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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999
REGISTRATION NO. 333-89479
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WORLD ACCESS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3669 58-2398004
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
MARK A. GERGEL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
WORLD ACCESS, INC.
945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES OF COMMUNICATIONS TO:
LEONARD A. SILVERSTEIN, ESQ.
LONG ALDRIDGE & NORMAN LLP
5300 ONE PEACHTREE CENTER
303 PEACHTREE STREET
ATLANTA, GEORGIA 30308-3201
(404) 527-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only 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, please 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
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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 number of the earlier effective registration statement for the same
offering. [ ]
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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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS AND CONSENT SOLICITATION
WORLD ACCESS, INC.
$300,000,000 AGGREGATE PRINCIPAL AMOUNT OF 13.25% SENIOR NOTES DUE 2008
$15,000,000 OF WORLD ACCESS COMMON STOCK
EXCHANGE OFFER AND CONSENT SOLICITATION
OUTSTANDING 10 1/2% SERIES B SENIOR NOTES DUE 2008 OF FACILICOM INTERNATIONAL,
INC.
EXCHANGED FOR
13.25% SENIOR NOTES DUE 2008 AND COMMON STOCK OF WORLD ACCESS AND CASH
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TERMS OF THE EXCHANGE OFFER
- - The exchange offer will expire at 12:00 p.m., New York City time, on December
7, 1999, unless we extend it.
- - If all the conditions to this exchange offer are satisfied, we will exchange
all FaciliCom notes that are validly tendered and not withdrawn.
- - For each $1,000 principal amount of FaciliCom notes tendered and accepted for
exchange, you will receive (1) $1,000 principal amount of our 13.25% Senior
Notes due 2008, (2) such number of shares of our common stock having an
aggregate market value of $50 and (3) a payment of $10 in cash.
- - The exchange notes that we will issue to you in exchange for your FaciliCom
notes are new securities with no established trading market and will not be
listed on any securities exchange or market. We expect the exchange notes will
be eligible for trading in the PORTAL market.
- - Our common stock is traded on the Nasdaq National Market under the symbol
"WAXS."
- - The exchange offer is subject to various conditions described in this
document.
TERMS OF THE CONSENT SOLICITATION
- - The consent solicitation will expire at 12:00 p.m., New York City time, on
December 7, 1999, unless we extend it.
- - If you tender your FaciliCom notes, you will automatically consent to
amendments to the indenture governing the FaciliCom notes.
- - These amendments include the elimination of:
- your right to require us to repurchase your FaciliCom notes at a price of
101% of their principal amount upon completion of our pending merger with
FaciliCom; and
- other restrictions on our operations following the merger with FaciliCom.
- - These amendments will continue to apply after the merger to any FaciliCom
notes not exchanged.
- - We will make no separate payment, other than the exchange consideration in
exchange for your FaciliCom notes, for consents delivered in the consent
solicitation.
TAXABILITY OF EXCHANGE
- - The exchange of FaciliCom notes for exchange notes, common stock and cash
should be taxable only to the extent of the cash payment.
- - The IRS, however, could take the position that the receipt of both our common
stock and the cash payment may be taxable to holders.
SEE "RISK FACTORS," BEGINNING ON PAGE 18, FOR A DESCRIPTION OF FACTORS THAT
YOU SHOULD CONSIDER IN EVALUATING THE EXCHANGE OFFER AND CONSENT SOLICITATION.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus and consent solicitation is truthful or complete. Any representation
to the contrary is a criminal offense.
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The exchange agent for the exchange offer and consent solicitation is:
FIRST UNION NATIONAL BANK
The date of this prospectus and consent solicitation is November 5, 1999.
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TABLE OF CONTENTS
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SUMMARY.................................. 1
RISK FACTORS............................. 18
RECENT DEVELOPMENTS...................... 30
FORWARD-LOOKING STATEMENTS............... 32
USE OF PROCEEDS.......................... 32
CAPITALIZATION........................... 33
THE EXCHANGE OFFER....................... 34
DESCRIPTION OF THE EXCHANGE NOTES........ 45
COMPARISON OF THE EXCHANGE NOTES AND THE
FACILICOM NOTES........................ 84
THE PROPOSED AMENDMENTS.................. 98
FEDERAL INCOME TAX CONSIDERATIONS........ 112
WORLD ACCESS............................. 116
THE MERGER............................... 116
RELATED AGREEMENTS....................... 128
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RELATED TRANSACTIONS..................... 131
PRINCIPAL STOCKHOLDERS................... 132
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS................... 134
FACILICOM'S MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................. 144
BUSINESS OF FACILICOM.................... 153
LEGAL MATTERS............................ 170
EXPERTS.................................. 170
WHERE YOU CAN FIND MORE INFORMATION...... 171
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.............................. 172
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS............................. F-1
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This prospectus incorporates by reference documents relating to World
Access which are not presented in or delivered with this prospectus. These
documents (without exhibits, unless such exhibits are specifically incorporated
by reference) are available without charge to any holder or beneficial owner of
FaciliCom notes upon request. Requests for World Access documents should be
directed to World Access, Inc., 945 E. Paces Ferry Road, Suite 2200, Atlanta,
Georgia 30326 (Telephone (404) 231-2025), Attention: Chief Financial Officer. In
order to ensure timely delivery of the documents prior to the expiration of the
exchange offer and consent solicitation, any request should be made prior to
November 30, 1999.
