private Placement Legend" is defined to mean the legend set forth in
Section 2.7(g).
"Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Sale or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Sale or Asset
Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.
"Purchase Date" shall have the meaning set forth in Section 4.16.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
<PAGE>
17
"Record Date" is defined to mean the Record Dates specified in the Notes.
"Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under Section 4.15 and Section 4.16 and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.
"Redemption Date" when used with respect to any Note to be redeemed, is
defined to mean the date fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Notes.
"Redemption Price" when used with respect to any Note to be redeemed, is
defined to mean the price fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Notes.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" is defined to mean that certain
Registration Rights Agreement, dated the date hereof, between the Company and
the Trustee.
"Regulation S" is defined to mean Regulation S under the Securities Act.
"Regulation S Global Note" shall have the meaning set forth in Section 2.1.
"Regulation S Notes" shall have the meaning set forth in Section 2.1.
"Relevant Taxing Jurisdiction" shall have the meaning set forth in Section
4.20.
"Replacement Assets" is defined to mean any property, plant or equipment of
a nature or type that are used or usable in the Permitted Business (as
determined in good faith by the Board of Directors, whose determination shall be
evidenced by a Board Resolution).
"Restricted Period" shall have the meaning set forth in Section 2.7(c).
<PAGE>
18
"Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of the Company that is not then an Unrestricted Subsidiary.
"Rule 144" is defined to mean Rule 144 (including any successor regulation
thereto) under the Securities Act, as it may be amended from time to time.
"Rule 144A" is defined to mean Rule 144A (including any successor
regulation thereto) under the Securities Act, as it may be amended from time to
time.
"Rule 144A Global Note" shall have the meaning set forth in Section 2.1.
"Rule 144A Notes" shall have the meaning set forth in Section 2.1.
"S&P" is defined to mean Standard & Poor's Ratings Services, a division of
the McGraw-Hill Companies, and its successors.
"Securities Act" is defined to mean the United States Securities Act of
1933, as amended, or any successor statute, and the rules and regulations
thereunder.
"Senior Indebtedness" is defined to mean the following obligations of the
Company, whether outstanding on the date of the Indenture or thereafter
Incurred: (i) all Indebtedness and all other monetary obligations of the Company
under the Senior Notes; (ii) all other Indebtedness of the Company other than
the Notes and the PIK Notes, if any (including, without limitation, Indebtedness
Incurred under Credit Facilities), including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is pari
passu with, or subordinated in right of payment to, the Notes; and (iii) all
fees, expenses and indemnities payable in connection with the Senior Notes
(including any agreement pursuant to which the Senior Notes were issued);
provided that the term "Senior Indebtedness" shall not include (a) any
Indebtedness of the Company that, when Incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code, was without
recourse to the Company, (b) any Indebtedness of the Company to a Subsidiary of
the Company or a joint venture in which the Company has an interest, (c) any
Indebtedness of the Company, to the extent not permitted under the Indenture,
(d) any repurchase, redemption or other obligation in respect of Redeemable
Stock, (e) any Indebtedness to any employee of the Company or one of its
Subsidiaries, (f) any liability under federal, state, local, foreign or other
taxes owed or owing by the Company, (g) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities) or (h) any
Indebtedness, guarantee or obligation of the Company that is expressly
subordinate or junior in right of payment to any other Indebtedness, Guarantee
or obligation of the Company, including without limitation, any Senior
Subordinated Indebtedness and Subordinated Obligations. Senior Indebtedness will
also include interest accruing subsequent to events of bankruptcy of the Company
and its Subsidiaries at the rate provided for in the document governing such
Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the debtor in a bankruptcy case under federal bankruptcy
law.
<PAGE>
19
"Senior Notes" is defined to mean the 14.0% Senior Notes due 2009 of the
Company, issued on July 8, 1999.
"Senior Subordinated Indebtedness" is defined to mean the Notes and any
other Indebtedness of the Company, including, without limitation, any PIK Notes,
that specifically provides that such Indebtedness is to rank equally with the
Notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness.
"Significant Subsidiary" is defined to mean, at any time of determination,
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.
"Specified Date" is defined to mean any redemption date, any date of
purchase for any purchase of the Notes pursuant to Section 4.16 or Section 4.15,
any date of conversion or exchange of Notes or any date on which the Notes are
due and payable after an Event of Default.
"Stated Maturity" is defined to mean, (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.
"Subordinated Obligations" is defined to mean any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (A) more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof
whether in the form of membership, general, special or limited partnership or
otherwise and (B) such Person or any Restricted Subsidiary of such Person is a
controlling general partner, co-venturer, manager or is in a similar position or
otherwise controls such entity.
"Successor Company" shall have the meaning set forth in Section 5.1.
"Taxes" shall have the meaning set forth in Section 4.20.
<PAGE>
20
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as it may be amended from time to time.
"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Trading Day" is defined to mean, so long as the Common Stock trades on the
Neuer Markt, a day on which such exchange is open for the transaction of
business, or, if the Common Stock ceases to trade on the Neuer Markt, a day on
which the principal national securities exchange on which the Common Stock is
listed or admitted to trading is open for the transaction of business, or, if
the Common Stock is not so listed or admitted to trading on any national
securities exchange, a day on which the Nasdaq National Market System (or any
successor thereto) or such other system then in use is open for the transaction
of business, or, if the Common Stock is not quoted by any such organization, any
day other than a Saturday, Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Officer" is defined to mean any officer within the corporate trust
department (or any successor group of the Trustee), including any vice
president, assistant vice president, corporate trust officer, assistant
corporate trust officer, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his or her knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.
"Trustee" is defined to mean the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated 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 Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (a) the Company certifies in an
Officers' Certificate that such designation complies with the covenants
described under Section 4.3, (b) such Subsidiary is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the
<PAGE>
21
Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might reasonably be obtained in a comparable arm's-length
transaction at the time from Persons who are not Affiliates of the Company, (c)
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests in such
Subsidiary or any Subsidiary of such Subsidiary or (2) to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve any
specified levels of operating results and (d) such Subsidiary and its
Subsidiaries have not at the time of designation, and do not thereafter, Incur
any Indebtedness other than Unrestricted Subsidiary Indebtedness. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur 1.00 of additional Indebtedness under
Section 4.4(a) on a pro forma basis taking into account such designation and (y)
no Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"US GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
"U.S. Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and are not callable or redeemable at the option of the issuer thereof.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act or any successor to such Rule.
"Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products
<PAGE>
22
of the number of years from such date of determination to the dates of each
successive scheduled principal payment of, or redemption or similar payment with
respect to, such Indebtedness multiplied by (b) the amount of such principal
payment, by (ii) the sum of all such principal payments.
"Wholly Owned Restricted Subsidiary" is defined to mean any Restricted
Subsidiary all of the outstanding voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.2 Incorporation by Reference of TIA. This Indenture is subject to
---------------------------------
the mandatory provisions of the TIA which as of the date hereof and thereafter
as in effect are 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;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the 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 Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.3 Rules of Construction. Unless the context otherwise requires:
---------------------
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with U.S. GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) "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.
<PAGE>
23
ARTICLE II
THE NOTES
---------
SECTION 2.1 Form and Dating. The Notes and the notation relating to the
---------------
Trustee's certificate of authentication thereof, shall be substantially in the
form of Exhibits A or B, as applicable. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company and the
Trustee shall approve the form of the Notes and any notation, legend or
endorsement on them. Each Note shall be dated the date of its issuance and shall
show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as Exhibits
A and B shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. The Notes will initially be represented by
the Global Notes.
Notes offered and sold in their initial distribution in reliance on Rule
144A shall be initially issued as one or more global notes in registered, global
form without interest coupons, substantially in the form of Exhibit A hereto,
with such applicable legends as are provided in Exhibit A, except as otherwise
permitted herein. Such Global Notes shall be referred to collectively herein as
the "Rule 144A Global Note." Such Rule 144A Global Notes shall be deposited on
---------------------
behalf of the holders of the Notes represented thereby by the Trustee, at its
New York office, as custodian for DTC, duly executed by the Company and
authenticated by the Trustee or an Authenticating Agent as provided herein. The
aggregate principal amount of the Rule 144A Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for DTC, or the records of DTC or its nominee, as the case may be, as
hereinafter provided (or by the issue of a further Rule 144A Global Note), in
connection with a corresponding decrease or increase in the aggregate principal
amount of the Regulation S Global Note or in consequence of the issue of
Definitive Notes or additional Rule 144A Notes, as hereinafter provided. The
Rule 144A Global Note and all other Notes, if any, evidencing the debt, or any
portion of the debt, initially evidenced by such Rule 144A Global Note, shall
collectively be referred to herein as the "Rule 144A Notes."
---------------
Notes offered and sold in their initial distribution in reliance on
Regulation S shall be initially issued as one or more global notes, in
registered global form without interest coupons, substantially in the form of
Exhibit A hereto, with such applicable legends as are provided in Exhibit A
hereto, except as otherwise permitted herein. Such Global Notes, as the case
may be, shall be referred to collectively herein as the "Regulation S Global
-------------------
Note." Such Regulation S Global Note shall be deposited on behalf of the
- ----
holders of the Notes represented thereby with the Trustee, at its New York
office, as custodian for DTC, and registered in the name of DTC or its nominee,
duly executed by the Company and authenticated by the Trustee or an
Authenticating Agent as provided herein, for credit to the accounts of the
respective depositaries for Euroclear and Cedel (or such other accounts as they
may direct). The aggregate principal amount of the Regulation S Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for DTC, or the records of DTC or its nominee, as
the
<PAGE>
24
case may be, as hereinafter provided (or by the issue of a further Regulation S
Global Note), in connection with a corresponding decrease or increase in the
aggregate principal amount of the Rule 144A Global Note or in consequence of the
issue of Definitive Notes or additional Regulation S Notes, as hereinafter
provided. The Regulation S Global Note and all other Notes that are not Rule
144A Global Notes shall collectively be referred to herein as the "Regulation S
------------
Notes".
- -----
SECTION 2.2 Execution and Authentication. Two Officers shall sign, or one
----------------------------
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note was an Officer at the time of
such execution but no longer holds that office or position at the time the
Trustee authenticates the Note, the Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
Except as otherwise provided herein, the aggregate principal amount of
Notes which may be outstanding at any time under this Indenture is $100,000,000.
The Trustee shall authenticate an aggregate principal amount of Notes not to
exceed $100,000,000 for issuance, which shall consist of (i) Original Notes for
original issue on the Closing Date in the aggregate principal amount not to
exceed $93,500,000.00 and (ii) Additional Notes from time to time for issue in
an aggregate principal amount not to exceed $6,500,000.00, which may be issued
by the Company after the Closing Date. Additional Notes will be treated as the
same series of Notes as the Original Notes for all purposes under this
Indenture, including, without limitation, for purposes of waivers, amendments,
redemptions and offers to purchase. The Officers' Certificate shall specify the
aggregate principal amount of Notes to be authenticated, the series and type of
Notes, the date on which the Notes are to be authenticated, the issue price,
whether the Notes are to be Original Notes or Additional Notes, whether the
Notes are to be issued as Definitive Notes or Global Notes and whether or not
the Notes shall bear the Private Placement Legend, or such other information as
the Trustee may reasonably request. In authenticating the Notes and accepting
the responsibilities under this Indenture in relation to the Notes, the Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the form and terms thereof have been established
in conformity with the provisions of this Indenture. Upon receipt of a Company
Order, the Trustee shall authenticate Notes in substitution of Notes originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent ("Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate Notes. Unless otherwise
provided in the appointment, 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 Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
<PAGE>
25
The Notes shall be issuable only in denominations of $1,000 and any
integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an
--------------------------
office or agency in the Borough of Manhattan, The City of New York and, if and
so long as the Notes are listed, admitted or eligible for trading on a stock
exchange or trading market in whatever location the rules of such stock exchange
or trading market so require, where (i) Global Notes may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (ii)
---------
Global Notes may be presented or surrendered for payment ("Paying Agent") and
------------
(iii) notices and demands in respect of such Global Notes and this Indenture may
be served. In the event that Definitive Notes are issued, (x) Definitive Notes
may be presented or surrendered for registration of transfer or for exchange,
(y) Definitive Notes may be presented or surrendered for payment and (z) notices
and demands in respect of the Definitive Notes and this Indenture may be served
at an office of the Registrar or the Paying Agent, as applicable, in the Borough
of Manhattan, The City of New York. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Company, upon notice to the
Trustee, may have one or more co-Registrars and one or more additional Paying
Agents. The term "Registrar" includes any co-Registrar and the term "Paying
Agent" includes any additional Paying Agent. The Company initially appoints The
Bank of New York as Registrar and Paying Agent until such time as The Bank of
New York has resigned or a successor has been appointed. The Company may change
any Registrar or Paying Agent without notice to any Holder. Payment of Accreted
Value and principal will be made upon the surrender of Definitive Notes at the
office of the Paying Agent. In the case of a transfer of a Definitive Note in
part, upon surrender of the Definitive Note to be transferred, a Definitive Note
shall be issued to the transferee in respect of the principal amount transferred
and a Definitive Note shall be issued to the transferor in respect of the
balance of the principal amount of the transferred Definitive Note at the office
of any transfer agent.
SECTION 2.4 Paying Agent To Hold Assets in Trust. The Company shall require
------------------------------------
each Paying Agent other than the Trustee to agree in writing that each Paying
Agent shall hold in trust for the benefit of Holders or the Trustee all assets
held by the Paying Agent for the payment of Accreted Value or principal of or
interest, if any, Additional Amounts, if any, Liquidated Damages, if any,
premium, if any, or interest on, the Notes, and shall notify the Trustee of any
Default by the Company in making any such payment. The Company at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets 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 distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent, the
Paying Agent shall have no further liability for such assets.
SECTION 2.5 List of Holders. 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. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee before each Record Date and at such other times as
the Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
<PAGE>
26
SECTION 2.6 Book-Entry Provisions for Global Notes. (a) The Global Notes
--------------------------------------
initially shall (i) be registered in the name of DTC or the nominee of such
depositary, (ii) be delivered to the Trustee as custodian for such depositary
and (iii) bear legends as set forth in Section 2.7(g) hereto.
(b) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
-----------------------------------------------------
any other provisions of this Indenture, a Global Note may not be transferred as
a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another successor of DTC or a nominee of such successor depositary. Interests of
beneficial owners in the Global Notes may be transferred or exchanged for
Definitive Notes in accordance with the rules and procedures of DTC and the
provisions of Section 2.7. All Global Notes shall be exchanged by the Company
(with authentication by the Trustee) for one or more Definitive Notes, if (a)
any of DTC, Euroclear and Cedel (i) has notified the Company that it is
unwilling or unable to continue as a clearing agency, or (in the case of DTC)
ceases to be a clearing agency registered under the Exchange Act and (ii) a
successor to DTC, Euroclear or Cedel, as the case may be, that (in the case of
DTC) is registered as a clearing agency under the Exchange Act, is not able to
be appointed by the Company within 90 days of such notification or (b) at any
time at the option of the Company. If an Event of Default occurs and is
continuing, the Company shall, at the request of the Holder thereof, exchange
all or part of a Global Note for one or more Definitive Notes (with
authentication by the Trustee); provided, however, that the principal amount at
maturity of such Definitive Notes and such Global Note after such exchange shall
be $1,000 or integral multiples thereof. Whenever all of a Global Note is
exchanged for one or more Definitive Notes, it shall be surrendered by the
Holder thereof to the Trustee for cancellation. Whenever a part of a Global Note
is exchanged for one or more Definitive Notes, the Global Note shall be
surrendered by the Holder thereof to the Trustee who shall cause an adjustment
to be made to Schedule A of such Global Note such that the principal amount of
such Global Note will be equal to the portion of such Global Note not exchanged
and shall thereafter return such Global Note to such Holder. A Global Note may
not be exchanged for a Definitive Note other than as provided in this Section
2.6(b).
(c) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.6, the Global
Notes shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall upon written instructions from the
Company authenticate and make available for delivery, to each beneficial owner
in exchange for its beneficial interest in the Global Notes, an equal aggregate
principal amount of Definitive Notes of authorized denominations.
(d) Any Definitive Note constituting a Rule 144A Note delivered in exchange
for an interest in a Global Note pursuant to paragraph (b) of this Section 2.6
shall, except as otherwise provided by Section 2.8, bear the Private Placement
Legend.
SECTION 2.7 Registration of Transfer and Exchange. (a) Notwithstanding any
-------------------------------------
provision to the contrary herein, so long as a Note remains outstanding,
transfers of beneficial interests in Global Notes or transfers of Definitive
Notes, in whole or in part, shall be made only in accordance with this Section
2.7.
<PAGE>
27
(b) Rule 144A Global Note to Regulation S Global Note. If a holder of a
-------------------------------------------------
beneficial interest in the Rule 144A Global Note wishes at any time to exchange
its interest in such Rule 144A Global Note for an interest in the Regulation S
Global Note, or to transfer its interest in such Rule 144A Global Note to a
Person who wishes to take delivery thereof in the form of an interest in such
Regulation S Global Note, such holder may, subject to the rules and procedures
of DTC, Euroclear and Cedel, to the extent applicable, and to the requirements
set forth in the following sentence, exchange or cause the exchange or transfer
or cause the transfer of such interest for an equivalent beneficial interest in
such Regulation S Global Note. Upon receipt by the Trustee, as transfer agent,
at its office in The City of New York of (1) instructions given in accordance
with the procedures of DTC, Euroclear and Cedel, to the extent applicable, from
or on behalf of a holder of a beneficial interest in the Rule 144A Global Note,
directing the Trustee (via DWAC), as transfer agent, to credit or cause to be
credited a beneficial interest in the Regulation S Global Note in an amount
equal to the beneficial interest in the Rule 144A Global Note to be exchanged or
transferred, (2) a written order given in accordance with the procedures of DTC,
Euroclear or Cedel, to the extent applicable, containing information regarding
the Euroclear or Cedel account to be credited with such increase and the name of
such account, and (3) a certificate in the form of Exhibit C given by the holder
of such beneficial interest stating that the exchange or transfer of such
interest has been made pursuant to and in accordance with Rule 904 of Regulation
S or Rule 144A under the Securities Act, the Trustee, as transfer agent, shall
promptly deliver appropriate instructions (via DWAC) to DTC, its nominee, or the
custodian for DTC, as the case may be, to reduce or reflect on its records a
reduction of the Rule 144A Global Note by the aggregate principal amount of the
beneficial interest in such Rule 144A Global Note to be so exchanged or
transferred from the relevant participant, and the Trustee, as transfer agent,
shall promptly deliver appropriate instructions (via DWAC) to DTC, its nominee,
or the custodian for DTC, as the case may be, concurrently with such reduction,
to increase or reflect on its records an increase of the principal amount of
such Regulation S Global Note by the aggregate principal amount of the
beneficial interest in such Rule 144A Global Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions (who shall be the agent member of Euroclear or
Cedel, or both, as the case may be) a beneficial interest in such Regulation S
Global Note equal to the reduction in the principal amount of such Rule 144A
Global Note.
(c) Regulation S Global Note to Rule 144A Global Note. If a holder of a
-------------------------------------------------
beneficial interest in the Regulation S Global Note wishes at any time to
exchange its interest in such Regulation S Global Note for an interest in the
Rule 144A Global Note, or to transfer its interest in such Regulation S Global
Note to a Person who wishes to take delivery thereof in the form of an interest
in such Rule 144A Global Note, such holder may, subject to the rules and
procedures of Euroclear, Cedel or DTC, to the extent applicable, and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such interest for an equivalent beneficial
interest in such Rule 144A Global Note. Upon receipt by the Trustee, as transfer
agent, at its office in The City of New York of (l) instructions given in
accordance with the procedures of Euroclear, Cedel or DTC, to the extent
applicable, from or on behalf of a beneficial owner of an interest in the
Regulation S Global Note directing the Trustee, as transfer agent, to credit or
cause to be credited a beneficial interest in the Rule 144A Global Note in an
amount equal to the beneficial interest in the Regulation S Global Note to be
exchanged or transferred, (2) a written order given in accordance with the
procedures of
<PAGE>
28
Euroclear, Cedel or DTC, as the case may be, containing information regarding
the account with Euroclear, Cedel or DTC to be credited with such increase and
the name of such account, and (3) prior to or on the 40th day after the later of
the commencement of the offering of the Notes and the Closing Date (the
"Restricted Period"), a certificate in the form of Exhibit D given by the holder
-----------------
of such beneficial interest and stating that the Person transferring such
interest in such Regulation S Global Note reasonably believes that the Person
acquiring such interest in such Rule 144A Global Note is a Qualified
Institutional Buyer (as defined in Rule 144A) and is obtaining such beneficial
interest in a transaction meeting the requirements of Rule 144A and any
applicable securities laws of any state of the United States or any other
jurisdiction, the Trustee, as transfer agent, shall promptly deliver (via DWAC)
appropriate instructions to DTC, its nominee, or the custodian for DTC, as the
case may be, to reduce or reflect on its records a reduction of the Regulation S
Global Note by the aggregate principal amount of the beneficial interest in such
Regulation S Global Note to be exchanged or transferred, and the Trustee, as
transfer agent, shall promptly deliver (via DWAC) appropriate instructions to
DTC, its nominee, or the custodian for DTC, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Rule 144A Global Note by the aggregate principal amount
of the beneficial interest in such Regulation S Global Note to be so exchanged
or transferred, and to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest in such Rule 144A
Global Note equal to the reduction in the principal amount of such Regulation S
Global Note. After the expiration of the Restricted Period, the certification
requirement set forth in clause (3) of the second sentence of this Section
2.7(c) will no longer apply to such transfers.
(d) Any beneficial interest in one of the Global Notes that is transferred
to a Person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and become
an interest in the other Global Note and, accordingly, will thereafter be
subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
(e) Other Exchanges. In the event that a Global Note is exchanged for
---------------
Definitive Notes in registered form without interest coupons, pursuant to
Section 2.6(b), or a Definitive Note is exchanged for a beneficial interest in a
Global Note, such Notes may be exchanged or transferred for one another only in
accordance with such procedures as are substantially consistent with the
provisions of Sections 2.6 and 2.7 herein and as may be from time to time
adopted by the Company and the Trustee.
(f) Interests in Regulation S Global Notes to be held through Euroclear and
-----------------------------------------------------------------------
Cedel. Prior to the expiration of the Restricted Period, beneficial interests in
- -----
the Regulation S Global Note may only be held by DTC through its member
participants who are Agent Members of Euroclear and Cedel, unless delivery is
made through the Rule 144A Global Note in accordance with the certification
requirements hereof.
(g) Private Placement Legend. Each Note issued hereunder shall, upon
------------------------
issuance, bear the legend set forth herein and such legend shall not be removed
from such Note except as provided in the next sentence. Except in connection
with a Resale Shelf Registration Statement contemplated by and pursuant to the
Registration Rights Agreement, the legend required for a
<PAGE>
29
Rule 144A Note or a Regulation S Note may be removed from a Rule 144A Note or a
Regulation S Note if there is delivered to the Company and the Trustee such
satisfactory evidence, which may include an opinion of independent counsel
licensed to practice law in the State of New York, as may be reasonably required
by the Company and the Trustee, that neither such legend nor the restrictions on
transfer set forth therein are required to ensure that transfers of such Note
will not violate the registration requirements of the Securities Act. Upon
provision of such satisfactory evidence, the Trustee, at the direction of the
Company, shall authenticate and deliver in exchange for such Note another Note
or Notes having an equal aggregate principal amount that does not bear such
legend. If such a legend required for a Rule 144A Note or a Regulation S Note
has been removed from a Rule 144A Note or a Regulation S Note as provided above,
no other Note issued in exchange for all or any part of such Note shall bear
such legend, unless the Company has reasonable cause to believe that such other
Note is a "restricted security" within the meaning of Rule 144 and instructs the
Trustee to cause a legend to appear thereon.
The Notes shall bear the following legend (the "Private Placement Legend")
------------------------
on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
--------------
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
-----------------------------------
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S
<PAGE>
30
UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUER AND THE TRUSTEE SHALL HAVE
THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D)
OR (E), TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
(h) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among Agent Members or
beneficial owners of interest in any Global Note) other than to require delivery
of such certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by the terms of, this
Indenture, and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable United States Federal or state securities law.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.6 or this Section 2.7. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(i) Definitive Notes shall be transferable only upon the surrender of a
Definitive Note for registration of transfer. When a Definitive Note is
presented to the Registrar or a co-registrar with a request to register a
transfer, the Registrar shall register the transfer as requested if its
requirements for such transfers are met. When Definitive Notes are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Definitive Notes of other denominations, the Registrar shall
make the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall
<PAGE>
31
execute and the Trustee shall authenticate Definitive Notes at the Registrar's
or co-registrar's request.