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SUMMARY
We are offering to exchange the new World Access notes, World Access common
stock and a payment in cash described in this prospectus for FaciliCom's
outstanding 10 1/2% Series B Senior Notes due 2008 and are soliciting consents
with respect to FaciliCom's notes on the terms and conditions described in this
prospectus. The following is a brief summary of the information included in this
prospectus and may not contain all of the information that is important to you.
You should carefully read and review this entire document and the other
documents to which it refers to fully understand the terms of the new World
Access notes, exchange offer and consent solicitation. Throughout this
prospectus, we refer to the new World Access notes, or "exchange notes," the
World Access common stock, or "exchange shares," and the cash payment that you
are entitled to receive in exchange for your FaciliCom notes collectively as the
"exchange consideration." Our reference to the FaciliCom notes means the
FaciliCom notes as governed by the FaciliCom indenture until the execution of
the FaciliCom second supplemental indenture, after which the FaciliCom notes
means the FaciliCom notes as governed by the FaciliCom indenture, as amended by
the second supplemental indenture.
WORLD ACCESS
We provide international long distance voice and data services and
proprietary network equipment to the global telecommunications markets. Our
World Access Telecommunications Group provides wholesale international long
distance services through a combination of our own international routing
relationships and resale arrangements with other international long distance
service providers. Our World Access Equipment Group develops, manufacturers and
markets network products that switch and transport voice, data and internet
traffic.
Our principal executive offices are located at 945 E. Paces Ferry Road,
Suite 2200, Atlanta, Georgia 30326, and our telephone number at that location is
(404) 231-2025.
FACILICOM
FaciliCom is a multinational telecommunications carrier. It provides
international long distance services to other carriers worldwide and offers
international and domestic long distance voice, internet access, data and other
value-added services to business and residential customers in select European
markets. FaciliCom provides these services over its carrier-grade international
network, which consists of 17 gateway switches and 18 additional points of
presence in the U.S. and in 13 European countries, as well as a satellite earth
station. The FaciliCom network is connected primarily by fiber optic cable
capacity that FaciliCom owns or leases. In addition to these facilities,
FaciliCom has 12 interconnection agreements, ten of which are with the dominant
national carriers in its markets, and 21 operating agreements, 16 of which are
with the dominant national carriers in its markets.
The principal executive offices of FaciliCom are located at 1401 New York
Avenue, N.W., 9th Floor, Washington, D.C. 20005, and its telephone number at
this location is (202) 496-1100.
THE MERGER
On August 17, 1999, we announced that we entered into a merger agreement
with FaciliCom, providing that FaciliCom will merge with and into World Access.
Upon consummation of the merger, the separate existence of FaciliCom will cease
and World Access will continue as the surviving corporation. Pursuant to the
terms of the merger agreement, the shareholders and optionholders of FaciliCom
will receive approximately $436.0 million in consideration, primarily in the
form of new Series C preferred stock to be issued by us. The Series C preferred
stock bears no dividend and is convertible into shares of World Access common
stock at a conversion rate of $20.38 per common share, subject to potential
adjustment under certain circumstances. If the closing trading price of World
Access common stock on Nasdaq exceeds $20.38 per share for 60 consecutive
trading days, the Series C preferred stock will automatically convert into World
Access common stock.
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Under the terms of the merger agreement, the consummation of the merger is
conditioned upon the adoption of amendments to the FaciliCom indenture under
which FaciliCom issued the FaciliCom notes. We refer to these amendments
throughout this prospectus as the "proposed amendments." In addition, the
closing of the merger is subject to the approval of World Access stockholders at
a special meeting of stockholders to be held on December 7, 1999, expiration of
the waiting periods under applicable antitrust and anticompetition laws in
Sweden, Germany and Finland, and approval of the transfer to World Access of
FaciliCom's telecommunications licenses by the Federal Communications Commission
and other applicable regulatory authorities. WorldCom Network Services, Inc.,
The 1818 Fund III, L.P. and John D. Phillips, which hold shares representing in
the aggregate approximately 24.1% of the current voting power of World Access
common stock, have entered into a voting agreement committing to vote in favor
of the merger. Armstrong International Telecommunications, Inc., Epic Interests,
Inc. and BFV Associates, Inc., which are the majority stockholders of FaciliCom,
have already approved the merger. The merger is expected to close in the fourth
quarter of 1999 and will be accounted for as a purchase transaction. For a more
detailed discussion of the merger and related transactions, see "The Merger."