(j) The Company shall not be required to make, and the Registrar need not
register transfers or exchanges of, Definitive Notes selected for redemption
(except, in the case of Definitive Notes to be redeemed in part, the portion
thereof not to be redeemed) or any Definitive Notes for a period of 15 days
before a selection of Definitive Notes to be redeemed.
(k) Prior to the due presentation for registration of transfer of any Note,
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
may deem and treat the Person in whose name a Note is registered as the absolute
owner of such Note for the purpose of receiving payment of Accreted Value or
principal, interest, Additional Amounts, if any, or Liquidated Damages, if any,
on such Note and for all other purposes whatsoever, whether or not such Note is
overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar shall be affected by notice to the contrary.
(l) The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section 2.7.
(m) All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
(n) Holders of Notes (or holders of interests therein) and prospective
purchasers designated by such Holders (or holders of interests therein) will
have the right to obtain from the Company upon request by such Holders (or
holders of interests therein) or prospective purchasers, during any period in
which the Company is not subject to Section 13 or 15(d) of the Exchange Act, or
is exempt from reporting pursuant to 12g3-2(b) under the Exchange Act, the
information required by paragraph d(4)(i) of Rule 144A in connection with any
transfer or proposed transfer of such Notes.
SECTION 2.8 Replacement Notes. If a mutilated Definitive Note is
-----------------
surrendered to the Registrar, if a mutilated Global Note is surrendered to the
Company or if the Holder of a Note claims that such Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note in such form as the Note being replaced if the
requirements of the Trustee, the Registrar and the Company are met. If required
by the Trustee, the Registrar or the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of the Company,
the Registrar and the Trustee, to protect the Company, the Registrar, the
Trustee and any Agent from any loss which any of them may suffer if a Note is
replaced. The Company, the Trustee and Registrar, may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel. Every replacement Note is an additional obligation
of the Company.
SECTION 2.9 Outstanding Notes. Notes outstanding at any time are all the
-----------------
Notes that have been authenticated by the Trustee except those canceled by it,
those delivered to it for
<PAGE>
32
cancellation, those reductions in the Global Note effected in accordance with
the provisions hereof and those described in this Section as not outstanding.
Subject to Section 2.10, a Note does not cease to be outstanding because the
Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.8 (other than a mutilated Note
surrendered for replacement), it ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Note is held by a bona fide
purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note
and replacement thereof pursuant to Section 2.8.
If the Accreted Value or principal amount of any Note is considered paid
under Section 4.1 hereof, it ceases to be outstanding and interest, Additional
Amounts, if any, and Liquidated Damages, if any, on it cease to accrue and
Accreted Value ceases to increase.
If, on a Redemption Date or the Maturity Date, the Paying Agent holds cash
in U.S. dollars or U.S. Government Securities sufficient to pay all of the
Accreted Value or principal and interest due on the Notes payable on that date,
then, on and after that date, such Notes cease to be outstanding and interest,
Additional Amounts, if any, and Liquidated Damages, if any, on such Notes cease
to accrue and Accreted Value ceases to increase.
SECTION 2.10 Treasury Notes. In determining whether the Holders of the
--------------
required principal amount at maturity of Notes have concurred in any direction,
waiver or consent, Notes owned by the Company or its Affiliates shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Trust Officer of the Trustee actually knows are so owned shall be
disregarded.
The Company shall notify the Trustee, in writing, when it or any of its
Affiliates repurchases or otherwise acquires Notes of the aggregate principal
amount at maturity of such Notes so repurchased or otherwise acquired. The
Trustee may require an Officers' Certificate listing Notes owned by the Company,
a Subsidiary of the Company or an Affiliate of the Company.
SECTION 2.11 Temporary Notes. Until permanent Definitive Notes are ready
---------------
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Definitive Notes upon receipt of a Company Order in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
temporary Definitive Notes to be authenticated and the date on which the
temporary Definitive Notes are to be authenticated. Temporary Definitive Notes
shall be substantially in the form of permanent Definitive Notes but may have
variations that the Company considers appropriate for temporary Definitive
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate upon receipt of a Company Order pursuant to Section 2.2
permanent Definitive Notes in exchange for temporary Definitive Notes.
SECTION 2.12 Cancellation. The Company at any time may deliver Notes to the
------------
Trustee for cancellation. The Registrar and the Paying Agent shall forward to
the Trustee any Notes surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of
<PAGE>
33
the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel
and, at the written direction of the Company, shall dispose of (subject to the
record retention requirements of the Exchange Act) all Notes surrendered for
transfer, exchange, payment or cancellation; provided, however, that the Trustee
may, but shall not be required to, destroy such canceled Notes. Subject to
Section 2.7, the Company may not issue new Notes to replace Notes that it has
paid or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Notes, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation pursuant to this Section
2.12.
SECTION 2.13 Defaulted Interest. If the Company defaults in a payment of
------------------
interest on the Notes, it shall pay the defaulted interest, plus (to the extent
lawful) any interest payable on the defaulted interest, to the Holder thereof on
a subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest.
The Company shall notify the Trustee and Paying Agent in writing of the amount
of defaulted interest proposed to be paid on each Note and the date of the
proposed payment (a "Default Interest Payment Date"), and at the same time the
-----------------------------
Company shall deposit with the Trustee or Paying Agent an amount of money equal
to the aggregate amount proposed to be paid in respect of such defaulted
interest or shall make arrangements satisfactory to the Trustee or Paying Agent
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
defaulted interest as in this Section 2.13; provided, however, that in no event
shall the Company deposit monies proposed to be paid in respect of defaulted
interest later than 10:00 a.m. New York City time on the proposed Default
Interest Payment Date with respect to defaulted interest to be paid on the Note.
At least 15 days before the subsequent special record date, the Company shall
mail to each Holder, with a copy to the Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.14 CUSIP, ISIN and Common Code Numbers. The Company in issuing
-----------------------------------
the Notes may use a "CUSIP," "ISIN" or "Common Code" number, and if so, the
Trustee shall use the CUSIP, ISIN and Common Code number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN and Common Code number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP, ISIN or Common Code number.
SECTION 2.15 Deposit of Moneys. Prior to 10:00 a.m. New York City time on
-----------------
each Interest Payment Date and Maturity Date, the Company shall have deposited
with the Paying Agent in immediately available funds money sufficient to make
cash payments, if any, due on such Interest Payment Date or Maturity Date, as
the case may be, on all Notes then outstanding. Such payments shall be made by
the Company in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date or Maturity Date, as the case may
be.
<PAGE>
34
SECTION 2.16 Certain Matters Relating to Global Notes. (a) Members of, or
----------------------------------------
participants in, DTC ("Agent Members") shall have no rights under this Indenture
-------------
with respect to any Global Note held on their behalf by DTC or the Trustee as
its custodian, or under the Global Note, and DTC may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by DTC or impair, as between DTC and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
(b) The Holder of any Global Note may grant proxies and otherwise authorize
any person, including DTC and its Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
ARTICLE III
REDEMPTION
----------
SECTION 3.1 Optional Redemption. The Company may redeem all or any portion
-------------------
of the Notes, upon the terms and at the redemption prices set forth in each of
the Notes. Any redemption pursuant to this Section 3.1 shall be made pursuant to
the provisions of this Article III.
SECTION 3.2 Notices to Trustee. If the Company elects to redeem Notes
------------------
pursuant to Paragraphs 8 or 9 of such Notes, it shall notify the Trustee in
writing of the Redemption Date and the principal amount or Accreted Value, as
the case may be, of Notes to be redeemed at least 15 days prior to the giving of
the notice contemplated by Section 3.4 (or such shorter period as the Trustee in
its sole discretion shall determine). The Company shall give notice of
redemption as required under the relevant paragraph of the Notes pursuant to
which such Notes are being redeemed.
SECTION 3.3 Selection of Notes to Be Redeemed. If less than all of the
---------------------------------
Notes are to be redeemed at any time, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
securities exchange, if any, on which such Notes are listed, or if such Notes
are not so listed or such exchange prescribes no method of selection, on a pro
rata basis, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate (and in such manner as complies with applicable
legal and exchange requirements); provided, however, that no Note of $1,000 in
aggregate principal amount at maturity or less shall be redeemed in part. In the
event of partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the Redemption Date by the Trustee from the outstanding Notes not
previously called for redemption.
<PAGE>
35
SECTION 3.4 Notice of Redemption. At least 30 days but not more than 60
--------------------
days before a Redemption Date, the Company shall publish in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allegmeine Zeitung) (and, if and so long as the Notes are listed, admitted or
eligible for trading on a stock exchange or trading market and the rules or
regulations of such stock exchange or trading market shall so require, a
newspaper having a general circulation in the additional jurisdictions as such
rules or regulations may require) or, in the case of Definitive Notes, the
Company shall mail to the Holders by first-class mail, postage prepaid, at their
respective addresses as they appear on the registration books of the Registrar.
At the Company's request made at least 45 days before the Redemption Date (or
such shorter period as the Trustee in its sole discretion shall determine), the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense; provided, however, that the Company shall deliver to the
Trustee, an Officers' Certificate requesting that the Trustee give such notice
and setting forth the information to be stated in such notice as provided in the
following items. Each notice for redemption shall identify the Notes to be
redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Prices and the amount of interest, if any, Additional
Amounts, if any, and Liquidated Damages, if any, to be paid;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued and unpaid interest, if any,
Additional Amounts, if any, and Liquidated Damages, if any;
(e) that, unless the Company defaults in making the redemption payment,
interest, Additional Amounts, if any, and Liquidated Damages, if any, on Notes
called for redemption cease to accrue on and after the Redemption Date (and
Accreted Value ceases to increase), and the only remaining right of the Holders
of such Notes is to receive payment of the Redemption Price upon surrender to
the Paying Agent of the Notes redeemed;
(f) (i) if any Global Note is being redeemed in part, the portion of the
principal amount or Accreted Value, as the case may be, of such Note to be
redeemed and that, after the Redemption Date, interest, Additional Amounts, if
any, and Liquidated Damages, if any, shall cease to accrue (and Accreted Value
ceases to increase) on the portion called for redemption, and upon surrender of
such Global Note, the Global Note with a notation on Schedule A thereof
adjusting the principal amount at maturity thereof to be equal to the unredeemed
portion, will be returned and (ii) if any Definitive Note is being redeemed in
part, the portion of the principal amount at maturity of such Note to be
redeemed, and that, after the Redemption Date, upon surrender of such Definitive
Note, a new Definitive Note or Notes in aggregate principal amount at maturity
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof, upon cancellation of the original Note;
<PAGE>
36
(g) if fewer than all the Notes are to be redeemed, the identification of
the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount at maturity of Notes to be redeemed and the aggregate
principal amount of Notes at maturity to be outstanding after such partial
redemption;
(h) the paragraph of the Notes pursuant to which the Notes are to be
redeemed; and
(i) the CUSIP, ISIN or Common Code number, and that no representation is
made as to the correctness or accuracy of the CUSIP, ISIN or Common Code number,
if any, listed in such notice or printed on the Notes.
SECTION 3.5 Effect of Notice of Redemption. Once notice of redemption is
------------------------------
given in accordance with Section 3.4, Notes called for redemption become due and
payable on the Redemption Date and at the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages, if
any. Upon surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the Redemption Price (which shall include accrued
and unpaid interest thereon, if any, Additional Amounts, if any, and Liquidated
Damages, if any, to the Redemption Date), but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be payable to
Holders of record at the close of business on the relevant Record Dates.
SECTION 3.6 Deposit of Redemption Price. Prior to 10:00 a.m. New York City
---------------------------
time on the Redemption Date, the Company shall deposit with the Paying Agent
cash in U.S. dollars sufficient to pay the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages, if
any, of all Notes to be redeemed on that date. The Paying Agent shall promptly
return to the Company any cash in U.S. dollars so deposited which is not
required for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, Additional Amounts, if any, and Liquidated Damages, if any,
interest, Additional Amounts and Liquidated Damages on the Notes to be redeemed
will cease to accrue on and after the applicable Redemption Date (and Accreted
Value will cease to increase), whether or not such Notes are presented for
payment. With respect to Definitive Notes, if a Definitive Note is redeemed on
or after an interest Record Date but on or prior to the related Interest Payment
Date, then any accrued and unpaid interest, Additional Amounts, if any, and
Liquidated Damages, if any, shall be paid to the Person in whose name such Note
was registered at the close of business on such Record Date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, Additional
Amounts, if any, Liquidated Damages, if any, and interest shall be paid (or
Accreted Value shall increase, as the case may be) on the unpaid principal, from
the redemption date until such principal or Accreted Value is paid, and to the
extent lawful on any interest not paid on such unpaid principal or Accreted
Value, in each case at the rate provided in the Notes and in Section 4.1.
<PAGE>
37
SECTION 3.7 Notes Redeemed in Part. Upon surrender and cancellation of a
----------------------
Definitive Note that is redeemed in part, the Company shall execute and the
Trustee shall authenticate for the Holder (at the Company's expense) a new
Definitive Note equal in principal amount at maturity to the unredeemed portion
of the Definitive Note surrendered and canceled; provided, however, that each
such Definitive Note shall be in a principal amount at maturity of $1,000 or an
integral multiple thereof. Upon surrender of a Global Note that is redeemed in
part, the Paying Agent shall forward such Global Note to the Trustee who shall
make a notation on Schedule A thereof to reduce the principal amount at maturity
of such Global Note to an amount equal to the unredeemed portion of the Global
Note surrendered; provided, however, that each such Global Note shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof.
ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Notes. (a) The Company shall pay the principal,
----------------
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on the Notes, and Accreted Value thereon shall increase, in the manner
provided in such Notes and this Indenture. An installment of Accreted Value or
principal of or interest on the Notes shall be considered paid on the date it is
due if the Trustee or Paying Agent holds at 10:00 a.m. New York City time on
that date money deposited by the Company in immediately available funds and
designated for, and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders pursuant to the terms of this
Indenture.
(b) The Company shall pay, to the extent such payments are lawful, interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and on overdue installments of interest (without regard to any
applicable grace periods), on any Additional Amounts, and on any Liquidated
Damages, from time to time on demand at the rate borne by the Notes plus 1.5%
per annum. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
SECTION 4.2 Maintenance of Office or Agency. The Company shall maintain
-------------------------------
the offices or agencies (which offices may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-Registrar) required under Section 2.3
where Notes may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of any such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2. The Company hereby initially
designates the office of Corporation Services Company, located at Two World
Trade Center, Suite 8746, New York, New York, 10048, as its office or agency in
the State of New York as required under Section 2.3 hereof. The Company shall
maintain or appoint such other paying or transfer agents as may be required by
the rules of any stock exchange or
<PAGE>
38
trading market on which the Notes may be listed, admitted or eligible for
trading from time to time.
SECTION 4.3 Limitation on Restricted Payments. (a) 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 account of any Equity
Interest in the Company or any Restricted Subsidiary to the holders thereof,
including any dividend or distribution payable in connection with any merger or
consolidation (other than (A) dividends or distributions payable solely in
Equity Interests (other than Redeemable Stock) of the Company, (B) dividends or
distributions made only to the Company or a Restricted Subsidiary and (C) pro
rata dividends or distributions of Capital Stock of a Restricted Subsidiary held
by Persons other than the Company or a Restricted Subsidiary), (ii) purchase,
redeem, retire or otherwise acquire for value any Equity Interests of the
Company, an Unrestricted Subsidiary or a Restricted Subsidiary (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary), (iii)
make any principal payment or redeem, purchase, repurchase, defease, or
otherwise acquire or retire for value, in each case, prior to any scheduled
repayment, or maturity, any 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 (all such payments or any other actions
described in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments") unless, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing;
(B) the Company could Incur at least (Euro)1.00 of additional
Indebtedness under Section 4.4(a); and
(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, 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) after the Issue Date is less than the sum
of (1) 50% of the aggregate amount of the Consolidated Net Income (or, if
the Consolidated Net Income is a loss, 100% of the amount of such loss)
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter beginning
immediately following the Issue 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
4.10 plus (2) 100% of the aggregate Net Cash Proceeds received by the
Company after the Issue Date from the issuance and sale of its Equity
Interests (other than Redeemable Stock and excluding any Equity Interests
issued in connection with the Offering) to a Person (other than a
Subsidiary of the Company), except to the extent that such Net Cash
Proceeds are used (I) to purchase, redeem or otherwise retire Equity
Interests or Indebtedness as set forth below in clause (iii) or (iv) of the
immediately succeeding paragraph or (II) to Incur Indebtedness pursuant to
clause (x) of paragraph (b) of Section 4.4, plus (3) the aggregate amount
by which Indebtedness (other than any Indebtedness subordinated in right of
payment to the Notes) of the Company or any Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to the Issue Date
into
<PAGE>
39
Equity Interests (other than Redeemable Stock and less the amount of any
cash, or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange), plus (4) without
duplication of any amount included in the calculation of Consolidated Net
Income, in the case of repayment of, or return of capital with respect to,
any Investment constituting a Restricted Payment (including the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries) made
after the Issue Date, an amount equal to the lesser of (x) the repayment
of, or the return of capital with respect to, such Investment and (y) the
cost of such Investment, in either case less the cost of the disposition of
such Investment and net of taxes.
(b) The foregoing provisions of Section 4.3(a) shall not prohibit: (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 provisions of
this Indenture; (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
paragraph Section 4.4(b); (iii) the repurchase, redemption or other acquisition
of Equity Interests in the Company in exchange for, or out of the Net Cash
Proceeds of, a substantially concurrent offering of Equity Interests (other than
Redeemable Stock and excluding any Equity Interests issued in connection with
the Offering) in the Company to any Person (other than a Subsidiary); (iv) the
repurchase, redemption or other acquisition of Indebtedness of the Company which
is subordinated in right of payment to the Notes in exchange for, or out of the
Net Cash Proceeds of, a substantially concurrent offering of Equity Interests
(other than Redeemable Stock and excluding any Equity Interests issued in
connection with the Offering) in the Company to any Person (other than a
Subsidiary); (v) repurchases of Equity Interests of the Company from employees
of the Company or any of its Restricted Subsidiaries deemed to occur upon
exercise of stock options if such Equity Interests represent a portion of the
exercise price of such options, provided that any payments made pursuant to this
clause (v) may not exceed in the aggregate (Euro)5.0 million in any fiscal year
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 Investment); provided that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) (Euro)25.0 million, plus (b) the amount of Net Cash
Proceeds received by the Company after the Issue Date from the issuance and sale
of its Equity Interests (other than Redeemable Stock and excluding any Equity
Interests issued in connection with the Offering) to a Person (other than a
Subsidiary of the Company), except to the extent that such Net Cash Proceeds are
used (I) to make Restricted Payments pursuant to clause (C)(2) of Section 4.3(a)
or clauses (iii) or (iv) of Section 4.3(b) or (II) to Incur Indebtedness
pursuant to clause (x) of paragraph (b) of Section 4.4, plus (c) the aggregate
amount by which Indebtedness (other than any Indebtedness subordinated in right
of payment to the Notes) of the Company or any Restricted Subsidiary is reduced
on the Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date into Equity Interests
(other than Redeemable Stock and less the amount of any cash, or the fair value
of property, distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange); and (vii) Investments acquired in exchange for Capital
Stock (other than Redeemable Stock) of the Company; provided that, in the case
of clauses (ii) through (vii),
<PAGE>
40
no Default or Event of Default shall have occurred and be continuing or occur as
a consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payments referred to in clauses (ii) and
(vii) thereof and the Net Cash Proceeds from any issuance of Equity Interests
referred to in clauses (iii) and (iv) thereof) shall be included in calculating
whether the conditions of clause (C) of Section 4.3(a) have been met with
respect to any subsequent Restricted Payments. In the event the proceeds of an
issuance of Equity Interests (other than Redeemable Stock and excluding any
Equity Interests issued in connection with the Offering) of the Company are used
for the redemption, repurchase or other acquisition of the Notes, then the Net
Cash Proceeds of such issuance shall be included in clause (C) of Section 4.3(a)
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
(c) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.3 were computed, which calculations may
be based upon the Company's latest available financial statements. The Trustee
shall have no duty to recompute or recalculate or verify the accuracy of the
information set forth in such Officers' Certificate.
SECTION 4.4 Limitation on Indebtedness. (a) The Company will not, and will
--------------------------
not permit any of its Restricted Subsidiaries to, Incur any Indebtedness;
provided, however, that if no Default or Event of Default shall have occurred
and be continuing at the time, or would occur as a consequence of the Incurrence
of any such Indebtedness, the Company may Incur Indebtedness if immediately
thereafter the ratio of (i) the aggregate principal amount of Indebtedness of
the Company and its Restricted Subsidiaries on a consolidated basis outstanding
as of the Transaction Date to (ii) the pro forma Consolidated Cash Flow for the
preceding two full fiscal quarters multiplied by two, determined on a pro forma
basis as if any such Indebtedness had been Incurred and the proceeds thereof had
been applied at the beginning of such two fiscal quarters, would be greater than
zero and less than or equal to 6.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi), (x) and (xii) below) any Restricted Subsidiary may Incur
each and all of the following:
(i) Indebtedness (other than Acquired Indebtedness) in an aggregate
principal amount at any one time outstanding not to exceed (Euro)100.0
million Incurred to finance the cost (provided that such Indebtedness is
Incurred at any time on or before, or within 90 days following, the
incurrence of such cost) (including the cost of design, development,
construction, acquisition, transportation, installation or integration) of
equipment, inventory or network assets used in the Permitted Business or
Equity Interests of (A) a Restricted Subsidiary that owns principally such
assets from a Person other than the Company or a Restricted Subsidiary of
the Company or (B) any Person tha t is principally engaged in the Permitted
Business, that would become a Restricted Subsidiary and owns principally
such assets; provided that (x) any such Indebtedness of a Restricted
Subsidiary
<PAGE>
41
must be Incurred under one or more Credit Facilities, under one or more
Capitalized Leases or from the vendor of the equipment, inventory or
network assets acquired with the proceeds of such Indebtedness, (y) the
amount of such Indebtedness of the Company or any Restricted Subsidiary may
not exceed the Fair Market Value of the assets so acquired and (z) the
amount of any such Indebtedness permitted to be Incurred to acquire Equity
Interests pursuant to clauses (A) or (B) shall be reduced by the amount of
any Acquired Indebtedness Incurred in such acquisition;
(ii) Indebtedness of any Restricted Subsidiary owing to and held by
the Company, Indebtedness of the Company owing to and held by any
Restricted Subsidiary or Indebtedness of any Restricted Subsidiary owing to
and held by any other Restricted Subsidiary; provided that any subsequent
issuance or transfer of any Capital Stock or any other 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
the Incurrence of such Indebtedness not permitted by this clause (ii); and
provided, further, that Indebtedness of the Company owing to and held by a
Restricted Subsidiary must be unsecured and subordinated in right of
payment to the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness of the
Company or a Restricted Subsidiary, other than Indebtedness Incurred under
clauses (ii), (iv), (vii), (viii), (x) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, and reasonable fees and
expenses); provided that such new Indebtedness shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced or refunded is pari passu with the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding,
is expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new
Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness
being refinanced or refunded and (D) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, has a Weighted Average
Life to Maturity which is not less than the remaining Weighted Average Life
to Maturity of the Indebtedness to be refinanced or refunded; and provided
further that in no event may Indebtedness of the Company be refinanced or
refunded 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 or letters of credit supporting Trade Payables, in each case provided
in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that
<PAGE>
42
such agreements (x) are designed solely to protect the Company or the
Restricted Subsidiary, as the case may be, against fluctuations in foreign
currency exchange rates or interest rates and (y) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder, and (C)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, bankers' acceptances, surety bonds or performance bonds securing
any obligations of the Company or any of its Restricted Subsidiaries
pursuant to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of the Company
(other than Guarantees of Indebtedness Incurred for the purpose of
financing such acquisition by the Person acquiring all or any portion of
such business, assets or Restricted Subsidiary), 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, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described in Sections 8.1,
8.2 and 8.3;
(vi) Indebtedness of the Company represented by the Notes;
(vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of the Company by a Restricted Subsidiary
in each case permitted by and made in accordance with Section 4.17;
(viii)ab Indebtedness under one or more Credit Facilities (which shall be
in addition to any such Indebtedness incurred under one or more Credit
Facilities under clause (b)(i) above) in an aggregate principal amount at
any one time outstanding not to exceed the greater of (x) (Euro)50.0
million and (y) 80.0% of Eligible Accounts Receivable at such time;
(ix) Acquired Indebtedness; provided that the aggregate amount of
such Acquired Indebtedness of the Person that is to become a Restricted
Subsidiary, or to be merged or consolidated with or into the Company or any
Restricted Subsidiary in the contemplated transaction, or to be assumed by
the Company or a Restricted Subsidiary in connection with an Asset
Acquisition, outstanding at the time of such transaction does not exceed
the Fair Market Value of the equipment, inventory, network assets and Cash
Equivalents of any Restricted Subsidiary so acquired or that are acquired
in such Asset Acquisition, as the case may be;
(x) Indebtedness of the Company not to exceed, at any one time
outstanding, the sum of (A) 2.00 times the Net Cash Proceeds received from
the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Redeemable Stock and excluding any Equity Interests issued in
connection with the Offering) of the Company, less (I) the amount of such
proceeds used to make Restricted Payments as provided in clause (C)(2) of
subsection 4.3(a) or clauses (iii) or (iv) of the first paragraph of
subsection 4.3(b) and
<PAGE>
43
(II) if such proceeds are used to consummate a transaction pursuant to
which the Company Incurs Acquired Indebtedness, one-half of the amount of
such Acquired Indebtedness so Incurred and (B) the Fair Market Value of any
Permitted Assets acquired by the Company in exchange for Equity Interests
of the Company issued after the Issue Date; provided, however, that in
determining the Fair Market Value of any such Permitted Assets so acquired,
if the estimated Fair Market Value of such Permitted Assets exceeds (x)
(Euro)2.0 million, then the Fair Market Value of such Permitted Assets will
be determined by a majority of the Board of Directors, which determination
will be evidenced by a resolution thereof, and (y) (Euro)10.0 million, then
the Company will deliver to the Trustee a written appraisal as to the fair
market value of such Permitted Assets prepared by an internationally
recognized investment banking or public accounting firm (or, if no such
investment banking or public accounting firm is qualified to prepare such
an appraisal, by an internationally recognized appraisal firm); and
provided further that such Indebtedness (other than the Indebtedness
Incurred under one or more Credit Facilities, under one or more Capitalized
Leases or from the vendor of assets, property or services acquired with the
proceeds of such Indebtedness) does not mature prior to the Stated Maturity
of the Notes and the Weighted Average Life to Maturity of such Indebtedness
is longer than that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
(xii) Unsecured Indebtedness of the Company (in addition to Indebtedness
permitted under clauses (i) through (xi) above) in an aggregate principal
amount outstanding at any one time not to exceed (Euro)200.0 million.
(c) For purposes of determining any particular amount of Indebtedness
under subsection 4.4, 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; provided, however, that the
foregoing shall not in any way be deemed to limit the provisions of Section
4.17. For purposes of determining compliance with this Section 4.4, (A) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in subsection 4.4(b), the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses and (B)
the principal amount of Indebtedness issued at a price that is less than the
principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with US GAAP.
(d) For purposes of determining compliance with any Euro-denominated
restriction on the Incurrence of Indebtedness, the Euro-equivalent principal
amount of Indebtedness denominated in a non-Euro currency shall be calculated
based on the relevant currency exchange rate in effect on the date such
Indebtedness was Incurred, in the case of term Indebtedness, or first committed,
in the case of revolving credit Indebtedness; provided that if such Indebtedness
is Incurred to refinance other Indebtedness denominated in a non-Euro currency,
and such refinancing would cause the applicable Euro-denominated restriction to
be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such Euro-denominated restriction shall be deemed
not to have been exceeded so long as the principal
<PAGE>
44
amount of such refinancing Indebtedness does not exceed the principal amount of
such Indebtedness being refinanced. 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
currency exchange rate applicable to the currencies in which such refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.
SECTION 4.5 Corporate Existence. Except as otherwise permitted by Article
-------------------
V, the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and the corporate,
partnership, limited liability or other existence of each of its Subsidiaries in
accordance with the respective organizational documents (as the same may be
amended from time to time) of each Subsidiary and the rights (charter and
statutory) of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right, or the corporate,
partnership, limited liability or other existence of any Subsidiary, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and each of its
Subsidiaries, taken as a whole, and that the loss thereof is not, and will not
be, adverse in any material respect to the Holders.
SECTION 4.6 Payment of Taxes and Other Claims. The Company shall pay or
---------------------------------
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon it or any of its Subsidiaries or upon the income, profits or
property of it or any of its Subsidiaries and (ii) all lawful claims for labor,
materials and supplies which, in each case, if unpaid, might by law become a
material liability or Lien upon the property of it or any of its Subsidiaries;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
SECTION 4.7 Maintenance of Properties and Insurance. (a) The Company shall
---------------------------------------
cause all material properties owned by or leased by it or any of its
Subsidiaries useful and necessary to the conduct of its business or the business
of any of its Subsidiaries to be improved or maintained and kept in normal
condition, repair and working order and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
its judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.7 shall prevent the Company or any of its Subsidiaries
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 Board of Directors or of the board of directors of any
Subsidiary of the Company concerned, or of an officer (or other agent employed
by the Company or of any of its Subsidiaries) of the Company or any of its
Subsidiaries having managerial responsibility for any such property, desirable
in the conduct of the business of the Company or any Subsidiary of the Company,
and if such discontinuance or disposal is not adverse in any material respect to
the Holders.
<PAGE>
45
(b) To the extent available at commercially reasonable rates, the Company
shall maintain, and shall cause its Subsidiaries to maintain, insurance with
responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses of similar size.
SECTION 4.8 Compliance Certificate; Notice of Default. (a) The Company
-----------------------------------------
shall deliver to the Trustee, within 90 days after the close of each fiscal
year, an Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
it has kept, observed, performed and fulfilled, and has caused each of its
Subsidiaries to keep, observe, perform and fulfill its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
that, to the best of his or her knowledge, the Company during such preceding
fiscal year has kept, observed, performed and fulfilled, and has caused each of
its Subsidiaries to keep, observe, perform and fulfill each and every such
covenant contained in this Indenture and no Default occurred during such year
and at the date of such certificate there is no Default which has occurred and
is continuing or, if such signers do know of such Default, the certificate shall
describe its status, with particularity and that, to the best of his or her
knowledge, no event has occurred and remains by reason of which payments on the
account of the Accreted Value or principal of or interest, if any, Additional
Amounts, if any, or Liquidated Damages, if any, on the Notes is prohibited or if
such event has occurred, a description of the event and what action each is
taking or proposes to take with respect thereto. The Officers' Certificate shall
also notify the Trustee should the Company elect to change the manner in which
it fixes its fiscal year end. The Company shall notify the Trustee of any
default or defaults in the performance of any covenants or agreements under this
Indenture within five Business Days of becoming aware of any such default.
(b) The annual financial statements delivered pursuant to Section 4.10
shall include, so long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, a written report of the
Company's independent accountants (who shall be a firm of established
international reputation) that in conducting their audit of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Articles IV, V or VI of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall deliver to the Trustee, within five Business Days,
upon any officer becoming aware of any Default or any default or event of
default under any document, instrument or agreement representing Indebtedness of
the Company, an Officers' Certificate specifying the Default or such default or
event of default and describing its status with particularity.
SECTION 4.9 Compliance with Laws. The Company shall comply, and shall
--------------------
cause each of its Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders of the relevant jurisdiction in which they are incorporated
and/or in which they carry on business, all political subdivisions thereof, and
of any relevant governmental regulatory authority, in respect of the
<PAGE>
46
conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results of operations of
the Company and its Subsidiaries taken as a whole.
SECTION 4.10 Reports. (a) The Company will file on a timely basis with the
-------
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 10-K and 10-Q (which financial statements shall be
prepared in accordance with US GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual financial information, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K, in each case, if the Company had a
class of securities registered under the Exchange Act, whether or not the
Company has such a class of securities registered under the Exchange Act. Such
quarterly financial information shall be filed with the Commission within 45
days following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end of
each fiscal year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed by the
Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company shall also (a) file with the Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, supply, at the Company's cost, copies of
such reports and documents to any prospective holder promptly upon request. In
addition, if and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules or regulations of
such stock exchange or trading market shall require, copies of all reports and
information described above will be available in such places and during such
times as such rules or regulations may require.
(b) Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(c) Such reports shall be delivered to the Registrar and the Registrar will
mail them at the Company's expense to the Holders at their addresses appearing
in the register of Notes maintained by the Registrar if so requested by the
Holders in writing.
(d) Upon qualification of this Indenture with the TIA, the Company shall
also comply with the provisions of TIA Section 314(a).
<PAGE>
47
SECTION 4.11 Waiver of Stay; Extension or Usury Laws. The Company covenants
---------------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, 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 Company from paying all or any portion of the principal or
Accreted Value of and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture, and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.12 Limitation on Transactions with Shareholders and
------------------------------------------------
Affiliates. (a) The Company will not, and will not permit any Restricted
- ----------
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction or series of transactions (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any direct or indirect holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of the Company or with any Affiliate of
the Company or any Restricted Subsidiary, unless (i) such transaction or series
of transactions is on terms that are no less favorable to the Company or such
Restricted Subsidiary than could reasonably be obtained in a comparable arm's-
length transaction with a Person that is not such a holder or Affiliate, (ii) if
such transaction or series of transactions involves aggregate consideration in
excess of (Euro)2.5 million, the Company shall have delivered to the Trustee a
resolution set forth in an Officers' Certificate adopted by a majority of the
Board of Directors, including a majority of the independent, disinterested
directors, approving such transaction or series of transactions, and certifying
that such transaction or series of transactions comply with clause (i) above and
(iii) if such transaction or series of transactions involves aggregate
consideration in excess of (Euro)7.5 million, the Company shall have delivered
to the Trustee a written opinion as to the fairness to the Company or such
Restricted Subsidiary of such transaction or series of transactions from a
financial point of view from an internationally recognized investment banking
firm (or, if an investment banking firm is generally not qualified to give such
an opinion, by an internationally recognized appraisal firm or accounting firm).
(b) The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) the payment of dividends, distributions or other amounts by the Company or
any Restricted Subsidiary permitted by Section 4.3; (iv) issuances of Equity
Interests (other than Redeemable Stock) on terms consistent with the
requirements of clause (i) of the preceding paragraph; and (v) any payments or
other transactions pursuant to tax-sharing agreements 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.
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. (a) The Company will not, and will not permit
- ---------------------------------
any Restricted Subsidiary to, directly or indirectly, 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
<PAGE>
48
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Equity Interests 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.
(b) The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue Date, or
the property or assets of such Restricted Subsidiary, and 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; (iv) in the case of clause (iv) of subsection 4.13(a), (A)
that restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is, or is subject to, a lease, purchase mortgage
obligation, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, materially
detract from the value of property or assets of the Company or any Restricted
Subsidiary 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 in, or property and assets of, such Restricted Subsidiary; provided that
such restriction shall terminate if such transaction is abandoned or if such
transaction is not consummated within six months of the date such agreement was
entered into; 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 applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or 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 Board of Directors) and (C) the Board of Directors determines that any
such encumbrance or restriction will not materially affect the Company's ability
to make payments of Accreted Value or principal or interest on the Notes.
(c) Nothing contained in this Section 4.13 shall prevent the Company or any
Restricted Subsidiary from creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in Section 4.14 that limit the right of the debtor
to dispose of the assets securing such Indebtedness.
SECTION 4.14 Limitation on Liens. The Company will not, and will not permit
-------------------
any Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien
<PAGE>
49
(other than Permitted Liens) securing Senior Subordinated Indebtedness or
Subordinated Obligations on any asset or property of the Company or any
Restricted Subsidiary without making effective provisions 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; provided that any Lien which is granted to
secure the Notes under this covenant shall be discharged at the same time as the
discharge of the Lien that gave rise to the obligation to so secure the Notes.
SECTION 4.15 Change of Control. (a) Upon the occurrence of a Change of
-----------------
Control, the Company will make an offer to purchase all or any part (equal to
$1,000 in principal amount at maturity and integral multiples thereof) of the
Notes pursuant to the offer described below (the "Change of Control Offer") at a
price in cash (the "Change of Control Payment") equal to (i) if such purchase is
prior to August 15, 2004, 101% of the Accreted Value thereof or (ii) if such
repurchase is on or after August 15, 2004, 101% of the aggregate principal
amount thereof plus, in either case, accrued and unpaid interest thereon to the
date of repurchase, plus Additional Amounts, if any, and Liquidated Damages, if
any, to the date of repurchase (and in the case of Definitive Notes, subject to
the right of Holders of record on the relevant record date to receive interest
and Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). Within 30 days following any
Change of Control, the Company will publish notice of such Change of Control
Offer in a leading newspaper having a general circulation in New York (which is
expected to be The Wall Street Journal) and in Frankfurt (which is expected to
be the Frankfurter Allgemeine Zeitung) (and if and so long as the Notes are
listed, admitted or eligible for trading on a stock exchange or trading market
and the rules or regulations of such stock exchange or trading market shall so
require, a newspaper having a general circulation in the additional
jurisdictions as such rules or regulations may require) or, in the case of
Definitive Notes, mail a notice to each Holder (and if and so long as the Notes
are listed, admitted or eligible for trading on a stock exchange or trading
market and the rules or regulations of such stock exchange or trading market
shall so require, publish notice in a newspaper having a general circulation in
the additional jurisdictions as such rules or regulations may require), with a
copy to the Trustee, with the following information: (i) a Change of Control
Offer is being made pursuant to Section 4.15 and all Notes properly tendered
pursuant to such Change of Control Offer will be accepted for payment; (ii) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is published, or where relevant,
mailed, except as may be otherwise required by applicable law (the "Change of
Control Payment Date"); (iii) any Note not properly tendered will remain
outstanding and continue to accrue interest (or increase in Accreted Value, as
the case may be) and Liquidated Damages, if any; (iv) unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
(or increase in Accreted Value, as the case may be) and Liquidated Damages, if
any, on the Change of Control Payment Date; (v) Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, to the Paying Agent and at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (vi) Holders will be entitled to
withdraw their tendered Notes and their election to require the Company to
purchase such Notes;
<PAGE>
50
provided that the Paying Agent receives, not later than the close of business on
the last Business Day of the offer period, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount at maturity of Notes
tendered for purchase, and a statement that such Holder is withdrawing his
tendered Notes and his election to have such Notes purchased; and (vii) Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the principal amount at maturity
of the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount at maturity or an integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this Indenture, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in this Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount at maturity of the Notes.
(b) On the Change of Control Payment Date, the Company will, to the extent
permitted by law, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating that such Notes or portions thereof have been
tendered to and purchased by the Company. The Paying Agent will promptly either
(x) pay to the Holder against presentation and surrender (or, in the case of
partial payment, endorsement) of the Global Notes or (y) in the case of
Definitive Notes, mail to each Holder of Notes the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and deliver to the Holder
of the Global Notes a new Global Note or Notes or, in the case of Definitive
Notes, mail to each Holder a new Definitive Note, as applicable, equal in
principal amount at maturity to any unpurchased portion of the Notes
surrendered, if any; provided, however, that each new Definitive Note and Global
Note will be in a principal amount at maturity of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
SECTION 4.16 Limitation on Asset Sales. (a) The Company will not, and will
-------------------------
not permit any Restricted Subsidiary to, make any Asset Sale unless (i) the
Company or the Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or disposed of and (ii) at least 75% of the consideration received
for such Asset Sale consists of cash or Cash Equivalents or Replacement Assets
or the assumption of Indebtedness which ranks equal in right of payment with the
Notes.
<PAGE>
51
(b) The Company shall, or shall cause the relevant Restricted Subsidiary
to, apply the Net Cash Proceeds from an Asset Sale within 360 days of the
receipt thereof to (A) permanently prepay, repay or purchase Senior Indebtedness
of the Company or Senior Subordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary providing a Guarantee pursuant to
Section 4.17 or Indebtedness of any other Restricted Subsidiary, in each case
owing to a Person other than the Company or any of its Restricted Subsidiaries,
and elect to permanently reduce the commitments thereunder by the amount of such
Indebtedness prepaid, repaid or purchased, (B) invest in Replacement Assets or
(C) in any combination of prepayment, repayment, purchase and reinvestment
permitted by the foregoing clauses (A) and (B).
Any Net Cash Proceeds from such Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
subsection will be deemed to constitute "Excess Proceeds." If at any time the
aggregate amount of Excess Proceeds exceeds (Euro)5.0 million, the Company
shall, within 15 Business Days thereafter, make an offer (an "Asset Sale Offer")
to all Holders and to the extent required by the terms thereof, to all holders
of other Senior Subordinated Indebtedness outstanding with similar provisions
requiring the Company to make an offer to purchase such Senior Subordinated
Indebtedness with the proceeds from any Asset Sale ("Pari Passu Notes") to
purchase on a pro rata basis the maximum principal amount (or Accreted Value, as
the case may be) of Notes and the maximum principal amount (or accreted value,
as the case may be) of any such Pari Passu Notes to which the Asset Sale Offer
applies, that is an integral multiple of $1,000 (or (Euro)1,000, as the case may
be) that may be purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the outstanding principal amount or accreted value
or Accreted Value, as the case may be, thereof, plus accrued and unpaid interest
thereon plus Additional Amounts and Liquidated Damages, if any, to the date
fixed for the closing of such offer (and, in the case of Definitive Notes,
subject to the right of a Holder of record on the relevant record date to
receive interest and Liquidated Damages, if any, due on the relevant interest
payment date and Additional Amounts, if any, in respect thereof), in accordance
with the procedures set forth in this Indenture or agreements governing the Pari
Passu Notes, as applicable. The Company will commence an Asset Sale Offer by
publishing and mailing the notice required pursuant to the terms of this
Indenture, with a copy to the Trustee. To the extent that the aggregate amount
of Notes and Pari Passu Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, subject to applicable law, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
Accreted Value or principal amount of Notes and accreted value or principal
amount of Pari Passu Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the selection of such Notes and Pari Passu Notes for purchase
will be made by the Trustee in the same manner as the Notes are redeemed, as
provided in Section 3.1. Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
------------
Business Days after the termination of the Offer Period (the "Purchase Date"),
-------------
the Company shall purchase the maximum principal amount or Accreted Value, as
the case may be, of Notes that may be purchased with such Excess Proceeds (or
such pro rata portion) (which maximum principal amount or Accreted Value, as the
case may
<PAGE>
52
be, of Notes shall be the "Offer Amount") or, if less than the Offer Amount has
------------
been tendered, all Notes tendered in response to the Asset Sale Offer.
If the Purchase Date is on or after an interest Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest will
be paid in the case of a Global Note, to the Holder thereof or, in the case of a
Definitive Note, to the Person in whose name such Definitive Note is registered
at the close of business on such Record Date, and no additional interest will be
payable to Holders with respect to Notes tendered pursuant to the Asset Sale
Offer.
At least 30 days but not more than 60 days before a Purchase Date, the
Company shall publish in a leading newspaper having a general circulation in New
York (which is expected to be The Wall Street Journal) and in Frankfurt (which
is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so long as
the Notes are listed, admitted or eligible for trading on a stock exchange or
trading market and the rules of such stock exchange or trading market shall so
require, a newspaper having a general circulation in the locations in which the
stock exchange or trading market requires) or, in the case of Definitive Notes,
such notice shall be provided to Holders by first-class mail, postage prepaid,
at their respective addresses as they appear on the registration books of the
Registrar with a copy of such notice to the Trustee (and, if and so long as the
Notes are listed, admitted or eligible for trading on a stock exchange or
trading market and the rules of such stock exchange or trading market shall so
require, by publication in a newspaper having a general circulation in which
stock exchange or trading market requires). The notice shall contain all
instructions and materials (or instructions on how to obtain instructions and
materials) necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(A) that the Asset Sale Offer is being made pursuant to this Section
4.16 and the length of time the Asset Sale Offer shall remain open;
(B) the Offer Amount (including the amount of accrued and unpaid
interest, if any), the purchase price and the Purchase Date;
(C) that any Note or portion thereof not tendered or accepted for
payment shall continue to accrue interest (or increase in Accreted Value,
as the case may be), Additional Amounts, if any, and Liquidated Damages, if
any, in accordance with the terms thereof;
(D) that, unless the Company defaults in making payment therefor, any
Note or portion thereof accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest (or Accreted Value shall cease to
increase, as the case may be), Additional Amounts, if any, and Liquidated
Damages, if any, after the Purchase Date;
(E) (1) if any Global Note is being purchased in part, the portion of
the principal amount at maturity of such Note to be purchased and that,
after the Purchase Date, interest, Additional Amounts, if any, and
Liquidated Damages, if any, shall cease to accrue on the portion to be
purchased (and Accreted Value shall cease to increase
<PAGE>
53
thereon), and upon surrender of such Global Note, the Global Note with a
notation on Schedule A thereof adjusting the principal amount at maturity
thereof to be equal to the unpurchased portion, will be returned and (2) if
a Definitive Note may be purchased in part, that, after the Purchase Date,
upon surrender of such Definitive Note, a new Definitive Note or Notes in
aggregate principal amount at maturity equal at maturity to the unpurchased
portion thereof will be issued in the name of the Holder thereof, upon
cancellation of the original Note;
(F) that Holders electing to have a Note or portion thereof purchased
pursuant to any Asset Sale Offer shall be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at least
three Business Days before the Purchase Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the Trustee
and the Paying Agent;
(G) that, subject to applicable law, Holders shall be entitled to
withdraw their election if the Company, depositary or Paying Agent, as the
case may be, receives, not later than the second Business Day before the
Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount at maturity of the Note or portion thereof
the Holder delivered for purchase, the Note certificate number and a
statement that such Holder is withdrawing his election to have the Note or
portion thereof purchased;
(H) that, if the aggregate principal amount or Accreted Value, as the
case may be, of Notes tendered by Holders, together with the aggregate
principal amount or accreted value, as the case may be, of any Pari Passu
Notes, tendered by Holders exceeds the Offer Amount, the selection of such
Notes for purchase will be made by the Trustee in compliance with the
requirements of the principal securities exchange, if any, on which such
Notes are listed, or if such Notes are not so listed or such exchange
prescribes no method of selection, subject to applicable law, on a pro rata
basis by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate (and in such manner as complies with
applicable legal and exchange requirements); provided, however, that no
Notes of $1,000 at maturity or less shall be purchased in part; provided
further, that, subject to applicable law, in the event of partial purchase
by lot, the particular Notes to be purchased shall be selected, unless
otherwise provided herein, by the Registrar or Trustee from the outstanding
Notes not previously called for purchase; and
(I) the instructions that Holders must follow to tender their Notes.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered together with any Pari Passu
Notes, all Notes or portions thereof tendered, and deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
<PAGE>
54
for payment by the Company in accordance with the terms of this Section 4.16. On
the Purchase Date, the Paying Agent shall promptly cause the principal amount at
maturity of any Global Note so tendered to be adjusted on Schedule A thereof to
be equal to any unpurchased portion of such Global Note which unpurchased
portion must be equal to $1,000 in principal amount at maturity or an integral
multiple thereof, and shall promptly authenticate and mail or deliver to each
tendering Holder of a Definitive Note, a new Definitive Note or Notes equal in
principal amount at maturity to any unpurchased portion of the Definitive Note
surrendered which unpurchased portion must be equal to $1,000 in principal
amount at maturity or an integral multiple thereof. DTC, the Paying Agent or the
Company, as the case may be, shall promptly (but in any case not later than five
Business Days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the Offer Amount of the Notes tendered by such Holder and
accepted by the Company for purchase. Any Notes not so accepted shall be
promptly mailed or delivered by or on behalf of the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
not later than the second Business Day following the Purchase Date.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions hereunder, the Company will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.17 Limitation on Issuance of Guarantees of Indebtedness by
-------------------------------------------------------
Restricted Subsidiaries. (a) The Company shall not permit any Restricted
- -----------------------
Subsidiary, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of the Company unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee of all of the Company's
obligations under the Notes and this Indenture on terms substantially similar to
the guarantee of such Indebtedness, except that if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such
assumption, Guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to such
Restricted Subsidiary's assumption, Guarantee or other liability with respect to
the Notes substantially to the same extent as such Indebtedness is subordinated
to the Notes and (ii) such Restricted Subsidiary waives, and 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 Guarantee; provided that any Restricted Subsidiary may
guarantee Senior Indebtedness of the Company, including Indebtedness under a
Credit Facility if such Indebtedness is Incurred in accordance with Section 4.4;
and provided further 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.
<PAGE>
55
(b) Notwithstanding the foregoing subsection (a), any Guarantee of all of
the Company's obligations under the Notes and this Indenture by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Equity Interests in, or all or substantially all of the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture), or (ii) the release or discharge of the guarantee
which resulted in the creation of such Guarantee, except a discharge or release
by or as a result of payment under such guarantee.