We are conducting the exchange offer and consent solicitation in connection
with the merger. If the proposed amendments are approved in the consent
solicitation, we expect that FaciliCom and the trustee under the indenture for
the FaciliCom notes will execute a second supplemental indenture containing the
proposed amendments that will be effective immediately prior to the closing of
the merger. The continued effectiveness of the second supplemental indenture is
subject to the closing of the merger and consummation of the exchange offer. We
anticipate that the closing of the exchange offer will occur at the closing of
the merger.
THE EXCHANGE OFFER
On October 12, 1999, we entered into an agreement with FaciliCom and the
holders of a majority in interest of the FaciliCom notes in which we agreed,
under certain circumstances, to make an exchange offer for the outstanding
FaciliCom notes for the exchange consideration and those holders agreed to
tender their FaciliCom notes in exchange for the exchange consideration. You are
entitled to exchange in the exchange offer your FaciliCom notes for the exchange
consideration which consists of the following for each $1,000 principal amount
of FaciliCom notes:
(1) $1,000 principal amount of exchange notes, which have terms and
conditions substantially identical in all material respects to the
terms of the outstanding FaciliCom notes except:
- we, and not FaciliCom, are responsible for payment of all amounts due
on the exchange notes;
- the interest rate we will pay on the exchange notes is 13.25% per
annum;
- we will be obligated to make an offer to purchase the exchange notes
at a price of 100% of the principal amount with the cash proceeds from
any individual asset sales that exceeds $15.0 million;
- the amounts we must pay to redeem the exchange notes prior to 2006 are
greater than the equivalent payments under the FaciliCom notes; and
- the covenants in the indenture governing the terms of the exchange
notes allow us more flexibility to, among other things, incur
indebtedness, make some restricted payments, enter into some
transactions with our affiliates, permit restrictions on the payment
of dividends, conduct our telecommunications equipment business and
undertake some asset sales than was allowed under the FaciliCom
indenture;
(2) exchange shares, which are shares of our common stock, par value $.01
per share, having an aggregate market value of $50; and
(3) a cash payment of $10.
For a more detailed description of the exchange consideration, see "The
Exchange Offer."
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IN ORDER TO TENDER YOUR FACILICOM NOTES, YOU WILL BE REQUIRED, AS A
CONDITION TO A VALID TENDER, TO GIVE YOUR CONSENT TO THE PROPOSED AMENDMENTS TO
THE FACILICOM INDENTURE. BY PROPERLY TENDERING YOUR FACILICOM NOTES, YOU WILL
ALSO BE CONSENTING TO THE PROPOSED AMENDMENTS TO THE FACILICOM INDENTURE.
FURTHERMORE, IN ORDER TO GIVE YOUR CONSENT TO THE PROPOSED AMENDMENTS, YOU MUST
VALIDLY TENDER, AND NOT VALIDLY WITHDRAW, YOUR FACILICOM NOTES. IF YOU WITHDRAW
YOUR TENDER OF FACILICOM NOTES, YOUR CONSENT TO THE AMENDMENTS WILL ALSO BE
DEEMED WITHDRAWN. IF THE PROPOSED AMENDMENTS BECOME EFFECTIVE, EACH NON-
EXCHANGING HOLDER OF FACILICOM NOTES WILL BE BOUND BY THE PROPOSED AMENDMENTS TO
THE FACILICOM INDENTURE EVEN THOUGH THE HOLDER DID NOT CONSENT. SEE "-- THE
CONSENT SOLICITATION" BELOW AND "THE PROPOSED AMENDMENTS" FOR A DESCRIPTION OF
THE PROPOSED AMENDMENTS TO THE FACILICOM INDENTURE.
Interest on the Exchange
Notes......................... The exchange notes will bear interest at the
rate of 13.25% per annum, payable semiannually
in arrears on January 15 and July 15 of each
year, commencing January 15, 2000 or, if the
exchange date does not occur prior to January
1, 2000 on July 15, 2000, to the person in
whose name the exchange note is registered at
the close of business on the preceding January
1 or July 1, as the case may be. Interest will
begin to accrue at the rate of 13.25%
commencing on the exchange date. Interest will
be computed on the basis of a 360-day year of
twelve 30-day months.
Interest on the FaciliCom
Notes Accepted for Exchange... Accrued and unpaid interest on the FaciliCom
notes validly tendered and accepted for
exchange by World Access will be paid to the
person in whose name such notes are tendered or
such other person as indicated on the letter of
transmittal for tendered FaciliCom notes.
Interest on the FaciliCom notes tendered in the
exchange offer will cease to accrue interest on
the day prior to the exchange date. Payment
will be made on January 15, 2000 or, if the
exchange date has not occurred prior to January
1, 2000, on July 15, 2000.
Expiration Date; Withdrawal of
Tender........................ The exchange offer will expire at 12:00 p.m.,
New York City time, on December 7, 1999, or
such later date and time to which we extend it.
A tender of FaciliCom notes pursuant to the
exchange offer may be withdrawn at any time
prior to the expiration date. Withdrawal of
tendered FaciliCom notes will be deemed to be a
revocation of the consent to the proposed
amendments to the FaciliCom indenture. Any
FaciliCom notes not accepted for exchange for
any reason will be returned without expense to
the tendering holder promptly after the
expiration or termination of the exchange
offer.
Certain Conditions to the
Exchange Offer................ The exchange offer is subject to certain
conditions, which we may waive, including:
- consummation of the merger of FaciliCom and
World Access;
- tender by the holders of at least a majority
of the aggregate principal amount of the
FaciliCom notes in the exchange offer; and
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- consent by the holders of at least a majority
of the aggregate principal amount of the
FaciliCom notes to the proposed amendments to
the FaciliCom indenture.
Pursuant to the terms of our agreement dated
October 12, 1999 with FaciliCom and the holders
of a majority interest of the FaciliCom notes,
such holders agreed to tender their FaciliCom
notes in the exchange offer and to consent to
the proposed amendments, subject to various
conditions, including the consummation of our
merger with FaciliCom.
Please read the section captioned "The Exchange
Offer -- Certain Conditions to the Exchange
Offer" of this prospectus for more information
regarding the conditions to the exchange offer.
Procedures for Tendering
FaciliCom Notes............... If you wish to accept the exchange offer, you
must complete, sign and date the accompanying
letter of transmittal, or a photocopy or
facsimile of the letter of transmittal,
according to the instructions contained in this
prospectus and the letter of transmittal. You
must also mail or otherwise deliver the letter
of transmittal, or a photocopy or facsimile of
the letter of transmittal, together with the
FaciliCom notes and any other required
documents to the exchange agent at the address
on the cover page of the letter of transmittal.
If you hold FaciliCom notes through The
Depository Trust Company, which we refer to in
this prospectus as DTC, and wish to participate
in the exchange offer, you must comply with the
Automated Tender Offer Program procedures of
DTC, by which you will agree to be bound by the
letter of transmittal. By signing or agreeing
to be bound by the letter of transmittal, you
will represent to us that, among other things:
- any exchange notes that you receive will be
acquired in the ordinary course of your
business;
- you have no arrangement or understanding with
any person or entity to participate in the
distribution of the exchange notes;
- if you are a broker-dealer that will receive
exchange notes for your own account in
exchange for FaciliCom notes that were
acquired as a result of market-making
activities, that you will deliver a
prospectus, as required by law, in connection
with any resale of such exchange notes; and
- you are not our "affiliate," as defined in
Rule 405 of the Securities Act or, if you are
our affiliate, you will comply with any
applicable registration and prospectus
delivery requirements of the Securities Act.
In addition, by signing or agreeing to be bound
by the letter of transmittal, you will be
consenting to the proposed amendments to the
FaciliCom indenture.
Special Procedures for
Beneficial Owners............. If you are a beneficial owner of FaciliCom
notes which are not registered in your name,
and you wish to tender the FaciliCom
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notes in the exchange offer, you should contact
the registered holder promptly and instruct the
registered holder to tender on your behalf. If
you wish to tender on your own behalf, you
must, prior to completing and executing the
letter of transmittal and delivering your
FaciliCom notes, either make appropriate
arrangements to register ownership of the
FaciliCom notes in your name or obtain a
properly completed bond power from the
registered holder.
Guaranteed Delivery
Procedures.................... If you wish to tender your FaciliCom notes and
your FaciliCom notes are not immediately
available or you cannot deliver your FaciliCom
notes, the letter of transmittal or any other
documents required by the letter of transmittal
or comply with the applicable procedures under
DTC's Automated Tender Offer Program prior to
the expiration date, you must tender your
FaciliCom notes according to the guaranteed
delivery procedures set forth in this
prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures."
Accounting Treatment of the
Exchange Offer................ The exchange notes will be recorded by World
Access based on the fair value of the exchange
notes. Any difference (discount or premium)
between the fair value and par value of the
exchange notes will be amortized over the life
of the exchange notes as an adjustment to
interest expense.
No Dissenters' Rights......... You will not have any right to dissent and
receive an appraisal of your FaciliCom notes in
connection with the exchange offer or consent
solicitation.
Federal Income Tax
Considerations................ We believe that the exchange of FaciliCom notes
for exchange notes, common stock and cash in
the exchange offer will not result in your
recognizing gain or loss for federal income tax
purposes except to the extent of the cash
payment. However, due to the inherently factual
nature of these issues, our tax counsel is
unable to render any tax opinion to us with
respect to the federal income tax consequences
to you of the exchange offer and consent
solicitation. Moreover, the IRS may take the
position that tendering holders recognize
taxable income upon the receipt of both the
exchange shares and cash payment. We have not
requested a ruling from the IRS with respect to
the federal income tax consequences of the
exchange offer and consent solicitation. It is
not a condition to the exchange offer or
consent solicitation that we or FaciliCom
receive such a ruling or an opinion of tax
counsel concerning such tax consequences. See
"Tax Considerations -- Federal Income Tax
Considerations."