SECTION 4.18 Business of the Company; Restriction on Transfers of Existing
-------------------------------------------------------------
Business. The Company will not, and will not permit any Restricted Subsidiary
- --------
to, be principally engaged in any business or activity other than a Permitted
Business. In addition, the Company and any Restricted Subsidiary will not be
permitted, directly or indirectly, to transfer to any Unrestricted Subsidiary
(i) any of the licenses, permits or authorizations used in the Permitted
Business of the Company or any Restricted Subsidiary or (ii) any material
portion of the "property and equipment" (as such term is used in the Company's
consolidated financial statements) of the Company or any Restricted Subsidiary
used in the licensed service areas of the Company or any Restricted Subsidiary.
SECTION 4.19 Limitation on the Issuance and Sale of Capital Stock of
-------------------------------------------------------
Restricted Subsidiaries. The Company will not, and will not permit any
- -----------------------
Restricted Subsidiary, directly or indirectly, to issue, transfer, convey, sell,
lease or otherwise dispose of any shares of Capital Stock (including options,
warrants or other rights to purchase shares of such Capital Stock) of such
Restricted Subsidiary or any other Restricted Subsidiary to any Person (other
than (i) to the Company or a Wholly Owned Restricted Subsidiary and (ii)
issuances of director's qualifying shares of Capital Stock of foreign Restricted
Subsidiaries, in each case, to the extent required by applicable law), unless
(A) the Net Cash Proceeds from such issuance, transfer, conveyance, sale, lease
or other disposition are applied in accordance with the provisions of Section
4.16, (B) immediately after giving effect to such issuance, transfer,
conveyance, sale, lease or other disposition, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and (C) any Investment in such
Person remaining after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition would have been permitted to be made under
Section 4.3 if made on the date of such issuance, transfer, conveyance, sale,
lease or other disposition (valued as provided in the definition of "Investment"
in Section 1.1).
SECTION 4.20 Additional Amounts. At least 10 days prior to the first date
------------------
on which payment of Accreted Value, principal, premium, if any, or interest on
the Notes is to be made, and at least 10 days prior to any subsequent such date
if there has been any change with respect to the matters set forth in the
Officers' Certificate described in this Section 4.20, the Company will furnish
the Trustee and the Paying Agent, if other than the Trustee, with an Officers'
Certificate instructing the Trustee and the Paying Agent whether such payment of
Accreted Value, principal, premium, if any, or interest on the Notes (whether or
not in the form of Definitive Notes) shall be made to the Holders without
withholding for or on account of any present or future tax, duty, assessment or
other governmental charges of whatever nature (collectively "Taxes") imposed or
levied by or on behalf of The Federal Republic of Germany or any jurisdiction in
which the Company or any Successor Company is organized or is otherwise
<PAGE>
56
resident for tax purposes or any political subdivision thereof or any authority
having power to tax therein or any jurisdiction from or through which payment is
made (each a "Relevant Taxing Jurisdiction"), unless the withholding or
----------------------------
deduction of such Taxes is then required by law. If any deduction or withholding
for, or on account of, any Taxes of any Relevant Taxing Jurisdiction, shall at
any time be required on any payments made by the Company with respect to the
Notes, including payments of Accreted Value, principal, redemption price,
interest or premium, then such Officers' Certificate shall specify the amount,
if any, required to be withheld on such payments to such Holders and the Company
will pay to the Trustee or the Paying Agent the additional amounts pursuant to
paragraph 3 of the Notes (the "Additional Amounts") and, if paid to a Paying
------------------
Agent other than the Trustee, shall provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of such Additional Amounts.
Copies of such documentation shall be made available to the Holders upon
request. The Company shall indemnify the Trustee and the Paying Agent for, and
hold them harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers' Certificate
furnished to them pursuant to this Section 4.20.
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges. The Company
-----------------------------------------------
will pay any present or future stamp, court or documentary taxes, or any other
excise or property taxes, charges or similar levies which arise in any
jurisdiction from the execution, delivery or registration of the Notes or any
other document or instrument referred to therein, or the receipt of any payments
with respect to the Notes, excluding any such taxes, charges or similar levies
imposed by any jurisdiction outside of The Federal Republic of Germany, the
United States of America, or any jurisdiction in which a Paying Agent is
located, other than those resulting from, or required to be paid in connection
with, the enforcement of the Notes or any other such document or instrument
following the occurrence of any Event of Default with respect to the Notes.
SECTION 4.22 Limitation on Layering. Notwithstanding the provisions of
----------------------
Section 4.4, the Company shall not Incur any Indebtedness if such Indebtedness
is subordinate or junior in right of payment in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness.
SECTION 4.23 Limitation on Investment Company Activities. The Company
-------------------------------------------
will not, and will not permit any of its Restricted Subsidiaries or controlled
Affiliates to, conduct its business in a fashion that would cause the Company to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act")),
----------------------
or otherwise to become subject to regulation under the Investment Company Act.
For purposes of establishing the Company's compliance with this provision, any
exemption which is or would become available under Section 3(c)(1) or Section
3(c)(7) of the Investment Company Act will be disregarded.
<PAGE>
57
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Consolidation, Merger, and Sale of Assets. 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 in a series of
related transactions) to, any Person or permit any Person to merge with or into
the Company and the Company will not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) the Company will be the continuing Person, or the Person (if other
than the Company) (the "Successor Company") formed by such consolidation or into
-----------------
which the Company is merged or that acquired or leased such property and assets
of the Company will be a corporation organized and validly existing under the
laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of the Company with respect to
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;
(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 (Euro)1.00 of Indebtedness under subsection
4.4(a); (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 Indenture; and (vi) the Company shall have delivered to the Trustee an
opinion of tax counsel reasonably acceptable to the Trustee stating that (A)
Holders will not recognize income, gain or loss for U.S. federal or German
income tax purposes as a result of such transaction, (B) any payment of Accreted
Value, principal, redemption price or purchase price of, premium (if any) and
interest on the Notes by the Company to a Holder after the consolidation,
merger, conveyance, transfer or lease of assets will be exempt from any Taxes
and (C) no other taxes on income (including taxable capital gains) will be
payable under the tax laws of the Relevant Taxing Jurisdiction by a Holder who
is or who is deemed to be a non-resident of the Relevant Taxing Jurisdiction in
respect of the acquisition, ownership or disposition of the Notes, including the
receipt of Accreted Value, principal of, premium and interest paid pursuant to
such Notes.
SECTION 5.2 Successor Corporation Substituted. Upon any such
---------------------------------
consolidation, merger, assignment, conveyance, lease, transfer or other
disposition in accordance with Section 5.1, the Successor Company will succeed
to, and be substituted for every duty and obligation of, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Successor Company had been named as the Company herein, and thereafter
(except in the
<PAGE>
58
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under this Indenture and the Notes.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default. Wherever used herein with respect to any
-----------------
series of the Notes, "Event of Default" means any one of the following events
which shall have occurred and be continuing:
(a) a default for 30 days or more in the payment when due of interest
on the Notes or Additional Amounts, if any, or Liquidated Damages, if any,
with respect to the Notes;
(b) 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;
(c) a default in the payment of principal or interest on Notes
required to be purchased pursuant to an Asset Sale Offer as described under
Section 4.16 or pursuant to a Change of Control Offer as described under
Section 4.15;
(d) a failure to perform or comply with the provisions described in
Article V;
(e) a default in the performance of or breach of any other covenant
or agreement of the Company in this Indenture or under the Notes and such
default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the holders of 25% or more in aggregate
principal amount of the Notes;
(f) a default occurs on any other Indebtedness of the Company or any
Restricted Subsidiary if (i) either (x) such default is a failure to pay
principal of such Indebtedness when due after any applicable grace period
or (y) as a result of such default, the maturity of such Indebtedness has
been accelerated prior to its scheduled maturity and such default has not
been cured within the shorter of 30 days and the applicable grace period,
and such acceleration has not been rescinded and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Restricted Subsidiaries that is also in
default as to principal, or the maturity of which has also been
accelerated, aggregates (Euro)5.0 million or more;
(g) failure to pay final judgments and orders against the Company or
any Restricted Subsidiary (not covered by insurance) aggregating in excess
of (Euro)5.0 million (treating any deductibles, self-insurance or retention
as not so covered), which final judgments remain unpaid, undischarged and
unstayed for a period in excess of 30 consecutive days following entry of
the final judgment or order that causes the aggregate
<PAGE>
59
amount for all such final judgments or orders outstanding and not paid,
discharged or stayed to exceed (Euro)5.0 million;
(h) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries or
for all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or (C) the winding up or liquidation of
the affairs of the Company or any of its Significant Subsidiaries and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 30 consecutive days; or
(i) the Company or any of its Significant Subsidiaries (A) commences
a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Company or any of its Significant Subsidiaries or for all or substantially
all of the property and assets of the Company or any of its Significant
Subsidiaries or (C) effects any general assignment for the benefit of
creditors.
SECTION 6.2 Acceleration. If an Event of Default (other than an Event of
------------
Default specified in Sections 6.1(h) or (i)) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company, may declare the
Accreted Value of, premium, if any, interest and other monetary obligations
(including Additional Amounts, if any, and Liquidated Damages, if any) on all
the then outstanding Notes to be immediately due and payable. Upon such a
declaration, such Accreted Value of, premium, if any, interest and other
monetary obligations on the Notes shall be immediately due and payable. In the
event of a declaration of acceleration because an Event of Default set forth in
subsection 6.1(f) above 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 subsection 6.1(f) shall be
remedied or cured by the Company and/or the relevant Restricted Subsidiaries or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in subsections 6.1(h) or (i) above occurs, the Accreted Value of,
premium, if any, accrued interest and other monetary obligations 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.
The Trustee shall have no obligation to accelerate the Notes if in the best
judgment of the Trustee acceleration is not in the best interest of the Holders
of such Notes.
SECTION 6.3 Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of Accreted Value, principal of or, premium, if
any, interest, Additional Amounts, if
<PAGE>
60
any, or Liquidated Damages, if any, on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
SECTION 6.4 The Trustee May Enforce Claims Without Possession of
----------------------------------------------------
Securities. All rights of action and claims under this Indenture or the Notes
- ----------
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto.
SECTION 6.5 Rights and Remedies Cumulative. Except as otherwise provided
------------------------------
with respect to the replacement or payment of mutilated, destroyed, lost or
stolen Notes in Section 2.8, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Notes 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 or subsequent assertion or employment of any
other appropriate right or remedy.
SECTION 6.6 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any Holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the Holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders of Notes.
SECTION 6.7 Waiver of Past Defaults. Subject to Sections 6.10 and 9.2,
-----------------------
at any time after a declaration of acceleration with respect to the Notes as
described in Section 6.1, the Holders of at least a majority in principal amount
at maturity of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the Accreted Value or principal of, premium, if any,
interest and other monetary obligations on the Notes that have become due solely
by such declaration of acceleration, have been cured or waived and (ii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. Such waiver shall not excuse a continuing Event of
Default in the payment of interest, premium, if any, principal, Accreted Value,
Additional Amounts, if any, or Liquidated Damages, if any, on such Note held by
a non-consenting Holder, or in respect of a covenant or a provision which cannot
be amended or modified without the consent of all Holders. In the event of any
Event of Default specified in subsection 6.1(f), such Event of Default and all
consequences thereof (including, without limitation, any acceleration or
resulting payment default) shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders of the Notes,
if within 60 days after such Event of Default arose (x) the Indebtedness or
guarantee that is the basis for such Event of Default has been discharged, or
(y) the holders thereof have rescinded or waived the acceleration, notice or
action (as the case may be) giving rise to such Event of Default, or (z) if the
default that is the basis for such Event of Default has been cured. The Company
shall deliver to the Trustee an Officers' Certificate stating that the requisite
percentage
<PAGE>
61
of Holders have consented to such waiver and attaching copies of such consents.
When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.8 Control by Majority. Subject to Section 2.10, the Holders of
-------------------
not less than a majority in principal amount at maturity of the outstanding
Notes may, by written notice to the Trustee, 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 it. Subject to Section 7.1, however,
the Trustee may refuse to follow any direction that conflicts with any law or
this Indenture that the Trustee determines may be unduly prejudicial to the
rights of another Holder of Notes, or that may involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
SECTION 6.9 Limitation on Suits. A Holder of Notes may not pursue any
-------------------
remedy with respect to this Indenture or the Notes unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holder or Holders of at least 25% in principal amount at
maturity of the outstanding Notes make a written request to the Trustee to
pursue the remedy;
(ii) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(v) during such 30-day period the Holder or Holders of a majority in
principal amount at maturity of the outstanding Notes do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
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 6.10 Rights of Holders To Receive Payment. Notwithstanding any
------------------------------------
other provision of this Indenture, the right of any Holder to receive payment of
Accreted Value, principal of, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, on a Note, on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION 6.11 Collection Suit by Trustee. If an Event of Default in
--------------------------
payment of Accreted Value, principal, premium, if any, interest, Additional
Amounts, if any, or Liquidated Damages, if any, specified in subsection 6.1(a)
or (b) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company or any other obligor
on the Notes for the whole amount of Accreted Value or principal and accrued
<PAGE>
62
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum borne by the Notes
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.12 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, accountants and experts) and the Holders allowed in any
judicial proceedings relating to the Company, its creditors or its property or
other obligor on the Notes, its creditors and its property and shall be entitled
and empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.7. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties which the
Holders of the Notes may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
SECTION 6.13 Priorities. If the Trustee collects any money or property
----------
pursuant to this Article VI, it shall pay out the money or property in the
following order:
First: to the Trustee, the Agents and their agents and attorneys for
amounts due under Section 7.7, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and
the costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
Accreted Value, principal, premium, if any, interest, Additional Amounts,
if any, and Liquidated Damages, if any, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for Accreted Value, principal, premium, if any, interest, Additional
Amounts, if any, and Liquidated Damages, if any, respectively; and
Third: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.13; provided
that the failure to give any
<PAGE>
63
such notice shall not affect the establishment of such record date or payment
date for Holders pursuant to this Section 6.13.
SECTION 6.14 Restoration of Rights and Remedies. If the Trustee or any
----------------------------------
Holder of any Note has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders of Notes shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders of Notes shall continue as though no
such proceeding had been instituted.
SECTION 6.15 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 the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, 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 6.15 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.10, or a suit
by a Holder or Holders of more than 10% in principal amount at maturity of the
outstanding Notes.
SECTION 6.16 Compliance Certificate; Notices of Default. The Company is
------------------------------------------
required to deliver to the Trustee annually a statement, in the form of an
Officers' Certificate, regarding compliance with this Indenture, and the Company
is required, within five Business Days, upon becoming aware of any Default or
Event of Default or any default under any document, instrument or agreement
representing Indebtedness of the Company, to deliver to the Trustee a statement,
in the form of an Officers' Certificate, specifying such Default or Event of
Default.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee. (a) If an Event of Default actually
-----------------
known to a Trust Officer of the Trustee has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under this Indenture at the
request of any of the Holders of Notes, unless they shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
(b) Except during the continuance of an Event of Default actually known to
the Trustee:
<PAGE>
64
(i) The Trustee and the Agents will perform only those duties as are
specifically set forth herein and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee or the
Agents.
(ii) In the absence of bad faith on their part, the Trustee and
the Agents may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions and such other documents delivered to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are required to be
furnished to the Trustee, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph does not limit the effect of subsection (b) of
this Section 7.1.
(ii) Neither the Trustee nor Agent shall be liable for any error
of judgment made in good faith by a Trust Officer of such Trustee or Agent,
unless it is proved that the Trustee or such Agent was negligent in
ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.8.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or to take or omit to take any action under this
Indenture or take any action at the request or direction of Holders if it shall
have reasonable grounds for believing that repayment of such funds is not
assured to it or it does not receive an indemnity satisfactory to it in its sole
discretion against such risk, liability, loss, fee or expense which might be
incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to subsections (a),
(b), (c) and (d) of this Section 7.1.
(f) 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.
(g) Any provision hereof relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.1 and, upon qualification of this Indenture under
the TIA, the TIA.
<PAGE>
65
SECTION 7.2 Rights of Trustee. Subject to Section 7.1:
-----------------
(a) The Trustee and each Agent may rely conclusively on and shall be
protected from acting or refraining from acting based upon any document
believed by the Trustee or such Agent to be genuine and to have been signed
or presented by the proper person. Neither the Trustee nor any Agent shall
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent order, approval, appraisal, bond, debenture, note, coupon,
security or other paper or document, but the Trustee or Agent, as the case
may be, in its discretion, may make reasonable further inquiry or
investigation into such facts or matters stated in such document and if the
Trustee or Agent, as the case may be, shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, at reasonable times during normal
business hours, personally or by agent or attorney and neither the Trustee
nor any Agent shall incur any liability or additional liability of any kind
by reason of such inquiry or investigation. The Trustee shall not be
deemed to have notice or any knowledge of any matter (including without
limitation Defaults or Events of Default) unless a Trust Officer assigned
to and working in the Trustee's Corporate Trust Administration has actual
knowledge thereof or unless written notice thereof is received by the
Trustee, Attention: Corporate Trust Administration, and such notice
references the Notes generally, the Company or this Indenture;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate or
Company Order and any resolution of the Board of Directors, as the case may
be, may be sufficiently evidenced by a Board Resolution;
(c) Before the Trustee and any Agent acts or refrains from acting,
the Trustee or such Agent may require an Officers' Certificate or an
Opinion of Counsel or both, which shall conform to the provisions of
Sections 12.4 and 12.5. Neither the Trustee nor any Agent shall be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(d) The Trustee and any Agent may act through its respective
attorneys and agents and shall not be responsible for the misconduct or
negligence of any agent or attorney appointed with due care.
(e) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Indenture; provided,
however, that the Trustee's conduct does not constitute willful misconduct,
negligence or bad faith.
(f) The Trustee or any Agent may consult with counsel of its
selection and the advice or opinion of such counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
<PAGE>
66
(g) Subject to Section 9.2 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver
or approval required by the terms hereof, but shall not without the consent
of the Holders of not less than a majority in aggregate principal amount at
maturity of the Notes at the time outstanding (i) give any consent, waiver
or approval or (ii) agree to any amendment or modification of this
Indenture, in each case, that shall have a material adverse effect on the
interests of any Holder. The Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any
consent, waiver, approval, amendment or modification shall have a material
adverse effect on the interests of any Holder.
(h) the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder or in connection with the transactions
contemplated hereby.
SECTION 7.3 Individual Rights of Trustee. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company, its Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. The Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee and the Agents shall not
--------------------
be responsible for and make no representation as to the validity, effectiveness
or adequacy of this Indenture or the Notes; the Trustee and the Agents shall not
be accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company or upon the Company's direction under
any provision hereof; the Trustee shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee;
and the Trustee and the Agents shall not be responsible for any statement or
recital herein of the Company, or any document issued in connection with the
sale of Notes or any statement in the Notes other than the Trustee's certificate
of authentication.
SECTION 7.5 Notice of Default. If an Event of Default occurs and is
-----------------
continuing and a Trust Officer of the Trustee receives actual notice of such
event, the Trustee shall mail to each Holder, as their names and addresses
appear on the list of Holders described in Section 2.5, notice of the uncured
Default or Event of Default within 90 days after the Trustee receives such
notice. Except in the case of a Default or Event of Default in payment of
Accreted Value or principal of, premium, if any, interest, Additional Amounts,
if any, or Liquidated Damages, if any, on any Note, including the failure to
make payment on (i) the Change of Control Payment Date pursuant to a Change of
Control Offer or (ii) the Asset Sale Purchase Date pursuant to an Asset Sale
Offer, the Trustee may withhold the notice if and so long as a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interest of the Holders.
<PAGE>
67
SECTION 7.6 Report by Trustee to Holders. This Section 7.6 shall not be
----------------------------
operative as a part of this Indenture until this Indenture is qualified under
the TIA, and, until such qualification, this Indenture shall be construed as if
this Section 7.6 were not contained herein.
Within 60 days after each July 15 beginning with July 15, 2000, the Trustee
shall, to the extent that any of the events described in TIA Section 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and
313(d).
A copy of each report at the time of its mailing to Holders shall be mailed
to the Company and filed with the Commission and each securities exchange, if
any, on which the Notes are listed.
The Company shall promptly notify the Trustee if subsequent to the date
hereof the Notes become listed on any securities exchange or of any delisting
thereof.
SECTION 7.7 Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing for its acceptance of this Indenture and
services hereunder. The Trustee's and the Agents' compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee and the Agents upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for their
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's or any Agent's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's and Agents' accountants, experts and counsel and any taxes or
other expenses incurred by a trust created pursuant to Section 8.4 hereof.
The Company shall indemnify each of the Trustee, any predecessor Trustee
and the Agents for, and hold them harmless against, any and all loss, damage,
claim, expense or liability including taxes (other than taxes based on the
income of the Trustee) incurred by the Trustee or an Agent without negligence,
willful misconduct or bad faith on its part in connection with the acceptance or
administration of this trust and its duties under this Indenture, including the
reasonable expenses and attorneys' fees and expenses of defending itself against
any claim or liability arising hereunder. The Trustee and the Agents shall
notify the Company promptly of any claim asserted against the Trustee or such
Agent for which it may seek indemnity. However, the failure by the Trustee or
the Agent to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee or
such Agent shall cooperate in the defense (and may employ its own counsel
reasonably satisfactory to the Trustee) at the Company's expense. The Trustee
or such Agent may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its written consent, which consent shall not be unreasonably
withheld. The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee or such Agent as a result of the
violation of this Indenture
<PAGE>
68
by the Trustee or such Agent if such violation arose from the Trustee's or such
Agent's negligence or bad faith.
When the Trustee or an Agent incurs expenses or renders services after the
occurrence of an Event of Default specified in subsection 6.1(h) or (i), the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.7 and any claim arising hereunder shall survive the
termination of this Indenture, the resignation or removal of any Trustee or
Agent, the discharge of the Company's obligations pursuant to Article VIII and
any rejection or termination under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of this
Indenture.
SECTION 7.8 Replacement of Trustee. The Trustee may resign at any time
----------------------
by so notifying the Company in writing. The Holders of a majority in principal
amount at maturity of the outstanding Notes may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent. 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. The
Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting with respect to its
duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount at
maturity of the then outstanding Notes may, with the Company's consent, appoint
a successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.7, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
<PAGE>
69
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount at maturity of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee and the Company shall pay to any replaced or removed
Trustee all amounts owed under Section 7.7 upon such replacement or removal.
SECTION 7.9 Successor Trustee by Merger, etc.. If the Trustee
---------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by consolidation, merger or conversion to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 7.10 Corporate Trustee Required; Eligibility. There shall be at
---------------------------------------
all times a Trustee hereunder which shall be eligible to act as Trustee under
the TIA and shall have a combined capital and surplus of at least $50,000,000
and have its Corporate Trust Office in the Borough of Manhattan, The City of New
York. If such Person publishes reports of condition at least annually, pursuant
to law or to the requirements of a Federal, State or District of Columbia
supervising or examining authority within the United States of America, then for
the purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 7.11 Disqualification; Conflicting Interests. If the Trustee has
---------------------------------------
or shall acquire a conflicting interest within the meaning of the TIA, the
Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the TIA and this
Indenture.
SECTION 7.12 Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee, in its capacity as Trustee hereunder, shall comply with TIA Section
311(a), excluding any creditor relationship listed in TIA Section 311(b). A
Trustee who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
<PAGE>
70
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
---------------------------------------
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, with respect to
the Notes, elect to have either Section 8.2 or 8.3 be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article VIII.
SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's exercise
------------------------------
under Section 8.1 of the option applicable to this Section 8.2, the Company
shall be deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
----------------
means that the Company shall be deemed to have paid and discharged all the
Obligations relating to the outstanding Notes and the Notes shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.6, Section 8.8 and
the other Sections of this Indenture referred to below in this Section 8.2, and
to have satisfied all of their other obligations under such Notes and this
Indenture and cured all then existing Events of Default (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the Accreted Value or
principal of, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes when such payments are due or on the
Redemption Date solely out of the trust created pursuant to this Indenture; (b)
the Company's obligations with respect to Notes concerning issuing temporary
Notes, or, where relevant, registration of such Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust; (c) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith; and (d) this Article VIII and the obligations set forth in
Section 8.6 hereof.
Subject to compliance with this Article VIII, the Company may exercise its
option under Section 8.2 notwithstanding the prior exercise of its option under
Section 8.3 with respect to the Notes.
SECTION 8.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.1 of the option applicable to this Section 8.3, the Company shall be
released from any obligations under the covenants contained in Sections 4.3,
4.4, 4.10, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.22, 4.23 and 5.1
hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
-------------------
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the
<PAGE>
71
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or Event of Default under subsection 6.1(e), nor shall any event
referred to in subsection 6.1(f) or (g) thereafter constitute a Default or Event
of Default, but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby.