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of the exchange notes and exchange
shares pursuant to the exchange offer.
Exchange Agent................ First Union National Bank is the exchange agent
for the exchange offer. The address and
telephone number of the
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exchange agent are set forth in the section
captioned "The Exchange Offer -- Exchange
Agent" of this prospectus.
DESCRIPTION OF EXCHANGE NOTES
The exchange offer applies to $300,000,000 aggregate principal amount of
FaciliCom notes. The exchange notes will be entitled to the benefits and subject
to the terms and conditions of an indenture to be entered into between World
Access and First Union National Bank. See "Description of the Exchange Notes."
Issue......................... $300,000,000 aggregate principal amount of
13.25% Senior Notes due 2008.
Maturity Date................. January 15, 2008
Interest Payment Dates........ January 15 and July 15, commencing on January
15, 2000, or July 15, 2000 if the exchange date
does not occur prior to January 1, 2000.
Security...................... On the exchange date, a pro rata portion of the
securities and/or cash pledged in connection
with the issuance of the FaciliCom notes will
be deposited in a pledge account created for
the benefit of the holders of the exchange
notes. The exchange notes will be secured by a
first priority security interest in the pledged
securities and/or cash deposited in the pledge
account. See "Description of the Exchange
Notes -- Security."
Ranking....................... The indebtedness evidenced by the exchange
notes will be our unsecured (except as
described) obligations. The exchange notes will
rank senior in right of payment to any of our
existing and future obligations expressly
subordinated in right of payment to the
exchange notes and will be pari passu in right
of payment with all of our other existing and
future unsecured and unsubordinated
obligations, including trade payables. The
exchange notes will be subordinated to all of
our existing and future secured indebtedness,
including indebtedness under our credit
facility, to the extent of the value of the
assets securing the indebtedness. After giving
effect to the merger of World Access and
FaciliCom, we will have approximately $464.0
million of indebtedness, excluding trade
payables, of which $187.1 million will rank
senior to and $1.9 million will rank pari passu
with the exchange notes, respectively. Because
we are a holding company and we conduct
business through our subsidiaries, all existing
and future indebtedness and other liabilities
and commitments of our subsidiaries, including
trade payables, will be effectively senior to
the exchange notes. Our subsidiaries will not
be guarantors of the exchange notes. The
indenture under which we will issue the
exchange notes limits, but does not prohibit,
the incurrence of certain additional
indebtedness by us and our restricted
subsidiaries and does not limit the amount of
indebtedness incurred to finance the cost of
telecommunications assets.
After giving effect to our merger with
FaciliCom, our consolidated subsidiaries will
have aggregate liabilities of approximately
$428.3 million, which includes $164.0 million
of indebtedness.
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Market for the Exchange Notes;
Listing....................... Although we expect the exchange notes will be
eligible for trading in the PORTAL market,
there is no public market for the exchange
notes, and we do not intend to apply for
listing of the exchange notes on any national
securities exchange or for quotation through
Nasdaq. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the exchange notes.
Optional Redemption........... The exchange notes are not redeemable at our
option prior to January 15, 2003. At any time
on or after that date, the exchange notes will
be redeemable, in whole or in part, at our
option, at the redemption prices set forth in
this prospectus plus accrued and unpaid
interest thereon to the date of redemption.
Notwithstanding the foregoing, prior to January
15, 2001, we may redeem from time to time up to
35.0% of the originally issued aggregate
principal amount of exchange notes at a
redemption price equal to 110.5% of the
aggregate principal amount thereof, plus
accrued and unpaid interest thereon to the date
of redemption with the net cash proceeds of one
or more public equity offerings; provided, that
at least 65.0% of the originally issued
aggregate principal amount of the exchange
notes remains outstanding immediately after
such redemption; and provided further that
notice of the redemption shall be given within
60 days after the closing of any such public
equity offering. See "Description of the
Exchange Notes -- Optional Redemption."
Change of Control............. In the event of a change of control of the
surviving corporation subsequent to the merger
of World Access and FaciliCom, each holder of
exchange notes will have the right to require
us to purchase all or any part of such holder's
exchange notes at a purchase price in cash
equal to 101.0% of the aggregate principal
amount thereof, plus accrued and unpaid
interest to the date of purchase. See
"Description of the Exchange
Notes -- Repurchase of Exchange Notes Upon a
Change of Control." We cannot assure you that
we will be able to fund these repurchase
obligations in the event of a change of
control.
Covenants..................... The indenture under which we will issue the
exchange notes contains covenants that, among
other things, limit our ability and the ability
of our restricted subsidiaries to incur
additional indebtedness, pay dividends or make
other distributions, repurchase capital stock
or subordinated indebtedness or make some other
types of restricted payments, create some types
of liens, enter into some types of transactions
with stockholders and affiliates, sell assets,
issue or sell capital stock of certain of our
subsidiaries or enter into some types of
mergers and consolidations. See "Description of
the Exchange Notes -- Covenants."
THE CONSENT SOLICITATION
As part of the exchange offer, we are soliciting consents from the holders
of the FaciliCom notes to some amendments to the FaciliCom indenture under which
FaciliCom issued the FaciliCom notes. The
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proposed amendments materially reduce the obligations of FaciliCom (and us as
the surviving corporation after the merger) under the FaciliCom indenture by,
among other things:
(1) removing restrictions on FaciliCom's ability to:
- consolidate and/or merge;
- incur additional debt;
- make payments to affiliates;
- make dividend payments;
- sell capital stock of its subsidiaries;
- enter into transactions with shareholders;
- create liens on its property;
- sell assets;
- transfer its existing business; and
- enter into sale-leaseback transactions; and
(2) eliminating FaciliCom's obligations to:
- hold money for payment of the FaciliCom notes in trust;
- pay taxes;
- maintain its properties;
- maintain insurance coverage; and
- provide the holders of FaciliCom notes with financial statements.
If the consents of the holders of a majority of the aggregate principal
amount of the FaciliCom notes are received, the FaciliCom indenture will be
amended in accordance with the proposed amendments described more fully under
"The Proposed Amendments." If the proposed amendments become effective, each
holder of FaciliCom notes that does not exchange its FaciliCom notes for the
exchange notes will be bound by the applicable proposed amendments even though
the holder did not consent to the proposed amendments.
WE WILL MAKE NO SEPARATE PAYMENT, OTHER THAN THE EXCHANGE CONSIDERATION IN
EXCHANGE FOR THE FACILICOM NOTES, FOR CONSENTS DELIVERED IN THE CONSENT
SOLICITATION WHICH IS PART OF THE EXCHANGE OFFER.
If you withdraw your tender of FaciliCom notes, your consent to the
proposed amendments will also be deemed withdrawn. You may not withdraw your
consent without withdrawing your tender of FaciliCom notes.
EFFECT OF THE EXCHANGE OFFER AND CONSENT SOLICITATION ON HOLDERS OF FACILICOM
NOTES WHO DO NOT TENDER
The holders of a majority in interest of the FaciliCom notes have agreed to
tender their FaciliCom notes in the exchange offer. If you do not tender your
FaciliCom notes in the exchange offer, you will continue to be entitled to all
the rights and subject to the terms applicable to the FaciliCom notes under the
FaciliCom indenture. However, if the exchange offer and consent solicitation are
consummated, the terms of the FaciliCom indenture will be materially changed
pursuant to the proposed amendments and you will no longer have the right to
require us to repurchase your FaciliCom notes at a purchase price of 101% of the
principal amount upon completion of our pending merger with FaciliCom or to
approve the merger. For a description of the proposed amendments, see "The
Proposed Amendments."
8
<PAGE> 12
If you do not tender your FaciliCom notes in the exchange offer, you will
not be entitled to receive the exchange consideration, which includes exchange
notes with an interest rate of 13.25% per annum as compared to the 10 1/2% per
annum for the FaciliCom notes and more favorable offer to purchase and
redemption provisions as compared to the FaciliCom notes.
Our proposed merger with FaciliCom would violate several covenants
applicable to the FaciliCom notes allowing the holders of 25.0% of the aggregate
principal amount of the FaciliCom notes or the trustee under the FaciliCom
indenture to declare principal and accrued and unpaid interest on the FaciliCom
notes immediately due and payable. However, holders who tender their FaciliCom
notes in the exchange offer will effectively waive this right by consenting to
the proposed amendments to the FaciliCom indenture that delete the covenants
which would be breached. Upon effectiveness of the consent solicitation, the
proposed amendments will apply to all FaciliCom notes that are not tendered in
the exchange offer.
MARKETS AND MARKET PRICES
Our common stock is traded on Nasdaq under the symbol "WAXS." The following
table shows the high and low sales prices for the World Access common stock as
reported by Nasdaq for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C> <C> <C>
CALENDAR YEAR 1997
First Quarter............................................. $ 9 1/4 $ 7 1/2
Second Quarter............................................ 23 7 5/8
Third Quarter............................................. 34 1/8 20
Fourth Quarter............................................ 33 3/4 17
CALENDAR YEAR 1998
First Quarter............................................. 33 1/2 21 5/8
Second Quarter............................................ 40 25 3/8
Third Quarter............................................. 30 15/16 18 3/4
Fourth Quarter............................................ 24 3/4 12
CALENDAR YEAR 1999
First Quarter............................................. 22 3/4 6 3/8
Second Quarter............................................ 14 1/8 7 7/8
Third Quarter............................................. 16 3/16 10 5/16
Fourth Quarter (through November 3, 1999)................. 14 1/16 10 13/16
</TABLE>
On August 16, 1999, the last full trading day prior to the public
announcement of the execution of the merger agreement with FaciliCom, and
November 3, 1999, the last reported sale prices on Nasdaq of World Access common
stock were $13 11/16 and $13 3/16, respectively.