SECTION 8.4 Conditions to Legal or Covenant Defeasance. The following
------------------------------------------
shall be the conditions to the application of either Section 8.2 or Section 8.3
to the outstanding Notes:
(i) the Company must irrevocably deposit, or cause to be irrevocably
deposited, with the Trustee, in trust, for the benefit of the Holders of
the Notes, cash in U.S. dollars, U.S. Government Securities or a
combination thereof in such amounts as will be sufficient, in the opinion
of an internationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, due on the outstanding Notes on the
stated maturity date or on the applicable Redemption Date, as the case may
be, of such principal, premium, if any, interest, Additional Amounts, if
any, and Liquidated Damages, if any, due on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, (1) the Company has received from, or there has
been published by, the U.S. Internal Revenue Service a ruling or (2) since
the Issue Date, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel in the United States shall confirm that, subject to
customary assumptions and exclusions, the Holders of the outstanding Notes
will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Legal Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred
and (B) an Opinion of Counsel in The Federal Republic of Germany reasonably
acceptable to the Trustee to the effect that (1) Holders will not recognize
income, gain or loss for German income tax purposes as a result of such
Legal Defeasance and will be subject to German income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred and (2) payments from the
defeasance trust will be free and exempt from any and all withholding and
other income taxes of whatever nature imposed or levied by or on behalf of
the German government or any political subdivision thereof or therein
having the power to tax;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax
<PAGE>
72
purposes as a result of such Covenant Defeasance and will be subject to
such tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred and
(B) an Opinion of Counsel in The Federal Republic of Germany reasonably
acceptable to the Trustee to the effect that (1) Holders will not recognize
income, gain or loss for German income tax purposes as a result of such
Covenant Defeasance and will be subject to German income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred and (2) payments from the
defeasance trust will be free and exempt from any and all withholding and
other income taxes of whatever nature imposed or levied by or on behalf of
the German government or any political subdivision thereof or therein
having the power to tax;
(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of such
deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under any material
agreement or instrument to which the Company is a party or by which the
Company is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any applicable German law or U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which opinion
of counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 8.5 Satisfaction and Discharge of Indenture. This Indenture will
---------------------------------------
be discharged and will cease to be of further effect as to all Notes issued
thereunder when either (i) all such Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
and thereafter repaid to the Company) have been delivered to the Trustee for
cancellation or (ii) (A) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable within one
year and the Company has irrevocably deposited or caused to be deposited with
such Trustee as trust funds in trust an amount of money sufficient to
<PAGE>
73
pay and discharge the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation for principal, premium, if any, and
accrued and unpaid interest, Additional Amounts, if any, and Liquidated Damages,
if any, to the date of maturity or redemption; (B) no Default with respect to
this Indenture or the Notes shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound; (C) the
Company has paid, or caused to be paid, all sums payable by it under this
Indenture; and (D) the Company has delivered irrevocable instructions to the
Trustee under this Indenture to apply the deposited money toward the payment of
such Notes at maturity or the Redemption Date, as the case may be. In addition,
the Company must deliver an Officers' Certificate and an Opinion of Counsel to
the Trustee stating that all conditions precedent to satisfaction and discharge
have been satisfied.
SECTION 8.6 Survival of Certain Obligations. Notwithstanding the
-------------------------------
satisfaction and discharge of this Indenture and of the Notes referred to in
Section 8.1, 8.2, 8.3, 8.4 or 8.5, the respective obligations of the Company and
the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10, 2.11, 2.12, 2.13,
2.14, 4.1, 4.2, 4.5, 4.21, 6.10, Article VII, 8.7, 8.8, 8.9 and 8.10 shall
survive until the Notes are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.7, 8.7, 8.8, 8.9 and
8.10 shall survive. Nothing contained in this Article VIII shall abrogate any
of the obligations or duties of the Trustee under this Indenture.
SECTION 8.7 Acknowledgment of Discharge by Trustee. Subject to Section
--------------------------------------
8.10, after (i) the conditions of Section 8.4 or 8.5 have been satisfied, (ii)
the Company has paid or caused to be paid all other sums payable hereunder by
the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon written
request shall acknowledge in writing the discharge of all of the Company's
obligations under this Indenture except for those surviving obligations
specified in this Article VIII.
SECTION 8.8 Application of Trust Moneys. All cash in U.S. dollars and
---------------------------
U.S. Government Securities deposited with the Trustee pursuant to Section 8.4 or
8.5 in respect of Notes shall be held in trust and applied by it, in accordance
with the provisions of such Notes and this Indenture, to the payment, either
directly or through any Paying Agent as the Trustee may determine, to the
Holders of the Notes of all sums due and to become due thereon for principal,
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Securities
deposited pursuant to Section 8.4 or 8.5 or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of outstanding Notes.
SECTION 8.9 Repayment to the Company; Unclaimed Money. The Trustee and
-----------------------------------------
any Paying Agent shall promptly pay or return to the Company upon Company Order
any cash or U.S. Government Securities held by them at any time that are not
required for the payment of the
<PAGE>
74
principal of, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, on the Notes for which cash or U.S. Government
Securities have been deposited pursuant to Section 8.4 or 8.5.
Any money held by the Trustee or any Paying Agent under this Article, in
trust for the payment of the principal of, premium, if any, interest, Additional
Amounts, if any, and Liquidated Damages, if any, on any Note and remaining
unclaimed for two years after such principal, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, has become due and
payable shall be paid to the Company upon Company Order or if then held by the
Company shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company give notice to the Holders or cause to be
published notice once, in a leading newspaper having a general circulation in
New York (which is expected to be The Wall Street Journal) and in Frankfurt
(which is expected to be the Frankfurter Allgemeine Zeitung) (and, if and so
long as the Notes are listed, admitted or eligible for trading on a stock
exchange or trading market, in a newspaper having a general circulation in the
locations which such stock exchange or trading market requires) or in the case
of Definitive Notes, such notice shall be made by first-class mail to Holders,
postage prepaid, at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Notes are
listed, admitted or eligible for trading on a stock exchange or trading market
and the rules of such stock exchange or trading market shall so require, by
publication in a newspaper having a general circulation in the locations which
such stock exchange or trading market requires), that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.10 Reinstatement. If the Trustee or Paying Agent is unable to
-------------
apply any cash or U.S. Government Securities, as applicable, in accordance with
Section 8.2, 8.3, 8.4 or 8.5 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 Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2, 8.3, 8.4 or 8.5 until such time as
the Trustee or Paying Agent is permitted to apply all such cash or U.S.
Government Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5; provided,
however, that if the Company has made any payment of interest on, premium, if
any, principal, Additional Amounts, if any, and Liquidated Damages, if any, of
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Securities, as applicable, held by the Trustee
or Paying Agent.
<PAGE>
75
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders of Notes. Notwithstanding Section
-----------------------------------
9.2 hereof, the Company and the Trustee together may amend or supplement this
Indenture or the Notes without the consent of any Holder of a Note (i) to cure
any ambiguity, omission, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, or to
provide for additional forms of global Notes containing transfer and other
restrictions and which comply with applicable U.S. securities and other laws,
(iii) to comply with the covenant relating to mergers, consolidations and sales
of assets, (iv) to provide for the assumption of the Company's obligations to
Holders of such Notes, (v) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights under this Indenture of any such Holder, (vi) to add covenants
for the benefit of the Holders or to surrender any right or power conferred upon
the Company, or (vii) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amendment or supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture which adversely affects its own rights, duties
or immunities hereunder or otherwise.
SECTION 9.2 With Consent of Holders of Notes. The Company and the
--------------------------------
Trustee may amend or supplement this Indenture or the Notes or any amended or
supplemental indenture with the written consent of the Holders of at least a
majority in principal amount at maturity of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and any existing Default or Event of Default and its
consequences or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of at least a majority in principal
amount at maturity of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Notes). However,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a nonconsenting Holder of Notes): (i) reduce
the principal amount at maturity of the Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the Accreted Value of or change the
fixed maturity of any such Note or alter or waive the provisions with respect to
the redemption of the Notes, (iii) reduce the rate of or change the time for
payment of interest on any Note, (iv) waive a Default in the payment of Accreted
Value or principal of, or premium, if any, interest, Additional Amounts, if any,
or Liquidated Damages, if any, on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount at maturity of the Notes and a waiver of the payment default
that resulted from such acceleration with respect to the Notes) or in respect of
a covenant or provision contained in this Indenture which cannot be amended or
modified without the consent of all Holders, (v) make any Note payable in money
other than that stated in the Notes,
<PAGE>
76
(vi) make any change in the provisions of this Indenture relating to waivers of
past Defaults or the rights of Holders of the Notes to receive payments of
Accreted Value or principal of, premium, interest, Additional Amounts, if any,
or Liquidated Damages, if any, on, such Notes, (vii) make any change in the
amendment and waiver provisions contained in this Indenture, (viii) make any
change in paragraph 3 of the Notes that adversely affects the rights of any
Holder of the Notes, (ix) amend the terms of the Notes or this Indenture in a
way that would result in the loss of an exemption from any Taxes or an exemption
from any obligation to withhold or deduct Taxes unless the Company agrees to pay
Additional Amounts, if any, in respect thereof, (x) impair the right of any
Holder of the Notes to receive payment of Accreted Value or principal of,
interest and Liquidated Damages, if any, on, such Holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 9.6, the Trustee shall join with the Company
in the execution of such amended or supplemental indenture unless such amended
or supplemental indenture adversely affects the Trustee's own rights, duties or
immunities hereunder or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver.
SECTION 9.3 Compliance with TIA. From the date on which this Indenture is
-------------------
qualified under the TIA, every amendment, waiver or supplement of this Indenture
or the Notes shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents. Until an amendment,
---------------------------------
supplement or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. However,
any such Holder of a Note or subsequent Holder of a Note may revoke the consent
as to its Note if the Trustee receives written notice of revocation before the
date the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder of a Note.
<PAGE>
77
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company fixes
a record date, the record date shall be fixed at (i) the later of 30 days prior
to the first solicitation of such consent or the date of the most recent list of
Holders of Notes furnished to the Trustee prior to such solicitation pursuant to
Section 2.5 or (ii) such other date as the Company shall designate.
SECTION 9.5 Notation on or Exchange of Notes. The Trustee may place an
--------------------------------
appropriate notation about an amendment, supplement or waiver on any Note
thereafter authenticated. The Company in exchange for all Notes may issue and
the Trustee shall authenticate new Notes that reflect the amendment, supplement
or waiver.
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 9.6 Trustee to Sign Amendments, etc.. The Trustee shall execute
--------------------------------
any amendment, supplement or waiver authorized pursuant to this Article IX;
provided, however, that the Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver which adversely affects the Trustee's
own rights, duties or immunities under this Indenture. The Trustee shall be
entitled to receive indemnity reasonably satisfactory to it, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article IX is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
not be an expense of the Trustee.
SECTION 9.7 Senior Indebtedness. Notwithstanding anything in this Article
-------------------
IX to the contrary, no amendment may be made to Article XI hereof or to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any trustee, group or representative thereof authorized
to give a consent) consent to such change.
ARTICLE X
CONVERSION
----------
SECTION 10.1 Right to Convert; Mandatory Conversion. (a) Subject to and
--------------------------------------
upon compliance with the provisions of this Indenture, at any time on or after
365 days after the Issue Date and on or before the Maturity Date, each Holder
shall have the right, at its option, to convert the Accreted Value of any Note,
or any portion of such Accreted Value, into that number of validly issued, fully
paid and nonassessable shares of Common Stock (as such shares shall then be
constituted) (the "Conversion Shares") obtained by dividing the aggregate
-----------------
Accreted Value of the Note or portion thereof surrendered for conversion (on the
date of conversion) by $25.00, subject to adjustment as set forth in Section
10.5, below (the "Conversion Ratio").
----------------
<PAGE>
78
(b) Notwithstanding anything in this Section 10.1 to the contrary, the
right to convert with respect to any Note or portion of a Note that shall be
called for redemption or delivered for repurchase, shall terminate at the close
of business on the Trading Day next preceding the Redemption Date, unless the
Company shall default in payment due upon redemption or repurchase thereof.
(c) In addition to the rights of the Holders to convert the Notes as set
forth in Sections 10.1(a) and 10.1(b), above, if the closing price of the Common
Stock on the Neuer Markt during any period (or portion of a period) described
below has exceeded the price for such period (or portion of a period) referred
to below for at least 30 consecutive Trading Days ("Market Criteria," with the
---------------
30-day period being referred to as the "Market Criteria Period"), and the
----------------------
Conversion Shelf Registration Statement (as defined in the Registration Rights
Agreement) is effective and available, then , on the next succeeding Trading
Day, all of the Notes will be automatically converted into that number of
Conversion Shares derived by application of the Conversion Ratio specified in
Section 10.1(a) above; provided, however, that if the Market Criteria is
satisfied during the first 365 days after the Closing Date, the conversion will
not occur until the one-year anniversary of the Closing Date and will occur only
if the closing price on the Neuer Markt of the Common Stock is at least
(Euro)32.00 on such date:
12 Months Beginning Closing Price
------------------- -------------
August 15, 1999 (Euro) 32.00
August 15, 2000 (Euro) 38.46
August 15, 2001 (Euro) 44.92
August 15, 2002 (Euro) 51.37
August 15, 2003 (Euro) 57.83
The Company shall promptly take all steps necessary to provide for the issuance
of shares of Common Stock to the Holders of Notes in connection with any such
mandatory conversion of the Notes and, upon such conversion, the Notes shall
cease to be outstanding and interest, premium, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes shall cease to accrue (and Accreted
Value shall cease to increase). If, on or after the date which is 365 days after
the Closing Date, the Notes would be automatically converted pursuant to the
terms hereof but for the fact that the Conversion Shelf Registration Statement
is not then effective and available, then the Notes shall be automatically
converted on the next date that such Conversion Shelf Registration Statement
becomes effective and available (but only if on such date of conversion, the
closing price on the Neuer Markt is equal to or exceeds the price referred to in
the table above for such date).
(d) No Holder or holder of any beneficial interest in any Note is entitled
to any rights of a holder of Common Stock (including, without limitation,
receipt of dividends or other distributions, notices of meetings of
stockholders, consents to actions of stockholders or notices of any other
stockholder proceedings) until such Holder has converted his Notes to Common
Stock (or such time as they may have been automatically converted pursuant to
the provisions of Section 10.1(c), as the case may be), and only to the extent
such Notes are deemed to have been converted to Common Stock under this Article
X.
<PAGE>
79
SECTION 10.2 Exercise of Conversion Privilege; Issuance of Common Stock on
-------------------------------------------------------------
Conversion; No Adjustment for Interest or Dividends. In order to effect the
- ---------------------------------------------------
conversion of any Note into Conversion Shares pursuant to Section 10.1(a), the
Holder of any Note to be converted in whole or in part shall surrender such
Note, duly endorsed, at an office or agency maintained by the Company pursuant
to Section 2.3, accompanied by the funds, if any, required by the last paragraph
of this Section 10.2, and shall give written notice of conversion in the form
provided on the Notes (or such other notice that is acceptable to the Company)
to the Company at such office or agency that the Holder elects to convert such
Note or the portion thereof specified in such notice, stating the name or names
(with address) in which the certificate or certificates for Conversion Shares
that shall be issuable on such conversion shall be issued. Each Note surrendered
for conversion shall, unless the Conversion Shares are to be issued in the same
name as the registration under such Note, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to the Company duly executed by,
the Holder or his duly authorized attorney, and such instruments shall be
accompanied by amounts sufficient to pay all transfer taxes payable upon
issuance of Conversion Shares in such other name or names. Other than such
transfer taxes, the Company shall pay any and all other taxes (other than taxes
based upon income) that may be payable in respect of any issue or delivery of
Conversion Shares. The Holder may not withdraw its conversion notice after
receipt of the Company's notice of its election regarding conversion.
As promptly as practicable (and in any event no later than ten Business
Days) after the surrender of such Note and the receipt of such notice and funds,
if any, as aforesaid, the Trustee shall instruct the Company to and the Company
shall issue and shall deliver at such office or agency to such Holder, or on his
written order, (i) a certificate or certificates for the number of full
Conversion Shares or portion thereof in accordance with the provisions of this
Article X and (ii) a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such conversion as provided in
Section 10.3. In case any Note of a denomination greater than $1,000 shall be
surrendered for partial conversion, and subject to Article II, the Company shall
execute and the Trustee shall authenticate and deliver to or upon the written
order of the Holder thereof, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected on the date on which
such Note shall have been surrendered (accompanied by the funds, if any,
required by the last paragraph of this Section 10.2) and such notice shall have
been received by the Company, as aforesaid, and the person in whose name any
certificate or certificates for Conversion Shares shall be issuable upon such
conversion shall be deemed to have become on said date the holder of record of
the Conversion Shares represented thereby; provided, however, that in the event
of any such surrender on any date when the stock transfer books of the Company
shall be closed, the Person in whose name any certificate or certificates for
Conversion Shares shall be issuable upon such conversion shall be deemed to have
become the holder of record of the Conversion Shares on the next day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such Note shall have been
surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on a Record Date to the opening of business on the
next succeeding Interest Payment
<PAGE>
80
Date shall (unless such Note or portion thereof being converted shall have been
called for redemption on a date in such period) be accompanied by payment, in
funds acceptable to the Company, of an amount equal to the interest otherwise
payable on such Interest Payment Date on the Accreted Value being converted;
provided, however, that no such payment need be made if there shall exist at the
time of conversion a default in the payment of interest on the Notes. An amount
equal to such payment shall be paid by the Company on such Interest Payment Date
to the holder of such Note at the close of business on such Record Date;
provided, however, that if the Company shall default in the payment of interest
on such Interest Payment Date, such amount shall be paid to the Person who made
such required payment. Except as provided above in this Section 10.2, no
adjustment shall be made for interest accrued on any Note converted or for
dividends on any shares on the conversion of such Note as provided in this
Article X. If any Note or portion thereof which has been called for redemption
on a date during the period from the close of business on a Record Date for any
Interest Payment Date to the opening of business on such Interest Payment Date
is surrendered for conversion during such period, no interest shall be payable
to the Holder on account of such Note or portion thereof.
SECTION 10.3 Cash Payments in Lieu of Fractional Shares. No fractional
------------------------------------------
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
Accreted Value of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of Common Stock would
be issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment therefor in cash at the current market value thereof. The current
market value of a share of Common Stock shall be the Closing Price on the Neuer
Markt on the last Trading Day prior to the day on which the Notes (or specified
portions thereof) are deemed to have been converted and such Closing Price shall
be determined as provided in subsection (f) of Section 10.5.
SECTION 10.4 Conversion Price. The conversion price shall be as specified
----------------
in the form of Note hereinabove set forth, subject to adjustment as provided in
this Article (the "Conversion Price").
----------------
SECTION 10.5 Adjustment of Conversion Price. (a) In case the Company shall
------------------------------
(i) pay a dividend, or make a distribution, in shares of its Common Stock on its
Common Stock, (ii) subdivide its outstanding Common Stock into a greater number
of shares or (iii) combine its outstanding Common Stock into a smaller number of
shares, the denominator of the Conversion Ratio in effect immediately prior
thereto shall be adjusted so that the Holder of any Note thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common Stock
of the Company that he would have owned or have been entitled to receive after
the happening of any of the events described above had such Note been converted
immediately before the happening of such event. An adjustment made pursuant to
this subsection (a) shall become effective immediately after the record date in
the case of a dividend and shall become effective immediately after the
effective date in the case of subdivision or combination.
(b) In case the Company shall issue rights or warrants to all holders of
its Common Stock entitling them (for a period expiring within 45 days after the
record date mentioned below) to
<PAGE>
81
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price per share of Common Stock at the record date for the
determination of stockholders entitled to receive such rights or warrants,
except as provided in subsection (f) below, the denominator of the Conversion
Ratio in effect immediately prior thereto shall be adjusted so that the same
shall equal the price determined by multiplying the denominator of the
Conversion Ratio in effect immediately before the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price
(determined by multiplying the total number of shares by the exercise price of
such rights or warrants and dividing the product so obtained by the Current
Market Price), and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately after such record
date. Except as provided in subsection (f) below, in determining whether any
rights or warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received by the Company for such rights or
warrants, the value of such consideration, if other than cash, to be determined
in good faith by the Board of Directors whose determination shall be conclusive
and described in an Officers' Certificate filed with the Trustee. Upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the denominator of the Conversion Ratio
pursuant to this subsection (b), if any such right or warrant shall expire and
shall not have been exercised, the denominator of the Conversion Ratio shall
immediately upon such expiration be recomputed to the denominator of the
Conversion Ratio which would have been in effect had the adjustment of the
denominator of the Conversion Ratio made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised. If the Company shall at any time
issue two or more securities as a unit and one or more of such securities shall
be rights or warrants for Common Stock subject to this Section 10.5(b), the
consideration allocated to each such security shall be determined in good faith
by the Board of Directors whose determination shall be conclusive and described
in an Officers' Certificate filed with the Trustee.
(c) In case the Company shall distribute to all holders of its Common
Stock any shares of Capital Stock of the Company (other than Common Stock) or
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any of its securities (including securities but excluding those
rights, warrants, dividends and distributions referred to in subsections (a) and
(b) above and dividends and distributions in connection with the liquidation,
dissolution or winding up of the Company or paid in cash), then, except as
provided in subsection (f) below, in each such case the denominator of the
Conversion Ratio shall be adjusted so that the same shall equal the price
determined by multiplying the denominator of the Conversion Ratio in effect
immediately before the date of such distribution by a fraction of which the
numerator shall be the Current Market Price per share of the Common Stock on the
record date mentioned below less the Fair Market Value on such record date (as
determined by the Board of Directors, whose
<PAGE>
82
determination shall be conclusive, and described in an Officers' Certificate
filed with the Trustee) of the portion of the Capital Stock or assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock, and the denominator shall be the
Current Market Price per share of the Common Stock on such record date. Such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to received such distribution, except as
provided in subsection (f) below.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (excluding (x) any quarterly
cash dividend on the Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed the greater of (i)
the amount per share of Common Stock of the next preceding quarterly cash
dividend on the Common Stock to the extent not requiring any adjustment of the
denominator of the Conversion Ratio pursuant to this subparagraph (d) (as
adjusted to reflect subdivisions or combinations of the Common Stock) and (ii)
3.75% of the average of the daily Closing Prices on The Neuer Markt of the
Common Stock, for the ten consecutive Trading Days immediately prior to the date
of declaration of such dividend and (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary), then, in such case, unless the Company elects
to reserve such cash for distribution to the Holders of the Notes upon the
conversion of the Notes so that any such Holder converting Notes will receive
upon such conversion, in addition to the Conversion Shares to which such Holder
is entitled, the amount of cash which such Holder would have received if such
Holder had, immediately prior to the record date for such distribution of cash,
converted its Notes into Conversion Shares, the denominator of the Conversion
Ratio shall be reduced so that the same shall be equal to the number determined
by multiplying the denominator of the Conversion Ratio in effect immediately
prior to such record date by a fraction of which the numerator shall be the
Current Market Price of the Common Stock on such record date less the amount of
cash so distributed (and not excluded as provided above) applicable to one share
of Common Stock and the denominator shall be such Current Market Price of the
Common Stock, such reduction to become effective immediately prior to the
opening of business on the day following such record date; provided, however,
that in the event the portion of the cash so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market Price of the
Common Stock on such record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Holder of Notes shall thereafter have the
right to receive upon conversion the amount of cash such Holder would have
received had he converted each Note on such record date. In the event that such
dividend or distribution is not so paid or made, the denominator of the
Conversion Ratio shall again be adjusted to be the denominator of the Conversion
Ratio which would then be in effect if such dividend or distribution had not
been declared.
(e) In case a tender or exchange offer made by the Company or any
Subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Company or such Subsidiary of consideration per share of Common Stock having a
Fair Market Value at the last time (the "Expiration Time") tenders or exchanges
---------------
may be made by holders of Common Stock pursuant to such offer (as it shall have
been amended) that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, the denominator of the
Conversion Ratio shall be reduced
<PAGE>
83
so that such denominator shall equal the number determined by multiplying the
denominator of the Conversion Ratio in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
on the Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the Fair Market Value of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
----------------
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time. In the event that the Company is
obligated to purchase shares pursuant to any such tender or exchange offer, but
the Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the denominator of the Conversion
Ratio shall again be adjusted to be the denominator of the Conversion Ratio
which would then be in effect if such tender or exchange offer had not been
made.
(f) No adjustment in the denominator of the Conversion Ratio shall be
required unless such adjustment would require an increase or decrease of at
least 1.0% in the denominator of the Conversion Ratio then in effect; provided,
however, that any adjustments which by reason of this subparagraph (f) are not
required to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required. Except as
provided in this Section 10.5, the denominator of the Conversion Ratio will not
be adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock or carrying the right to purchase any of the
foregoing.
(g) Whenever the conversion price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other than
the Trustee an Officers' Certificate setting forth the denominator of the
Conversion Ratio after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
denominator of the Conversion Ratio setting forth the adjusted denominator of
the Conversion Ratio and the date on which such adjustment becomes effective and
shall mail or cause to be mailed such notice of such adjustment of the
denominator of the Conversion Ratio to the Holder of each Note at his last
address appearing on the Note register provided for in Section 2.3 of this
Indenture.
(h) In any case in which this Section 10.5 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the Holder of any
Note converted after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such Holder any amount in cash in lieu of any fraction pursuant to Section 10.3.
<PAGE>
84
(i) The Company may make such reductions in the denominator of the
Conversion Ratio, in addition to those required by subparagraphs (a), (b), (c),
(d) and (e) of this Section 10.5, as the Board of Directors considers to be
advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or in any event treated as such for income
tax purposes. To the extent permitted by applicable law, the Company from time
to time may reduce the denominator of the Conversion Ratio by any amount for any
period of time if the period is at least 20 days, the reduction is irrevocable
during such period, and the Board of Directors (or, to the extent permitted by
applicable law, a duly authorized committee thereof) shall have made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive. Whenever the denominator of the
Conversion Ratio is reduced pursuant to the preceding sentence, the Company
shall mail to holders of record of the Notes a notice of the reduction at least
15 days prior to the date the reduced denominator of the Conversion Ratio takes
effect, and such notice shall state the reduced denominator of the Conversion
Ratio and the period it will be in effect.
(j) Notwithstanding any other provision of this Section 10.5, no
adjustment to the denominator of the Conversion Ratio shall reduce the
denominator of the Conversion Ratio below the then par value per share of the
Common Stock, and any such purported adjustment shall instead reduce the
denominator of the Conversion Ratio to such par value. The Company hereby
covenants not to take any action (i) to increase the par value per share of the
Common Stock or (ii) that would or does result in any adjustment in the
denominator of the Conversion Ratio that, if made without giving effect to the
previous sentence, would cause the denominator of the Conversion Ratio to be
less than the then par value per share of the Common Stock, provided, however,
that the covenant in this sentence shall be suspended if within ten days of
determining in good faith that such action would result in such adjustment (but
not later than the Business Day next following the effectiveness of such
adjustment), the Company gives notice of redemption of all outstanding Notes,
and effects the redemption referred to in such notice on the redemption date
referred to therein in compliance with Article III, but the covenant in this
sentence shall be retroactively reinstated if such notice is not given or such
redemption does not occur.
(k) In the event that the provisions of this Article X specifying the
methods by which the Conversion Price or other provisions are adjusted would
require an adjustment that is determined in good faith by the Board of Directors
to be inconsistent with the purpose of the provisions hereof providing for
Conversion Price adjustments or other adjustments (generally, to place Holders
in a position equivalent to the position they were in prior to the occurrence of
the event requiring adjustment to the Conversion Price or other adjustment), the
Board of Directors may make an adjustment (in lieu of that required by such
provisions) that it determines in good faith places the Holders in a position at
least equivalent to the position they were in prior to such event, which
determination shall be described in a Board Resolution. If any action of
transaction would require adjustment to any Conversion Price established
hereunder pursuant to more than one paragraph of this Article X, only the
adjustment that would result in the largest reduction of such Conversion Price
shall be made.
<PAGE>
85
SECTION 10.6 Effect of Reclassification, Consolidation, Merger or Sale. In
---------------------------------------------------------
the case of (a) any reclassification or change of the Common Stock of the
Company, (b) a consolidation, merger or combination involving the Company or (c)
a sale or conveyance to another corporation of the property and assets of the
Company as an entirety or substantially as an entirety, in each case as a result
of which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, the Holders of the Notes then outstanding will
be entitled thereafter to convert such Notes into the kind and amount of shares
of stock, other securities or other property or assets which they would have
owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Conversion Shares immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming that a
Holder of Notes would not have exercised any rights of election as to the stock,
other securities or other property or assets receivable in connection therewith.
SECTION 10.7 Taxes on Shares Issued. The issue of stock certificates on
----------------------
conversions of Notes shall be made without charge to the converting Holder of
Notes for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the Holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
SECTION 10.8 Reservation of Shares; Shares to be Fully Paid. The Company
----------------------------------------------
shall, at all times, from and after the date hereof, reserve for issuance and
maintain, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares of Common Stock to provide for the
conversion of all outstanding Notes. The Company covenants that all shares of
Common Stock which may be issued upon conversion of Notes will upon issue be
validly issued, fully paid and nonassessable by the Company and free from all
taxes, liens and charges with respect to the issue thereof.
Before taking any action which would cause an adjustment reducing the
denominator of the Conversion Ratio below the then par value, if any, of the
shares of Common Stock issuable upon conversion of the Notes, the Company will
take all corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue shares of such Common
Stock at such adjusted conversion price.
SECTION 10.9 Permanent Reduction of Conversion Ratio upon Certain
----------------------------------------------------
Registration Defaults. In addition to the provisions of this Section 10.5, the
- ---------------------
Conversion Ratio may also be permanently reduced pursuant to and in accordance
with the provisions of the Registration Rights Agreement.
SECTION 10.10 Definition of Closing Price. For purposes of this Article X,
---------------------------
"Closing Price" with respect to any securities on any day means the closing sale
price regular way on such day or, in case no such sale takes place on such day,
the average of the reported closing bid and
<PAGE>
86
asked prices, regular way, in each case on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such manner as
furnished by any National Association of Securities Dealer member firm selected
from time to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors or, to the extent permitted
by applicable law, a duly authorized committee thereof, whose determination
shall be conclusive.
ARTICLE XI
SUBORDINATION
-------------
SECTION 11.1 Notes Subordinated to Senior Indebtedness. (a) The Company
-----------------------------------------
covenants and agrees, and each Holder by accepting a Note covenants and agrees,
that (i) the Indebtedness evidenced by the Notes, including, but not limited to,
the payment of Accreted Value, principal of, premium, if any, interest,
Additional Amounts, if any, and Liquidation Damages, if any, on the Notes, and
any other payment obligation of the Company in respect of the Notes (including
any obligation to repurchase the Notes) is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full in cash or Cash Equivalents of all Senior Indebtedness of the Company
(whether outstanding on the date hereof or hereafter Incurred) (including,
without limitation, the Company's obligations under the Senior Notes) and (ii)
the subordination is for the benefit of the Holders of Senior Indebtedness. The
Notes shall rank in all respects pari passu with all other Senior Subordinated
Indebtedness of the Company. The Notes shall rank senior in all respects to all
existing and future Indebtedness of the Company that is neither Senior
Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness of the
Company that is Senior Indebtedness shall rank senior to the Notes in accordance
with the provisions set forth herein.
(b) Subject to Section 11.4, if (i) the Company shall default in the
payment of any principal of, premium, if any, or interest, if any, on any Senior
Indebtedness when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration of acceleration or otherwise, or
(ii) any other default shall occur with respect to Senior Indebtedness and the
maturity of such Senior Indebtedness has been accelerated in accordance with its
terms, then, upon written notice of such default to the Company and the Trustee
by the holders of Senior Indebtedness or any trustee or representative therefor,
unless and until, in either case, the default has been cured or waived, or has
ceased to exist, or any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full, no direct or indirect payment (in cash,
property, Notes, by set-off or otherwise) shall be made or agreed to be made on
account of the Accreted Value, principal of, premium, if any, interest,
Additional Amounts, if any, or Liquidated Damages, if any, on any of the Notes,
or in respect of any redemption, retirement, purchase or other acquisition of
any of the Notes nor may any deposit in respect of the Notes be made pursuant to
the provisions of Article VIII hereof; provided, however, such payments and
<PAGE>
87
deposits may be made if the Company and the Trustee receive written notice
approving such payment from the holders of such Senior Indebtedness or any
trustee or representative therefor with respect to which either of the events
set forth in clause (i) or (ii) of this sentence has occurred and is continuing.
(c) If any default (other than a default described in paragraph (b) of
this Section 11.1) shall occur under Designated Senior Indebtedness, pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods occurs (a "Designated Senior
-----------------
Indebtedness Non-Payment Default"), then, upon the receipt by the Trustee (with
- --------------------------------
a copy to the Company) of written notice thereof (a "Payment Notice") from or on
--------------
behalf of holders of such Designated Senior Indebtedness or any trustee or
representative therefor specifying an election to prohibit such payment and
other action by the Company in accordance with the following provisions of this
paragraph (c), the Company may not make any payment or take any other action
that would be prohibited by paragraph (b) of this 11.1 during the period (the
"Payment Blockage Period") commencing on the date of receipt of such Payment
- ------------------------
Notice and ending on the earlier of (i) the date, if any, on which the holders
of such Designated Senior Indebtedness or any trustee or representative therefor
notify the Trustee and the Company in writing that such Designated Senior
Indebtedness Non-Payment Default is cured or waived or ceases to exist or the
Senior Indebtedness to which such Designated Senior Indebtedness Non-Payment
Default relates is discharged or (ii) the 179th day after the date of receipt of
such Payment Notice. Notwithstanding the provisions described in the immediately
preceding sentence, (i) payments and other distributions made from any
defeasance trust created pursuant to Section 8.1 hereof may be used to make
payments on the Notes if the applicable deposit does not violate Article VIII or
this Article XI, (ii) no Designated Senior Indebtedness Non-Payment Default that
existed or was continuing on the date of delivery to the Trustee of a Payment
Notice shall be, or shall be made, the basis for a subsequent Payment Notice
unless such default shall have been cured or waived for a period of no less than
90 days and (iii) the Company may resume payments on the Notes following such
Payment Blockage Period unless the holders of such Designated Senior
Indebtedness or the trustee or representative of such holders has accelerated
the maturity of such Designated Senior Indebtedness. Any number of Payment
Notices may be given; provided, however, that (i) irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period, not
more than one Payment Notice shall be given within a period of any 360
consecutive days and (ii) no default that existed upon the date of such Payment
Notice or the commencement of such Payment Blockage Period (whether or not such
event of default is on the same issue of Senior Indebtedness) shall be made the
basis for the commencement of any other Payment Blockage Period.
(d) In the event of (i) a total or partial liquidation or a dissolution of
the Company, (ii) reorganization, bankruptcy, insolvency, receivership of or
similar proceeding relating to the Company or its property or (iii) an
assignment for the benefit of creditors or marshaling of the Company's assets
and liabilities, then the holders of Senior Indebtedness will be entitled to
receive payment in full in cash or Cash Equivalents in respect of Senior
Indebtedness (including interest accruing after, or which would accrue but for,
the commencement of any proceeding at the rate specified in the applicable
Senior Indebtedness, whether or not a claim for such interest would be allowed)
before the Holders will be entitled to receive any payment or distribution
<PAGE>
88
(except that Holders may receive (i) securities of the Company or any other
company provided for by a plan of reorganization or readjustment that are
subordinated at least to the same extent as the Notes are subordinated to Senior
Indebtedness and (ii) payments made from any defeasance trust created pursuant
to Section 8.1 hereof provided that the applicable deposit does not violate
Article VIII or this Article XI), in the event of any payment or distribution of
the assets or securities of the Company. In addition, until the Senior
Indebtedness is paid in full in cash or Cash Equivalents, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness as their interests may appear. In the event of any proceeding
described in the first sentence of this Section 11.1(d), after payment in full
of all sums owing with respect to Senior Indebtedness, the Holders of the Notes,
together with the holders of any obligations of the Company ranking pari passu
with the Notes, shall be entitled to be paid from the remaining assets of the
Company the amounts at the time due and owing on account of unpaid Accreted
Value, principal of, interest, if any, Additional Amounts, if any, and
Liquidated Damages, if any, on the Notes and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any Capital Stock or any obligations of the Company ranking
junior to the Notes and such other obligations.
(e) If, notwithstanding the foregoing, any payment or distribution of any
character, whether in cash, Notes or other property (other than securities of
the Company or any other company provided for by a plan of reorganization or
readjustment that are subordinated at least to the same extent as the Notes are
subordinated to Senior Indebtedness), shall be received by the Trustee or any
Holder in contravention of any of the terms hereof, such payment or distribution
of Notes shall be received in trust for the benefit of and shall be paid over or
delivered and transferred to the holders of the Senior Indebtedness then
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all such Senior Indebtedness in full. In the event
of the failure of the Trustee or any Holder to endorse or assign any such
payment, distribution or security, each holder of Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the same. Under the circumstances
described in this Section 11.1, the Company or any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making any
payment or distribution of cash or other property or securities is authorized or
instructed to make any payment or distribution to which the Holders would
otherwise be entitled (other than securities that are subordinated at least to
the same extent as the Notes are subordinated to Senior Indebtedness and
payments made from any defeasance trust created pursuant to Section 8.1 hereof
provided that the applicable deposit does not violate Article VIII or this
Article XI) directly to the holders of the Senior Indebtedness of the Company
(pro rata to such holders on the basis of the respective amounts of Senior
Indebtedness of the Company held by such holders), or their representatives, or
to any trustee or trustees under any other indenture pursuant to which any such
Senior Indebtedness may have been issued, as their respective interests appear,
to the extent necessary to pay all such Senior Indebtedness in full, in cash or
Cash Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Indebtedness.
(f) To the extent that any payment of Senior Indebtedness (whether on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared
<PAGE>
89
to be fraudulent or preferential, set aside or required to be paid to any
receiver, trustee in bankruptcy, liquidating trustee, agent or similar Person
under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar
law, then if such payment is recovered by, or paid over to, such receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person, the
Senior Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not occurred. To
the extent the obligation to repay such Senior Indebtedness is declared to be
fraudulent, invalid or otherwise set aside under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then the obligation so
declared fraudulent, invalid or otherwise set aside (and all other amounts that
would come due with respect thereto had such obligation not become so affected)
shall be deemed to be reinstated and outstanding as Senior Indebtedness for all
purposes of the Indenture as if such declaration, invalidity or setting aside
had not occurred.
(g) No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the Indebtedness evidenced
by the Notes by any act or failure to act on the part of the Company or any
Holder of Notes. Nothing contained herein shall impair, as between the Company
and the Holders of Notes, the obligation of the Company to pay to such Holders
the Accreted Value, principal of, interest, premium, if any, Additional Amounts,
if any, and Liquidated Damages, if any, on such Notes or prevent the Trustee or
the Holder from exercising all rights, powers and remedies otherwise permitted
by applicable law or hereunder upon a Default or Event of Default hereunder, all
subject to the rights of the holders of the Senior Indebtedness to receive cash,
Notes or other property otherwise payable or deliverable to the Holders.
(h) Upon the payment in full of all Senior Indebtedness, the Holders
(together with holders of any Indebtedness that is pari passu with the Notes and
having an equivalent right of subrogation) shall be subrogated to all rights of
any holders of Senior Indebtedness to receive any further payment or
distributions applicable to the Senior Indebtedness until the Indebtedness
evidenced by the Notes shall have been paid in full and such payments or
distributions received by such Holders, by reason of such subrogation, of cash,
Notes or other property which otherwise would be paid or distributed to the
holders of Senior Indebtedness, shall, as between the Company and its creditors
other than the holders of Senior Indebtedness, on the one hand, and such
Holders, on the other hand, be deemed to be a payment by the Company on account
of Senior Indebtedness, and not on account of the Notes.
(i) The provisions of this Section 11.1 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Company in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
(j) The securing of any obligations of the Company, otherwise ranking pari
passu with the Notes or ranking junior to the Notes, shall not be deemed to
prevent such obligations from constituting, respectively, obligations ranking
pari passu with the Notes or ranking junior to the Notes.
SECTION 11.2 Reliance on Certificate of Liquidating Agent; Further
-----------------------------------------------------
Evidence as to Ownership of Senior Indebtedness. Upon any payment or
- -----------------------------------------------
distribution of assets of the Company,
<PAGE>
90
the Trustee and the Holders shall be entitled to rely upon an order or decree
issued by any court of competent jurisdiction in which such dissolution or
winding up or liquidation or reorganization or arrangement proceedings are
pending or upon a certificate of the bankruptcy trustee, receiver, assignee for
the benefit of creditors or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XI. In the absence of any such
bankruptcy trustee, receiver, assignee or other Person, the Trustee shall be
entitled to rely upon written notice by a Person representing himself to be a
holder of Senior Indebtedness (or a trustee or representative on behalf of such
holder) as evidence that such Person is a holder of Senior Indebtedness (or is
such a trustee or representative). If the Trustee determines, in good faith,
that further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distributions
pursuant to this Article XI, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, as to the extent to which such Person
is entitled to participate in such payment or distribution, and to other facts
pertinent to the rights of such Person under this Article XI, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 11.3 Payment Permitted If No Default. Nothing contained in this
-------------------------------
Article XI or elsewhere in this Indenture, or in any of the Notes, shall prevent
(a) the Company at any time, except during the pendency of any default with
respect to Senior Indebtedness described in Section 11.1(b) or Section 11.1(c)
or of any of the events described in Section 11.1(d), from making payments of
the Accreted Value, principal of, interest, premium, if any, Additional Amounts,
if any, or Liquidated Damages, if any, on the Notes, or (b) the application by
the Trustee or any Paying Agent of any moneys deposited with it hereunder to
make payments of the Accreted Value, principal of, interest, premium, if any,
Additional Amounts, if any, or Liquidated Damages, if any, on the Notes, if, at
the time of such deposit, the Trustee or such Paying Agent, as the case may be,
did not have the written notice provided for in Section 11.4 of any event
prohibiting the making of such deposit, or if, at the time of such deposit
(whether or not in trust) by the Company with the Trustee or Paying Agent (other
than the Company) such payment would not have been prohibited by the provisions
of this Article XI, and the Trustee or any paying agent shall not be affected by
any notice to the contrary received by it on or after such date.
SECTION 11.4 Disputes with Holders of Certain Senior Indebtedness. Any
----------------------------------------------------
failure by the Company to make any payment on or under any Senior Indebtedness,
other than any Senior Indebtedness as to which the provisions of this Section
11.4 shall have been waived by the Company in the instrument or instruments by
which the Company Incurred such Senior Indebtedness, shall not be deemed a
default under Section 11.1 hereof if (i) the Company shall be disputing its
obligation to make such payment or perform such obligation and (ii) either (A)
no final judgment relating to such dispute shall have been issued against the
Company which is in full force and effect and is not subject to further review,
including a judgment that has become final by reason of the expiration of the
time within which a party may seek further appeal or
<PAGE>
91
review, or (B) if a judgment that is subject to further review or appeal has
been issued, the Company shall in good faith be prosecuting an appeal or other
proceeding for review, and a stay of execution shall have been obtained pending
such appeal or review.
SECTION 11.5 Trustee Not Charged with Knowledge of Prohibition. Anything
-------------------------------------------------
in this Article XI or elsewhere in this Indenture contained to the contrary
notwithstanding, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
moneys to or by the Trustee and shall be entitled to assume conclusively that no
such facts exist and that no event specified in clauses (b) and (c) of Section
11.1 has happened unless and until the Trustee shall have received an Officers'
Certificate to that effect or notice in writing to that effect signed by or on
behalf of the holder or holders of Senior Indebtedness or any trustee or
representative therefor who shall have been certified by the Company or
otherwise established to the reasonable satisfaction of the Trustee to be such
holder or holders or trustee or representative; provided, however, that, if the
Trustee shall not have received the Officers' Certificate or notice provided for
in this Section 11.5 at least three Business Days preceding the date upon which
by the terms hereof any moneys become payable for any purpose, then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such moneys and apply the same to the purpose for
which they were received and shall not be affected by any notice to the contrary
that may be received by it within three Business Days preceding such date. The
Company shall give prompt written notice to the Trustee and to each paying agent
of any facts that would prohibit any payment of moneys to or by the Trustee or
any paying agent, and the Trustee shall not be charged with knowledge of the
curing of any default or the elimination of any other fact or condition
preventing such payment or distribution unless and until the Trustee shall have
received an Officers' Certificate to such effect.
SECTION 11.6 Trustee to Effectuate Subordination. Each Holder of Notes by
-----------------------------------
his acceptance thereof authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
as between such Holder and holders of Senior Indebtedness as provided in this
Article XI and appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 11.7 Rights of Trustee as Holder of Senior Indebtedness. The
--------------------------------------------------
Trustee shall be entitled to all the rights set forth in this Article XI with
respect to any Senior Indebtedness which may at the time be held by it, to the
same extent as any other holder of Senior Indebtedness and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
Nothing in this Article XI shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 7.7.
SECTION 11.8 Article Applicable to Paying Agents. In case at any time any
-----------------------------------
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article XI shall in
such case (unless the context shall otherwise require) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if the Paying Agent were named in this Article XI
<PAGE>
92
in addition to or in place of the Trustee; provided, however, that Sections 11.5
and 11.7 shall not apply to the Company if it acts as Paying Agent.
SECTION 11.9 Subordination Rights Not Impaired by Acts or Omissions of the
-------------------------------------------------------------
Company or Holders of Senior Indebtedness. No right of any present or future
- -----------------------------------------
holders of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with. The holders of
Senior Indebtedness may, at any time or from time to time and in their absolute
direction, change the manner, place or terms of payment, change or extend the
time of payment of, or renew or alter, any such Senior Indebtedness, or amend or
supplement any instrument pursuant to which any such Senior Indebtedness is
issued or by which it may be secured, or release any security therefor, or
exercise or refrain from exercising any other of their rights under such Senior
Indebtedness, including, without limitation, the waiver of default thereunder,
all without notice to or assent from the Holders of the Notes or the Trustee and
without affecting the obligations of the Company, the Trustee or the Holders of
Notes under this Article XI.
SECTION 11.10 Trustee Not Fiduciary for Holders of Senior Indebtedness.
--------------------------------------------------------
The Trustee shall not be deemed to owe any fiduciary duty to the holders of the
Senior Indebtedness, and shall not be liable to any such holders if it shall
mistakenly pay over or distribute money or assets to securityholders or the
Company. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article XI and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
SECTION 11.11 Notice of Acceleration. If payment of the Notes is
----------------------
accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness or the trustee
or representative of such holders of the acceleration. The Company may not make
any payment on the Notes that would be prohibited by paragraph (b) of Section
11.1 until five Business Days after such holders, trustee or representative of
the Designated Senior Indebtedness receives notice of such acceleration and,
thereafter, may make such payment on the Notes only if the subordination
provisions hereof otherwise permit payment at such time.
SECTION 11.12 Relative Rights. This Article XI defines the relative rights
---------------
of Holders of Notes and holders of Senior Indebtedness. Nothing in this
Indenture shall (i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay Accreted
Value, principal of and interest on the Notes in accordance with their terms,
(ii) affect the relative rights of Holders of Notes and creditors of the Company
other than their rights in relation to holders of Senior Indebtedness or (iii)
prevent the Trustee or any Holder from exercising its available remedies upon a
Default or Event of Default, subject to the rights of holders and owners of
Senior Indebtedness to receive distributions and payments otherwise payable to
Holders of Notes. If the Company fails because of this Article XI to pay
Accreted Value, principal of, interest, premium, if any, Additional Amounts, if
any, or
<PAGE>
Liquidated Damages, if any, on a Note on the due date, the failure is still a
Default or Event of Default.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1 TIA Controls. If any provision of this Indenture limits,
------------
qualifies, or conflicts with the duties imposed by operation of Section 3.18(c)
of the TIA, the imposed duties shall control.
SECTION 12.2 Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or first-class mail, postage prepaid, addressed
as follows:
if to the Company:
Cybernet Internet Services International, Inc.
Stefan-George-Ring 19-23
D-81929 Munchen
Facsimile No: +49-89-993-15199
Attention: Robert Eckert
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Facsimile No: +202-624-7222
Attention: Joseph M. Berl, Esq.
if to the Trustee:
The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Each of the Company and the Trustee by written notice to each other such
Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company and the Trustee, must be in
writing and shall be deemed to have been given or made as of the date so
delivered if personally delivered; when receipt is acknowledged, if telecopied;
and upon actual receipt if sent by first class mail, postage prepaid
<PAGE>
94
(except that a notice of change of address and a Notice to the Trustee shall not
be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Person by first-class mail or other equivalent means at such Person's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
Notices regarding the Notes in global form will be published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Frankfurt (which is expected to be the Frankfurter
Allgemeine Zeitung) (and, if and so long as the Notes are listed, admitted or
eligible for trading on a stock exchange or trading market and the rules of such
stock exchange or trading market shall so require, a newspaper having a general
circulation in the locations which the stock exchange or trading market
requires). Notices regarding the Definitive Notes will be mailed to Holders by
first-class mail at their respective addresses as they appear on the
registration books of the Registrar and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, such notices
will be published in a newspaper having a general circulation in the locations
which such stock exchange or trading market requires. Notices given by
publication will be deemed given on the first date on which publication is made
and notices given by first-class mail, postage prepaid, will be deemed given
five calendar days after mailing.