We have not paid or declared any cash dividends on our common stock since
our inception and anticipate that our future earnings will be retained to
finance the continuing development of our business. The payment of any future
dividends will be at the discretion of our board of directors and will depend
upon future earnings, the success of business activities, regulatory and capital
requirements, our financial condition, general business conditions and other
factors. We currently are restricted from paying dividends on our common stock
under our revolving credit facility, and, after the merger, we will also be
restricted from paying dividends under the terms of the exchange notes.
The holders of our 4.25% Cumulative Senior Perpetual Convertible Preferred
Stock, Series A, and our 4.25% Cumulative Junior Convertible Preferred Stock,
Series B, which have preference to the holders of shares of World Access common
stock, are entitled to receive, when, as and if declared by our board of
directors, cash dividends at an annual rate on the respective liquidation
preferences equal to 4.25%. Dividends payable on the Series A preferred stock
and Series B preferred stock are cumulative and accrue, whether or not declared,
on a daily basis from the respective dates of issuance. The current aggregate
annual dividend payments required to be made by World Access on the Series A
preferred stock and Series B preferred stock are approximately $3.1 million. The
Series C preferred stock to be issued in our
9
<PAGE> 13
merger with FaciliCom will rank, as to dividends, on parity with our common
stock and junior to our Series A preferred stock and Series B preferred stock.
RISK FACTORS
For a discussion of factors that should be considered in evaluating the
exchange offer and consent solicitation, see "Risk Factors," beginning on page
18.
10
<PAGE> 14
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
WORLD ACCESS SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below for the five years ended
December 31, 1998 have been derived from the audited consolidated financial
statements of World Access. The financial data for the six month periods ended
June 30, 1998 and 1999 have been derived from unaudited consolidated financial
statements of World Access, which, in the opinion of World Access' management,
include all the significant normal and recurring adjustments necessary for fair
presentation of the financial position and results of operations for such
unaudited periods.
On October 28, 1999, World Access reported the financial results of its
third quarter ended September 30, 1999. Net sales, income from continuing
operations and income from continuing operations per diluted share for the three
months and nine months ended September 30, 1999 were $203.0 million and $524.3
million; $14.3 million and $22.6 million; and $0.33 and $0.56, respectively. For
additional information relating to these financial results, see "Recent
Developments".
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONTINUING OPERATIONS DATA(1):
Equipment sales............................... $ 6,014 $12,612 $17,131 $ 48,614 $ 138,990 $ 56,684 $122,360
Carrier service revenues...................... -- -- -- -- 13,143 1,263 198,891
------- ------- ------- -------- --------- -------- --------
Total sales........................... 6,014 12,612 17,131 48,614 152,133 57,947 321,251
Gross profit.................................. 135 1,802 3,055 21,087 56,031 27,477 64,929
In-process research and development........... -- -- -- -- 100,300 35,400 --
Goodwill impairment........................... -- -- -- -- 6,200 -- --
Restructuring and other charges............... -- -- -- -- 17,240 590 --
Income (loss) from continuing operations...... (2,079) (389) (1,041) 8,350 (114,645) (27,690) 8,393
Income (loss) from continuing operations per
share(2).................................... $ (0.45) $ (0.04) $ (0.07) $ 0.45 $ (5.19) $ (1.39) $ 0.22
Weighted average shares outstanding(2)........ 4,631 9,083 14,530 18,708 22,073 19,960 38,446
OTHER FINANCIAL DATA:
EBITDA from continuing operations(3).......... $(1,261) $ 288 $ (632) $ 13,709 $(106,950) $(19,489) $ 34,903
Cash flows from operating activities.......... (1,247) (6,189) 1,995 (1,602) (13,038) 2,952 4,288
Cash flows from investing activities.......... (240) (2,687) (1,793) (18,240) (66,527) (69,774) (4,102)
Cash flows from financing activities.......... 1,616 10,010 20,391 115,427 16,676 6,410 43,634
Capital expenditures.......................... 240 280 1,176 3,591 12,216 5,859 4,163
Ratio of earnings to fixed charges(4)......... -- -- -- 9.1 -- -- 4.1
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
------ ------- ------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(5):
Cash and equivalents................................ $ 753 $ 1,887 $22,480 $118,065 $ 55,176 $ 57,653 $ 98,996
Working capital..................................... 2,267 10,222 37,961 153,750 125,586 112,465 180,061
Total assets........................................ 8,943 28,515 60,736 225,283 613,812 268,518 693,146
Long-term debt...................................... 4,328 3,750 -- 115,264 137,864 115,529 140,728
Total liabilities................................... 7,783 14,181 8,362 133,528 253,229 169,944 267,354
Stockholders' equity................................ 1,160 14,334 52,374 91,755 360,583 98,574 425,792
</TABLE>
(Footnotes on following page)
11
<PAGE> 15
- ------------------------------
(1) Includes the results of operations for the following businesses from their
respective dates of acquisition: AIT, Inc. -- May 1995; Cellular
Infrastructure Supply, Inc. -- January 1997; Galaxy Personal Communications
Services, Inc. -- July 1997; Advanced TechCom, Inc. -- January 1998; NACT
Telecommunications, Inc. -- February 1998; Telco Systems, Inc. -- November
1998; and Cherry Communications Incorporated (d/b/a Resurgens Communications
Group) and Cherry Communications U.K. Limited -- December 1998. We refer to
Cherry Communications Incorporated, or Cherry U.S., and Cherry
Communications U.K. Limited, or Cherry U.K., collectively in this prospectus
as Resurgens.