SECTION 12.3 Communications by Holders with Other Holders. Holders may
--------------------------------------------
communicate pursuant to Section 312(b) of the TIA with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other person shall have the protection of Section
312(c) of the TIA.
SECTION 12.4 Certificate and Opinion as to Conditions Precedent. Upon any
--------------------------------------------------
request or application by the Company to the Trustee or an Agent to take any
action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5), stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied or complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee or such Agent (which shall include the
statements set forth in Section 12.5) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been satisfied or
complied with.
<PAGE>
95
SECTION 12.5 Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, such Person has
made such examination or investigation as is necessary to enable such
Person to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of 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 12.6 Rules by Trustee, Paying Agent, Registrar. The Trustee,
-----------------------------------------
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.7 Legal Holidays. If a payment date is not a Business Day,
--------------
payment may be made on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
SECTION 12.8 Governing Law. This Indenture and the Notes shall be
-------------
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
SECTION 12.9 Submission to Jurisdiction; Appointment of Agent for Service;
-------------------------------------------------------------
Waiver. To the fullest extent permitted by applicable law, the Company
- ------
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in The City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Indenture and the Notes, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints Corporation Services Company (the "Authorized Agent"), for a period of
----------------
ten years from the date hereof or until such time as no Notes are outstanding,
as its authorized agent upon whom process may be served in any such suit or
proceeding. The Company represents that it has notified the Authorized Agent of
such designation and appointment and that the Authorized Agent has accepted the
same in writing. The Company hereby irrevocably authorizes and directs its
Authorized Agent to accept such service. The Company further agrees that
service of process upon its Authorized Agent and written notice of said service
to the
<PAGE>
96
Company mailed by first class mail or delivered to its Authorized Agent shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. Nothing herein shall affect the right of any person to
serve process in any other manner permitted by law. The Company agrees that a
final action in any such suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other lawful
manner. Notwithstanding the foregoing, any action against the Company arising
out of or based on this Indenture, the Notes or the transactions contemplated
hereby may also be instituted in any competent court in Germany, and the Company
expressly accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by law, any
immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Indenture, the Notes or the transactions
contemplated hereby.
To the extent permitted by applicable law, the Company and the Trustee each
waive any right to have a jury participate in resolving any dispute, whether
sounding in contract, tort, or otherwise arising out of, connected with, related
to or incidental to the relationship established between them in connection with
this agreement. Instead, any disputes resolved in court will be resolved in a
bench trial without a jury.
The provisions of this Section 12.9 are intended to be effective upon the
execution of this Indenture and the Notes without any further action by the
Company or the Trustee and the introduction of a true copy of this Indenture
into evidence shall be conclusive and final evidence as to such matters.
SECTION 12.10 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of any of the Company or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.11 No Personal Liability of Directors, Officers, Employees,
--------------------------------------------------------
Stockholders or Incorporators. No director, officer, employee, incorporator or
- -----------------------------
stockholder of the Company shall have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder of the Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 12.12 Currency Indemnity. U.S. dollars are the sole currency of
------------------
account and payment for all sums payable by the Company under or in connection
with the Notes, including damages. Any amount received or recovered in a
currency other than U.S. dollars (whether as a result of, or the enforcement of,
a judgment or order of a court of any jurisdiction, in the winding-up or
dissolution of the Company or otherwise) by any Holder of a Note, the Trustee or
the Agents in respect of any sum expressed to be due to it from the Company
shall only constitute a discharge to the Company to the extent of the U.S.
dollar amount which the recipient
<PAGE>
97
is able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on that date, on the first date on which it is practicable
to do so). If that U.S. dollar amount is less than the U.S. dollar amount
expressed to be due to the recipient, the Company shall indemnify it against any
loss sustained by it as a result. If the dollar amount is greater than the
dollar amount expressed to be due to the recipient under this Agreement, the
Company shall be entitled to the amount of such excess. In any event, the
Company shall indemnify the recipient against the cost of making any such
purchase. For the purposes of this subsection, it will be sufficient for the
Trustee or any Holder of a Note to certify in a satisfactory manner (indicating
the sources of information used) that it would have suffered a loss had an
actual purchase of U.S. dollars been made with the amount so received in that
other currency on the date of receipt or recovery (or, if a purchase of dollars
on such date had not been practicable, on the first date on which it would have
been practicable, it being required that the need for a change of date be
certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from the Company's other obligations, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Trustee or any Holder of a Note
and shall continue in full force and effect despite any other judgment, order,
claim or proof for a liquidated amount in respect of any sum due under any Note.
SECTION 12.13 Successors. All agreements of the Company in this Indenture
----------
and the Notes shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 12.14 Counterparty Originals All parties hereto may sign any
------------------------------------------------------
number of copies of this Indenture. Each signed copy or counterpart shall be an
- ----------------------------------
original, but all of them together shall represent one and the same agreement.
SECTION 12.15 Severability. In case any one or more of the provisions in
------------
this Indenture or in the Notes shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 12.16 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 of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, as of the date first written above.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
THE BANK OF NEW YORK, as Trustee,
Registrar and Paying Agent
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO THE INDENTURE
[FORM OF FACE OF GLOBAL NOTE]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE ISSUER AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF ANY
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
A-1
<PAGE>
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
---
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.6 OF THE INDENTURE DATED AUGUST 26, 1999 PURSUANT TO WHICH THEY WERE
ISSUED.
A-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Discount Note due 2009
CUSIP No.:
No. $
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay Cede & Co. or registered assigns upon surrender hereof the
principal sum indicated on Schedule A hereof, on August 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2005
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:_____________________________
Name:
Title:
Dated: August 26, 1999
A-4
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Discount Note due 2009
1. Interest; Accreted Value. CYBERNET INTERNET SERVICES INTERNATIONAL,
------------------------
INC., a Delaware corporation (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below. The
Notes will accrete at a rate per annum of 13.0% on the principal amount then
outstanding, semi-annually on each February 15 and August 15, until August 15,
2004. There will be no accrual of cash interest on the Notes until August 15,
2004 and no payment of cash interest until February 15, 2005. From and after
August 15, 2004, interest on the Notes will accrue at 13.0% per annum on the
principal amount then outstanding, and be payable to the Holder hereof semi-
annually in arrears on each February 15 and August 15, or if any such day is not
a Business Day on the next succeeding Business Day. Notwithstanding any exchange
of this Note for a Definitive Note during the period starting on a Record Date
relating to such Definitive Note and ending on the immediately succeeding
Interest Payment Date, the interest due on such Interest Payment Date shall be
payable to the Person in whose name this Global Note is registered at the close
of business on the Record Date for such interest. From and after August 15,
2004, 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 August 15, 2004.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein.
2. Liquidated Damages; Adjustment of Conversion Ratio. Pursuant to the
--------------------------------------------------
Registration Rights Agreement, the Company has agreed to file a shelf
registration statement (the "Resale Shelf Registration Statement") with the
Commission with respect to resales of the Notes (which Resale Shelf Registration
Statement shall also register the sale of the underlying Common Stock issuable
upon conversion thereof) and use its best efforts to (i) cause such Resale Shelf
Registration Statement to be declared effective by the Commission and (ii) keep
such Resale Shelf Registration Statement continuously effective, supplemented
and amended to ensure that it is available for resales of Notes by holders
entitled to this benefit and to ensure that such Resale Shelf Registration
Statement conforms and continues to conform with the requirements of the
Registration Rights Agreement, the Securities Act and the policies, rules and
regulations of the Commission, as announced from time to time, until, subject to
certain exceptions specified in the Registration Rights Agreement, such time as
no Notes remain as Transfer Restricted Securities (as defined below). The
Holders shall be entitled to receive payment of additional interest in the form
of Liquidated Damages in the event such Resale Shelf Registration Statement is
not declared effective and in certain other events, subject, in each case, to
certain conditions, all
A-5
<PAGE>
pursuant to and in accordance with the terms of the Registration Rights
Agreement. Liquidated Damages which may be payable pursuant to the Registration
Rights Agreement shall be payable in the same manner as set forth herein with
respect to the stated interest. The provisions of the Registration Rights
Agreement relating to such Liquidated Damages are incorporated herein by
reference and made a part hereof as if set forth herein in full. The Company
shall provide written notice to the Trustee of the accrual and amount of
Liquidated Damages, if any, not less than ten (10) Business Days prior to each
Interest Payment Date. Absent such notice, the Trustee shall be conclusively
entitled to presume that no Liquidated Damages have accrued and are owing. For
purposes of the foregoing "Transfer Restricted Securities" means each Note and
the Common Stock issuable upon conversion thereof until (i) the date on which
such Note (and the Common Stock issuable upon conversion thereof) has been
effectively registered under the Securities Act and disposed of in accordance
with the Resale Shelf Registration Statement, (ii) the date on which such Note
(and the Common Stock issuable upon conversion thereof) is distributed to the
public pursuant to Rule 144 under the Securities Act (or any similar provision
then in effect) or is saleable pursuant to Rule 144(k) under the Act (or any
similar provision then in effect) or (iii) the date on which such Note (and the
Common Stock issuable upon the conversion thereof) ceases to be outstanding.
The Company has also agreed with the Initial Purchaser, for the benefit of
the Holders of the Notes, that it will use its best efforts to cause to become
effective no later than one year after the Closing Date, a shelf registration
statement with respect to the issuance of the Conversion Shares upon conversion
of the Notes, or if the Company determines that, notwithstanding its best
efforts, the Commission will not declare such registration statement effective,
a shelf registration statement with respect to the resale of the Conversion
Shares (either of such shelf registration statements, a "Conversion Shelf
Registration Statement"). The Company is required to use its best efforts, at
its cost, to maintain the effectiveness of the Conversion Shelf Registration
Statement until the earlier of (i) such time as all Notes have been converted or
redeemed and (ii) August 15, 2009, or in the case of a Conversion Shelf
Registration Statement with respect to the resale of Conversion Shares, until
the earlier of (i) the date on which all Notes can be resold by holders thereof
without restriction and without registration under the Securities Act and (ii)
such time as all the Conversion Shares covered by such registration statement
have been resold pursuant to such registration statement. Holders of Notes will
not be named as selling security holders in a Conversion Shelf Registration
Statement covering the issuance of the Conversion Shares, but would be named in
a Conversion Shelf Registration Statement covering resale of the Conversion
Shares, if applicable. If such a Conversion Shelf Registration Statement is not
declared effective on or prior to the date that is one year after the Closing
Date, the denominator of the Conversion Ratio will be decreased by 2.04%.
Holders of Notes will be able to convert their Notes only if a registration
statement relating to the Conversion Shares underlying the Notes is then
effective and available, or the conversion of the Notes is exempt from the
registration requirements of the Securities Act, and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states or other jurisdictions in which the various holders of the
Notes reside. The provisions of the Registration Rights Agreement relating to
the Conversion Shelf Registration Statement and the decrease of the Conversion
Ratio are incorporated herein by reference and made a part hereof as if set
forth herein in full.
A-6
<PAGE>
3. Additional Amounts. All payments made by the Company on the Notes will
------------------
be made without withholding or deduction for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of Germany or any
jurisdiction in which the Company or any Successor Company is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of Accreted Value, principal,
redemption price, interest or premium, the Company will pay such additional
amounts (the "Additional Amounts") as may be necessary in order that the net
amounts received in respect of such payments by the Holders of the Notes or the
Trustee, as the case may be, after such withholding or deduction, equal the
respective amounts which would have been received in respect of such payments in
the absence of such withholding or deduction; except that no such Additional
Amounts will be payable with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change
in law after the Issue Date where such withholding or imposition is by
reason of the failure of the Holder or beneficial owner of the Note to
comply with any request by the Company to provide information concerning
the nationality, residence or identity of such Holder or beneficial owner
or to make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (a) to (d) inclusive
above.
A-7
<PAGE>
4. Method of Payment. The Company shall pay interest on the Notes
-----------------
(except defaulted interest) to the Person in whose name this Note is registered
at the close of business on the Record Date for such interest. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in dollars or in such other coin or currency of
the United States of America that at the time of payment which is legal tender
for payment of public and private debts. Immediately available funds for the
payment of Accreted Value, the principal of (and premium, if any), interest,
Additional Amounts, if any, and Liquidated Damages, if any, on this Note due on
any Interest Payment Date, Maturity Date, Redemption Date or other repurchase
date will be made available to the Paying Agent to permit the Paying Agent to
pay such funds to the Holders on such respective dates.
5. Paying Agent and Registrar. Initially, The Bank of New York will act
--------------------------
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of August 26, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] Notes (as defined in the Indenture) of the Company designated as
its 13.0% Convertible Senior Subordinated Discount Notes due 2009 (together with
the [Original] [Additional] Notes, the "Notes"). 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 of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of the Company. The Notes are limited in
aggregate principal amount to $100,000,000 subject to the terms of the
Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
7. Ranking and Subordination. The Notes will be general unsecured
-------------------------
obligations of the Company and will rank in all respects pari passu with all
----------
other senior subordinated Indebtedness of the Company. The Notes will rank
senior to all existing and future Indebtedness of the Company that is neither
Senior Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness
of the Company that is Senior Indebtedness shall rank senior to the Notes in
accordance with the Indenture. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Notes may be paid by the
Company. The Company agrees, and each Holder by accepting a Note agrees, to the
subordination provisions contained in the Indenture and authorizes the Trustee
to give effect to such provisions, and each Holder appoints the Trustee his
attorney-in-fact for any and all such purposes.
A-8
<PAGE>
8. Optional Redemption. The Notes will be redeemable, at the Company's
-------------------
option, in whole or in part, on and after August 15, 2004 upon not less than 30
nor more than 60 days' prior notice published in a leading newspaper having a
general circulation in New York (which is expected to be The Wall Street
Journal) and in Frankfurt (which is expected to be the Frankfurter Allgemeine
Zeitung) (and if, and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules of such stock
exchange or trading market shall so require, in a newspaper having a general
circulation in the locations which the stock exchange or trading market shall
require) at the redemption prices (expressed as a percentage of principal
amount) set forth below (each, a "Redemption Price"), plus accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on August 15 of each of the years indicated below:
Redemption
Year Price
---- ----------
2004.............................................. 106.500%
2005.............................................. 104.333%
2006.............................................. 102.167%
2007 and thereafter............................... 100.000%
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of $1,000 in
original principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued and
delivered to DTC upon cancellation of the original Note. On and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
9. Special Tax Redemption. The Notes may be redeemed, at the option of
----------------------
the Company in whole but not in part, at any time upon giving not less than 30
nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price (each, a "Redemption Price") equal to the
principal amount thereof, together with accrued and unpaid interest and
Liquidated Damages, if any, to the date fixed by the Company for redemption (a
"Tax Redemption Date"), and, all Additional Amounts, if any, and Liquidated
Damages, if any, then due and which will become due on the Tax Redemption Date
as a result of the redemption or otherwise, if the Company determines that, as a
result of (i) any change in, or amendment to, the laws or treaties (or any
regulations or rulings promulgated thereunder) of The Federal Republic of
Germany (or any political subdivision or taxing authority thereof) affecting
taxation which becomes effective on or after the Issue Date, or (ii) any change
in or new or different position regarding the application, administration or
interpretation of such laws, treaties, regulations or
A-9
<PAGE>
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized international standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at least 30
--------------------
days but not more than 60 days before the redemption date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, a newspaper
having a general circulation in the location which such stock exchange or
trading market shall require). Notes in denominations of $1,000 principal
amount at maturity may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 or any integral multiple thereof) of the
principal amount at maturity of Notes that have denominations larger than
$1,000.
Except as set forth in the Indenture, from and after any redemption date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest (or increase in Accreted
Value, as the case may be), Additional Amounts, if any, or Liquidated Damages,
if any, and the only right of the Holders of such Notes will be to receive
payment of the Redemption Price.
11. Conversion. Subject to the provisions of the Indenture, unless
----------
previously redeemed, the Notes are convertible (in denominations of $1,000
principal amount at maturity or integral multiples thereof), at the option of
the holder thereof, into Capital Stock of the Company at any time after 365 days
following the Issue Date and prior to the maturity date. The number of shares
of Capital Stock of the Company ("Conversion Shares") issuable upon conversion
of the Notes is equal to the Accreted Value of the Notes being converted (on the
date of conversion) divided by $25.00, subject to adjustment as provided in the
Indenture (the "Conversion Ratio"). Except as described below, no adjustment
will be made on conversion of any Notes for interest accrued thereon or for
dividends paid on outstanding Capital Stock of the Company. If Notes not called
for redemption are converted (including pursuant to the mandatory conversion
feature described below) after a record date for the payment of interest and
prior to the next succeeding interest payment date, such Notes must be
accompanied by funds equal to the interest payable on such
A-10
<PAGE>
succeeding interest payment date on the principal amount so converted. The
Company is not required to issue fractional shares upon conversion of Notes
(including pursuant to the mandatory conversion feature described below) and, in
lieu thereof, will pay a cash adjustment based upon the Closing Price on the
Neuer Markt of the Common Stock on the last Trading Day prior to the day of
conversion. In the case of Notes called for redemption, conversion rights will
expire at the close of business on the Trading Day next preceding the date fixed
for redemption, unless the Company defaults in payment of the redemption price.
In addition, if the closing price on the Neuer Markt of the Common Stock
during any period described below has exceeded the price for such period
referred to below for at least 30 consecutive Trading Days ("Market Criteria,"
with the 30-day period being referred to as the "Market Criteria Period"), and
the Conversion Shelf Registration Statement described in paragraph 2 hereof is
effective and available, all of the Notes will be automatically converted into
that number of Conversion Shares derived by application of the Conversion Ratio;
provided, however, that if the Market Criteria is satisfied during the first
year after the Closing Date, the conversion will not occur until the one-year
anniversary of the Closing Date and will occur only if the closing price on the
Neuer Markt of the Common Stock is at least (Euro)32.00 on such date:
Closing
-------
12 Months Beginning Price
------------------- -----
August 15, 1999 (Euro)32.00
August 15, 2000 (Euro)38.46
August 15, 2001 (Euro)44.92
August 15, 2002 (Euro)51.37
August 15, 2003 (Euro)57.83
The denominator of the Conversion Ratio is subject to adjustment as provided in
Section 10.5 of the Indenture.
12. Change of Control Offer. Upon the occurrence of a Change of Control,
-----------------------
the Company will be required to make an offer to purchase all or any part (equal
to $1,000 in principal amount at maturity and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
(i) if such purchase is prior to August 15, 2004, 101% of the Accreted Value
thereof or (ii) if such purchase is on or after August 15, 2004, 101% of the
aggregate principal amount thereof, in either case, plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase. Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
13. Limitation on Disposition of Assets. When the aggregate amount of
-----------------------------------
Excess Proceeds from Asset Sales exceeds (Euro)5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to all Holders
and to the extent required by the terms thereof, to all
A-11
<PAGE>
holders of Pari Passu Notes to purchase on a pro rata basis the maximum
principal amount of Notes (or Accreted Value, as the case may be) and the
maximum principal amount (or accreted value, as the case may be) of any such
Pari Passu Notes to which the Asset Sale Offer applies, that is an integral
multiple of $1,000 (or (Euro)1,000, as the case may be) that may be purchased
out of the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the outstanding principal amount or accreted value or Accreted Value, as the
case may be, thereof, plus accrued and unpaid interest thereon plus Additional
Amounts and Liquidated Damages, if any, to the date fixed for the closing of
such offer. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, subject to applicable law, the
Trustee shall select the Notes to be redeemed in accordance with the Indenture;
provided, however, that no Notes of $1,000 or less shall be purchased in part.
Holders of Notes that are the subject of an offer to purchase will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holders to Elect Purchase" appearing below.
14. Denominations; Form. The Global Notes are in registered global form,
-------------------
without coupons, in denominations of $1,000 and integral multiples of $1,000.
15. Persons Deemed Owners. The registered Holder of this Note shall be
---------------------
treated as the owner of it for all purposes, subject to the terms of the
Indenture.
16. Unclaimed Funds. If funds for the payment of principal, interest,
---------------
Additional Amounts or Liquidated Damages remain unclaimed for two years, the
Trustee and the Paying Agents will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agents with
respect to such funds shall cease.
17. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from its
obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
18. Amendment; Supplement; Waiver. Subject to certain exceptions
-----------------------------
specified in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
19. Restrictive Covenants. The Indenture imposes certain covenants that,
---------------------
among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number
A-12
<PAGE>
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
20. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
21. Defaults and Remedies. If an Event of Default (other than an Event of
---------------------
Default specified in subsections 6.1(h) or (i) of the Indenture) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount at maturity of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of Accreted Value, principal, premium,
interest, Additional Amounts, if any, and Liquidated Damages, if any, including
an accelerated payment) if it determines that withholding notice is in their
interest.
22. Trustee Dealings with Company. The Trustee under the Indenture, in
-----------------------------
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
23. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
24. Authentication. This Note shall not be valid until the Trustee or
--------------
authenticating agent signs the certificate of authentication on this Note.
25. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Note 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). Unless otherwise defined herein, terms
defined in the Indenture are used herein as defined therein.
26. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a
A-13
<PAGE>
convenience to the Holders of the Notes. No representation is made as to the
accuracy of such numbers as printed on the Notes and reliance may be placed only
on the other identification numbers printed hereon.
27. Governing Law. The Indenture and the Notes shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
A-14
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be $ .
The following decreases/increases in the principal amount at maturity of this
Note have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
___________ ___________ ____________ ____________ ___________
</TABLE>
A-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$__________
Date:_____________
Your Signature:________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:_____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
A-16
<PAGE>
EXHIBIT B
TO THE INDENTURE
[FORM OF FACE OF DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144 (k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT THE PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHICH THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
THE
B-1
<PAGE>
ISSUER AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E), TO REQUIRE THE DELIVERY OF ANY
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
B-2
<PAGE>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Conversion Senior Subordinated Discount Note due 2009
CUSIP No.: __________
No.____ $_________
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay ______________________, or registered assigns, upon surrender
hereof the principal sum of U.S.$________, on August 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2005
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CYBERNET INTERNET SERVICES
INTERNATIONAL, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Certificate of Authentication:
This is one of the Notes referred to
in the within-mentioned Indenture:
THE BANK OF NEW YORK, as Trustee,
By:_____________________________
Name:
Title:
B-4
<PAGE>
[FORM OF REVERSE]
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
13.0% Convertible Senior Subordinated Discount Note due 2009
1. Interest. CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate and in the manner specified below. The Notes will accrete
at a rate per annum of 13.0% on the principal amount then outstanding, semi-
annually on each February 15 and August 15, until August 15, 2004. There will
be no accrual of cash interest on the Notes until August 15, 2004 and no payment
of cash interest until February 15, 2005. From and after August 15, 2004,
interest on the Notes will accrue at 13.0% per annum on the principal amount
then outstanding, and be payable to the Holder hereof semi-annually in arrears
on each February 15 and August 15, or if any such day is not a Business Day on
the next succeeding Business Day. From and after August 15, 2004, 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 August 15, 2004. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods), on
any Additional Amounts, and on any Liquidated Damages, from time to time on
demand at the rate borne by the Notes plus 1.5% per annum to the extent lawful.
Any interest paid on this Note shall be increased to the extent necessary to pay
Additional Amounts as set forth herein.
2. Liquidated Damages; Adjustment of Conversion Ratio. Pursuant to the
--------------------------------------------------
Registration Rights Agreement, the Company has agreed to file a shelf
registration statement (the "Resale Shelf Registration Statement") with the
Commission with respect to resales of the Notes (which Resale Shelf Registration
Statement shall also register the sale of the underlying Common Stock issuable
upon conversion thereof) and use its best efforts to (i) cause such Resale Shelf
Registration Statement to be declared effective by the Commission and (ii) keep
such Resale Shelf Registration Statement continuously effective, supplemented
and amended to ensure that it is available for resales of Notes by holders
entitled to this benefit and to ensure that such Resale Shelf Registration
Statement conforms and continues to conform with the requirements of the
Registration Rights Agreement, the Securities Act and the policies, rules and
regulations of the Commission, as announced from time to time, until, subject to
certain exceptions specified in the Registration Rights Agreement, such time as
no Notes remain as Transfer Restricted Securities (as defined below). The
Holders shall be entitled to receive payment of additional interest in the form
of Liquidated Damages in the event such Resale Shelf Registration Statement is
not declared effective and in certain other events, subject, in each case, to
certain conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. Liquidated Damages which may be payable pursuant
to the Registration Rights Agreement shall be payable in the same manner as set
forth herein with respect to the stated interest. The provisions of the
B-5
<PAGE>
Registration Rights Agreement relating to such Liquidated Damages are
incorporated herein by reference and made a part hereof as if set forth herein
in full. The Company shall provide written notice to the Trustee of the accrual
and amount of Liquidated Damages, if any, not less than ten (10) Business Days
prior to each Interest Payment Date. Absent such notice, the Trustee shall be
conclusively entitled to presume that no Liquidated Damages have accrued and are
owing. For purposes of the foregoing "Transfer Restricted Securities" means each
Note and the Common Stock issuable upon conversion thereof until (i) the date on
which such Note (and the Common Stock issuable upon conversion thereof) has been
effectively registered under the Securities Act and disposed of in accordance
with the Resale Shelf Registration Statement, (ii) the date on which such Note
(and the Common Stock issuable upon conversion thereof) is distributed to the
public pursuant to Rule 144 under the Securities Act (or any similar provision
then in effect) or is saleable pursuant to Rule 144(k) under the Act (or any
similar provision then in effect) or (iii) the date on which such Note (and the
Common Stock issuable upon the conversion thereof) ceases to be outstanding.
The Company has also agreed with the Initial Purchaser, for the benefit of
the Holders of the Notes, that it will use its best efforts to cause to become
effective no later than one year after the Closing Date, a shelf registration
statement with respect to the issuance of the Conversion Shares upon conversion
of the Notes, or if the Company determines that, notwithstanding its best
efforts, the Commission will not declare such registration statement effective,
a shelf registration statement with respect to the resale of the Conversion
Shares (either of such shelf registration statements, a "Conversion Shelf
Registration Statement"). The Company is required to use its best efforts, at
its cost, to maintain the effectiveness of the Conversion Shelf Registration
Statement until the earlier of (i) such time as all Notes have been converted or
redeemed and (ii) August 15, 2009, or in the case of a Conversion Shelf
Registration Statement with respect to the resale of Conversion Shares, until
the earlier of (i) the date on which all Notes can be resold by holders thereof
without restriction and without registration under the Securities Act and (ii)
such time as all the Conversion Shares covered by such registration statement
have been resold pursuant to such registration statement. Holders of Notes will
not be named as selling security holders in a Conversion Shelf Registration
Statement covering the issuance of the Conversion Shares, but would be named in
a Conversion Shelf Registration Statement covering resale of the Conversion
Shares, if applicable. If such a Conversion Shelf Registration Statement is not
declared effective on or prior to the date that is one year after the Closing
Date, the denominator of the Conversion Ratio will be decreased by 2.04%.
Holders of Notes will be able to convert their Notes only if a registration
statement relating to the Conversion Shares underlying the Notes is then
effective and available, or the conversion of the Notes is exempt from the
registration requirements of the Securities Act, and such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states or other jurisdictions in which the various holders of the
Notes reside. The provisions of the Registration Rights Agreement relating to
the Conversion Shelf Registration Statement and the decrease of the Conversion
Ratio are incorporated herein by reference and made a part hereof as if set
forth herein in full.
B-6
<PAGE>
3. Additional Amounts. All payments made by the Company on the Notes
------------------
(whether or not in the form of Definitive Notes) will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of Germany or any jurisdiction in
which the Company or any Successor Company is organized or is otherwise resident
for tax purposes or any political subdivision thereof or any authority having
power to tax therein or any jurisdiction from or through which payment is made
(each a "Relevant Taxing Jurisdiction"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any Relevant Taxing Jurisdiction, shall at any time be
required on any payments made by the Company with respect to the Notes,
including payments of Accreted Value, principal, redemption price, interest or
premium, the Company will pay such additional amounts (the "Additional Amounts")
as may be necessary in order that the net amounts received in respect of such
payments by the Holders of the Notes or the Trustee, as the case may be, after
such withholding or deduction, equal the respective amounts which would have
been received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such Note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
(b) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the Holder or beneficial owner of the Note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(c) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (a) to (d) inclusive
above.
B-7
<PAGE>
4. Method of Payment. The Company shall pay interest on the Notes (except
-----------------
defaulted interest) to the Person in whose name this Note is registered at the
close of business on the Record Date for such interest. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in dollars or in such other coin or currency of the
United States of America that at the time of payment which is legal tender for
payment of public and private debts. Immediately available funds for the
payment of Accreted Value, the principal of (and premium, if any), interest,
Additional Amounts, if any, and Liquidated Damages, if any, on this Note due on
any Interest Payment Date, Maturity Date, Redemption Date or other repurchase
date will be made available to the Paying Agent to permit the Paying Agent to
pay such funds to the Holders on such respective dates.
5. Paying Agent and Registrar. Initially, The Bank of New York will act
--------------------------
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of August 26, 1999 (the "Indenture"), between the Company and The Bank of New
York (the "Trustee"). This Note is one of a duly authorized issue of [Original]
[Additional] Notes (as defined in the Indenture) of the Company designated as
its 13.0% Convertible Senior Subordinated Discount Notes due 2009 (together with
the [Original] [Additional] Notes, the "Notes"). 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 of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in effect on the date on
which the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of the Company. The Notes are limited in
aggregate principal amount to $100,000,000 subject to the terms of the
Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from time to
time.
7. Ranking and Subordination. The Notes will be general unsecured
-------------------------
obligations of the Company and will rank in all respects pari passu with all
----------
other senior subordinated Indebtedness of the Company. The Notes will rank
senior to all existing and future Indebtedness of the Company that is neither
Senior Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness
of the Company that is Senior Indebtedness shall rank senior to the Notes in
accordance with the Indenture. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture). To the extent provided in the
Indenture, Senior Indebtedness must be paid before the Notes may be paid by the
Company. The Company agrees, and each Holder by accepting a Note agrees, to the
subordination provisions contained in the Indenture and authorizes the
B-8
<PAGE>
Trustee to give effect to such provisions, and each Holder appoints the Trustee
his attorney-in-fact for any and all such purposes.
8. Optional Redemption. The Notes will be redeemable, at the Company's
-------------------
option, in whole or in part, on and after August 15, 2004 upon not less than 30
nor more than 60 days' prior notice published in a leading newspaper having a
general circulation in New York (which is expected to be The Wall Street
Journal) and in Frankfurt (which is expected to be the Frankfurter Allgemeine
Zeitung) (and if, and so long as the Notes are listed, admitted or eligible for
trading on a stock exchange or trading market and the rules of such stock
exchange or trading market shall so require, published in a newspaper having a
general circulation in the locations which such stock exchange or trading market
shall require) and mailed by first-class mail to each Holder's registered
address, at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest, Additional Amounts,
if any, and Liquidated Damages, if any, to the applicable redemption date (and,
subject to the rights of Holders of record on the relevant record date to
receive interest and Additional Amounts, if any, and Liquidated Damages, if any,
due on the relevant interest payment date in respect thereof), if redeemed
during the twelve- month period beginning on August 15 of each of the years
indicated below:
Redemption
Year Price
---- -----
2004................................................... 106.500%
2005................................................... 104.333%
2006................................................... 102.167%
2007 and thereafter.................................... 100.000%
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of $1,000 in
original principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
9. Special Tax Redemption. The Notes may be redeemed, at the option of
----------------------
the Company in whole but not in part, at any time upon giving not less than 30
nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the principal amount thereof,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
B-9
<PAGE>
date fixed by the Company for redemption (a "Tax Redemption Date"), and, all
Additional Amounts, if any, and Liquidated Damages, if any, then due and which
will become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations or rulings promulgated
thereunder) of The Federal Republic of Germany (or any political subdivision or
taxing authority thereof) affecting taxation which becomes effective on or after
the Issue Date, or (ii) any change in or new or different position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Issue Date, the Company is, or on the next
Interest Payment Date would be, required to pay Additional Amounts, and the
Company determines that such payment obligation cannot be avoided by the Company
taking reasonable measures. Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Company would be obligated to make such payment or withholding if a
payment in respect of the Notes were then due. Prior to the publication or,
where relevant, mailing of any notice of redemption of the Notes pursuant to the
foregoing, the Company will deliver to the Trustee an opinion of an independent
tax counsel of recognized international standing to the effect that the
circumstances referred to above exist. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described
above, in which event it shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given at least 30
--------------------
days but not more than 60 days before the redemption date by publishing in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Frankfurt (which is expected to be the
Frankfurter Allgemeine Zeitung) (and, if and so long as the Notes are listed,
admitted or eligible for trading on a stock exchange or trading market and the
rules of such stock exchange or trading market shall so require, a newspaper
having a general circulation in the locations which such stock exchange or
trading market requires) and mailed to Holders by first-class mail at their
respective addresses as they appear on the registration books of the Registrar.
Notes in denominations of $1,000 principal amount at maturity may be redeemed
only in whole. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal amount at maturity of Notes
that have denominations larger than $1,000.
Except as set forth in the Indenture, from and after any redemption date,
if monies for the redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such redemption date, then,
unless the Company defaults in the payment of such Redemption Price, the Notes
called for redemption will cease to bear interest (or increase in Accreted
Value, as the case may be), Additional Amounts, if any, or Liquidated Damages,
if any, and the only right of the Holders of such Notes will be to receive
payment of the Redemption Price.
B-10
<PAGE>
11. Conversion. Subject to the provisions of the Indenture, unless
----------
previously redeemed, the Notes are convertible (in denominations of $1,000
principal amount at maturity or integral multiples thereof), at the option of
the holder thereof, into Capital Stock of the Company at any time after 365 days
following the Issue Date and prior to the maturity date. The number of shares
of Capital Stock of the Company ("Conversion Shares") issuable upon conversion
of the Notes is equal to the Accreted Value of the Notes being converted (on the
date of conversion) divided by $25.00, subject to adjustment as provided in the
Indenture (the "Conversion Ratio"). Except as described below, no adjustment
will be made on conversion of any Notes for interest accrued thereon or for
dividends paid on outstanding Capital Stock of the Company. If Notes not called
for redemption are converted (including pursuant to the mandatory conversion
feature described below) after a record date for the payment of interest and
prior to the next succeeding interest payment date, such Notes must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount so converted. The Company is not required
to issue fractional shares upon conversion of Notes (including pursuant to the
mandatory conversion feature described below) and, in lieu thereof, will pay a
cash adjustment based upon the Closing Price on the Neuer Markt of the Common
Stock on the last Trading Day prior to the day of conversion. In the case of
Notes called for redemption, conversion rights will expire at the close of
business on the Trading Day next preceding the date fixed for redemption, unless
the Company defaults in payment of the redemption price.
In addition, if the closing price on the Neuer Markt of the Common Stock
during any period described below has exceeded the price for such period
referred to below for at least 30 consecutive Trading Days ("Market Criteria,"
with the 30-day period being referred to as the "Market Criteria Period"), and
the Conversion Shelf Registration Statement described in paragraph 2 hereof is
effective and available, all of the Notes will be automatically converted into
that number of Conversion Shares derived by application of the Conversion Ratio;
provided, however, that if the Market Criteria is satisfied during the first
year after the Closing Date, the conversion will not occur until the one-year
anniversary of the Closing Date and will occur only if the closing price on the
Neuer Markt of the Common Stock is at least (Euro)32.00 on such date:
Closing
-------
12 Months Beginning Price
------------------- -----
August 15, 1999 (Euro)32.00
August 15, 2000 (Euro)38.46
August 15, 2001 (Euro)44.92
August 15, 2002 (Euro)51.37
August 15, 2003 (Euro)57.83
The denominator of the Conversion Ratio is subject to adjustment as
provided in Section 10.5 of the Indenture.
B-11
<PAGE>
12. Change of Control Offer. Upon the occurrence of a Change of Control,
-----------------------
the Company will be required to make an offer to purchase all or any part (equal
to $1,000 in principal amount at maturity and integral multiples thereof) of the
Notes on the Change of Control Payment Date at a purchase price in cash equal to
(i) if such purchase is prior to August 15, 2004, 101% of the Accreted Value
thereof or (ii) if such purchase is on or after August 15, 2004, 101% of the
aggregate principal amount thereof, in either case, plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase. Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
13. Limitation on Disposition of Assets. When the aggregate amount of
-----------------------------------
Excess Proceeds from Asset Sales exceeds (Euro)5.0 million, the Company will be
obligated, within 15 Business Days thereafter, to make an offer to all Holders
and to the extent required by the terms thereof, to all holders of Pari Passu
Notes to purchase on a pro rata basis the maximum principal amount of Notes (or
Accreted Value, as the case may be) and the maximum principal amount (or
accreted value, as the case may be) of any such Pari Passu Notes to which the
Asset Sale Offer applies, that is an integral multiple of $1,000
(or (Euro)1,000, as the case may be) that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the outstanding
principal amount or accreted value or Accreted Value, as the case may be,
thereof, plus accrued and unpaid interest thereon plus Additional Amounts and
Liquidated Damages, if any, to the date fixed for the closing of such offer. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, subject to applicable law, the Trustee shall
select the Notes to be redeemed in accordance with the Indenture; provided,
however, that no Notes of $1,000 or less shall be purchased in part. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holders to Elect
Purchase" appearing below.
14. Denominations; Form. The Definitive Notes are in bearer form, without
-------------------
coupons, in denominations of $1,000 and integral multiples of $1,000.
15. Persons Deemed Owners. The registered Holder of this Note shall be
---------------------
treated as the owner of it for all purposes, subject to the terms of the
Indenture.
16. Unclaimed Funds. If funds for the payment of principal, interest,
---------------
Additional Amounts or Liquidated Damages remain unclaimed for two years, the
Trustee and the Paying Agents will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agents with
respect to such funds shall cease.
17. Legal Defeasance and Covenant Defeasance. The Company may be
----------------------------------------
discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal
B-12
<PAGE>
Defeasance"), and may be discharged from its obligations to comply with certain
covenants contained in the Indenture ("Covenant Defeasance"), in each case upon
satisfaction of certain conditions specified in the Indenture.
18. Amendment; Supplement; Waiver. Subject to certain exceptions specified
-----------------------------
in the Indenture, the Indenture or the Notes may be amended or supplemented with
the written consent of the Holders of at least a majority in principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding.
19. Restrictive Covenants. The Indenture imposes certain covenants that,
---------------------
among other things, limit the ability of the Company and its Restricted
Subsidiaries to, incur additional Indebtedness, pay dividends or make other
distributions or investments, repurchase Equity Interests or make certain other
Restricted Payments, enter into certain consolidations or mergers or enter into
certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
20. Successors. When a successor assumes all the obligations of its
----------
predecessor under the Notes and the Indenture in accordance with the terms of
the Indenture, the predecessor will be released from those obligations.
21. Defaults and Remedies. If an Event of Default (other than an Event of
---------------------
Default specified in subsections 6.1(h) or (i) of the Indenture) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount at
maturity of the then outstanding Notes may declare all the Notes to be due and
payable immediately in the manner and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount at maturity of the Notes then outstanding to
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of Accreted Value, principal, premium,
interest, Additional Amounts, if any, and Liquidated Damages, if any, including
an accelerated payment) if it determines that withholding notice is in their
interest.
22. Trustee Dealings with Company. The Trustee under the Indenture, in its
-----------------------------
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
B-13
<PAGE>
23. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company 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 of the Notes 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.
24. Authentication. This Note shall not be valid until the Trustee or
--------------
authenticating agent signs the certificate of authentication on this Note.
25. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Note 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). Unless otherwise defined herein, terms
defined in the Indenture are used herein as defined therein.
26. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes immediately prior to the qualification
of the Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
27. Governing Law. The Indenture and the Notes shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
B-14
<PAGE>
___________________________________________________________
ASSIGNMENT FORM
To assign this Note fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
____________________________________________________________________
Date: _____________ Your Signature: ______________________
____________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
B-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount:
$_________________
Date:_____________
Your Signature:________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
B-16
<PAGE>
EXHIBIT C
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM
RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.7(b) of the Indenture)
Cybernet Internet Services International, Inc.
c/o The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
RE: 13.0% Convertible Senior Subordinated Discount Notes due 2009
(the "Notes") of Cybernet Internet Services International, Inc.
Reference is hereby made to the Indenture dated as of August 26, 1999 (the
"Indenture") between Cybernet Internet Services International, Inc. and The Bank
of New York, as Trustee, Registrar and Paying Agent. Capitalized terms used but
not defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$_________ (being any integral multiple of
U.S.$1,000) principal amount at maturity of Notes beneficially held through
interests in the Rule 144A Global Note (CUSIP No. _________) with DTC in the
name of ________(the "Transferor") account number ________. The Transferor
hereby requests that on [INSERT DATE] such beneficial interest in the Rule 144A
Global Note be transferred or exchanged for an interest in the Regulation S
Global Note (CUSIP (CINS) No. _________) in the same principal denomination and
transfer to (account no. ________). If this is a partial transfer, a minimum
amount of U.S.$1,000 and any integral multiple of U.S.$1,000 in excess thereof
of the Rule 144A Global Note will remain outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or 904 of Regulation S
under the Securities Act, and accordingly the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a person in the United
States;
C-1
<PAGE>
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
the Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States,
(3) no directed selling efforts have been made in contravention
of the requirements of Rule 903(b) or 904(b) of Regulation S, as
applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
OR
--
(B) such transfer is being made in accordance with Rule 144 under the
Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
Dated: _____________, ____
[Name of Transferor]
By:________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number) _________________
_________________
_________________
C-3
<PAGE>
EXHIBIT D
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM
REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE
(Transfers pursuant to Section 2.7(c) of the Indenture)
Cybernet Internet Services International, Inc.
c/o The Bank of New York, as Trustee, Registrar or Paying Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
RE: 13.0% Convertible Senior Subordinated Discount Notes due 2009
(the "Notes") of Cybernet Internet Services International, Inc.
Reference is hereby made to the Indenture dated as of August 26, 1999 (the
"Indenture") between Cybernet Internet Services International, Inc. and The Bank
of New York, as Trustee, Registrar and Paying Agent. Capitalized terms used but
not defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$__________ (being any integral multiple of
U.S.$1,000) principal amount at maturity of Notes beneficially held through
interests in the Regulation S Global Note (CUSIP (CINS) No. _________) with
[Euroclear] [Cedel] (Common Code No. _______) through DTC in the name of
_______________ (the "Transferor") [Euroclear] [Cedel] account number _________
. The Transferor hereby requests that on [INSERT DATE] such beneficial interest
in the Regulation S Global Note be transferred or exchanged for an interest in
the Rule 144A Global Note (CUSIP No. _________) in the same principal
denomination and transfer to ______________ (DTC account no. ________). If this
is a partial transfer, a minimum of U.S.$1,000 and any integral multiple of
U.S.$1,000 in excess thereof of the Regulation S Global Note will remain
outstanding.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act to a transferee that the
Transfer or reasonably believes is purchasing the Notes for its own account or
an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
D-1
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated:_______________, ____
[Name of Transferor]
By:___________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number) ______________
______________
______________
D-2
<PAGE>
EXHIBIT 21 SUBSIDIARIES
<TABLE>
<CAPTION>
Direct or Indirect Percentage Owned
- - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Cybernet Internet
Dienstleistungen AG
Germany Direct 100%
Vianet EDV Dienstleistungs
GmbH
Austria Direct 100%
Eclipse s.p.a.
Italy Indirect 66%
Cybernet Internet
Beteiligungs GmbH
Germany Indirect 100%
Open:Net Internet Solutions
GmbH
Germany Indirect 100%
Cybernet E-Commerce GmbH
& Co. KG Limited Partnership
Germany Indirect 100%
SunWeb Internet Services AG
Switzerland Direct 51%
Flashnet, S.p.A. Direct 100%
Italy
</TABLE>
<PAGE>
EXHIBIT 23.1
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 12, 1999 and November 10, 1998, in the
Registration Statement (Form S-4) and related prospectus of Cybernet Internet
Services International, Inc. for the registration of $150,000,000 of its 14.0%
Senior Notes due 2009.
/s/ Schitag Ernst & Young
Schitag Ernst & Young
Munich, Germany
September 7, 1999
<PAGE>
EXHIBIT 23.2
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 12, 1999, in the Registration Statement (Form
S-4) and related prospectus of Cybernet Internet Services International, Inc.
for the registration of $150,000,000 of its 14.0% Senior Notes due 2009.
Ernst & Young,
Wirtschaftsprufungs-Und,
Steuerberatungsellschaft MBH
/s/ Gerd Haberfehlner /s/ Edith Schmit
(Gerd Haberfehlner) (Edith Schmit)
Vienna, Austria
September 9, 1999
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF GRANT THORNTON SPA]
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated May 14, 1999, with respect to the financial statements
of Flashnet S.p.A. as of December 31, 1998 and for the year then ended, in the
Registration Statement (Form S-4) and related prospectus of Cybernet Internet
International, Inc. for the registration of $150,000,000 of its 14.0% Senior
Notes due 2009.
Grant Thornton SpA
Rome, Italy
September 9, 1999
<PAGE>
EXHIBIT 25.1
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 51-0384117
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Stefan-George-Ring 19-23
D-81929 Munich
Germany 20850
(Address of principal executive offices) (Zip code)
_____________
14.0% Senior Notes due 2009
(Title of the indenture securities)
========================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Name Address
- ----------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-
29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 8th day of September, 1999.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
-----------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
-3-
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
ASSETS Dollar Amounts
In Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and currency and
coin........................................... $ 5,597,807
Interest-bearing balances....................... 4,075,775
Securities:
Held-to-maturity securities..................... 785,167
Available-for-sale securities................... 4,159,891
Federal funds sold and Securities purchased
under agreements to resell...................... 2,476,963
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............38,028,772
LESS: Allowance for loan and
lease losses............568,617
LESS: Allocated transfer risk
reserve........................16,352
Loans and leases, net of unearned income,
allowance, and reserve......................... 37,443,803
Trading Assets................................... 1,563,671
Premises and fixed assets (including capitalized
leases)......................................... 683,587
Other real estate owned.......................... 10,995
Investments in unconsolidated subsidiaries and
associated companies............................ 184,661
Customers' liability to this bank on acceptances
outstanding..................................... 812,015
Intangible assets................................ 1,135,572
Other assets..................................... 5,607,019
------------
Total assets..................................... $64,536,926
============
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES
Deposits:
In domestic offices............................. $26,488,980
Noninterest-bearing.................. 10,626,811
Interest-bearing..................... 15,862,169
In foreign offices, Edge and Agreement
subsidiaries, and IBFs......................... 20,655,414
Noninterest-bearing..................... 156,471
Interest-bearing..................... 20,498,943
Federal funds purchased and Securities sold
under agreements to repurchase.................. 3,729,439
Demand notes issued to the U.S.Treasury.......... 257,860
Trading liabilities.............................. 1,987,450
Other borrowed money:
With remaining maturity of one year or less..... 496,235
With remaining maturity of more than one year
through three years............................ 465
With remaining maturity of more than three
years.......................................... 31,080
Bank's liability on acceptances executed and
outstanding..................................... 822,455
Subordinated notes and debentures................ 1,308,000
Other liabilities................................ 2,846,649
------------
Total liabilities................................ 58,624,027
============
EQUITY CAPITAL
Common stock..................................... 1,135,284
Surplus.......................................... 815,314
Undivided profits and capital reserves........... 4,001,767
Net unrealized holding gains (losses) on
available-for-sale securities................... ( 7,956)
Cumulative foreign currency translation
adjustments..................................... ( 31,510)
------------
Total equity capital............................. 5,912,899
------------
Total liabilities and equity capital............. $64,536,926
============
</TABLE>
-5-
<PAGE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni )
Alan R. Griffith ) Directors
Gerald L. Hassell )
- --------------------------------------------------------------------------------
-6-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 14,974
<SECURITIES> 482
<RECEIVABLES> 7,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,467
<PP&E> 14,429
<DEPRECIATION> 0
<TOTAL-ASSETS> 96,786
<CURRENT-LIABILITIES> 37,029
<BONDS> 104
0
5
<COMMON> 21
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 58,046
<SALES> 0
<TOTAL-REVENUES> 8,453
<CGS> 10,135
<TOTAL-COSTS> 12,291
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,654)
<INCOME-TAX> (5,302)
<INCOME-CONTINUING> (10,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,249)
<EPS-BASIC> (0.44)
<EPS-DILUTED> 0
</TABLE>