(2) Net income (loss) per share and weighted average shares outstanding are
presented on a diluted basis. The calculations exclude 8,307,000; 995,000;
401,000 and 896,000 shares of World Access Common Stock for 1998, 1997, 1996
and 1995, respectively, that are held in escrow accounts. See Notes A and B
to the World Access Consolidated Financial Statements which are incorporated
by reference and "Related Transactions."
(3) EBITDA from continuing operations consists of earnings (losses) before
interest expense, income taxes, depreciation and amortization. EBITDA should
not be considered as a substitute for operating earnings, net income (loss),
cash flow or other combined statement of operations or cash flow data
computed in accordance with generally accepted accounting principles or as a
measure of World Access' results of operations or liquidity. EBITDA is
widely used as a measure of a company's operating performance and its
ability to service its indebtedness because it assists in comparing
performance on a consistent basis across companies, which can vary
significantly. EBITDA from continuing operations before special charges
excludes charges for in-process research and development, goodwill
impairment, provision for doubtful accounts, restructuring and other charges
and inventory write-downs. The following table reconciles income (loss) from
continuing operations to EBITDA from continuing operations and EBITDA from
continuing operations before special charges:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------
1994 1995 1996 1997 1998 1998 1999
------- ------ ------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations...................... $(2,079) $ (389) $(1,041) $ 8,350 $(114,645) $(27,690) $ 8,393
Interest expense (income),
net........................... 511 308 (230) (1,426) 3,413 988 3,098
Income taxes (benefit).......... -- -- (114) 4,792 (1,387) 5,906 9,357
Income tax related to minority
interests..................... -- -- -- -- (1,663) (1,021) --
Depreciation and amortization... 307 369 753 1,993 7,332 2,328 14,055
------- ------ ------- ------- --------- -------- -------
EBITDA from continuing
operations.................... (1,261) 288 (632) 13,709 (106,950) (19,489) 34,903
Special charges:
In-process research and
development................... -- -- -- -- 100,300 35,400 --
Write-down of inventories....... -- -- -- -- 9,292 465 --
Goodwill impairment............. -- -- -- -- 6,200 -- --
Provision for doubtful
accounts...................... -- -- -- -- 10,674 -- --
Restructuring and other
charges....................... 80 980 -- -- 17,240 590 --
------- ------ ------- ------- --------- -------- -------
EBITDA from continuing
operations before special
charges....................... $(1,181) $1,268 $ (632) $13,709 $ 36,756 $ 16,966 $34,903
======= ====== ======= ======= ========= ======== =======
</TABLE>
(4) Computed by dividing earnings by total fixed charges. Earnings consist of
pretax income from continuing operations before fixed charges. Fixed charges
consist of interest on debt, including amortization of debt issuance costs,
and a portion of rent expense estimated by management to be the interest
component of the rentals. Earnings were not sufficient to cover fixed
charges for the years ended December 31, 1994, 1995, 1996 and 1998 and for
the six months ended June 30, 1998, in the amount of $2.1 million, $389,000,
$1.2 million, $117.7 million and $21.3 million, respectively. Excluding
special charges for the year ended December 31, 1998 and the six months
ended June 30, 1998 of $143.7 million and $36.5 million, respectively, our
ratio of earnings to fixed charges would have been approximately 4.3 and
5.3, respectively.
(5) In October 1997, World Access sold $115.0 million of convertible
subordinated notes. See Note I to the World Access Consolidated Financial
Statements which are incorporated by reference.
12
<PAGE> 16
FACILICOM SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below for the period from January 1,
1995 to June 30, 1995 are from FaciliCom's predecessor (the "Predecessor"), and
the period from FaciliCom's inception on May 5, 1995 to September 30, 1995 and
for the fiscal years ended September 30, 1996, 1997 and 1998 have been derived
from the audited consolidated financial statements of FaciliCom. The selected
financial data for FaciliCom for the nine month periods ended June 30, 1998 and
1999 have been derived from the unaudited consolidated financial statements of
FaciliCom which, in the opinion of FaciliCom's management, include all
significant normal and recurring adjustments necessary for fair presentation of
the financial position and results of operations for such unaudited periods.
On November 4, 1999, FaciliCom reported financial results of its fourth
quarter ended September 30, 1999. Revenues and net loss for the three and twelve
months ended September 30, 1999 were $124.1 million and $403.8 million, and
$22.6 million and $74.5 million, respectively. For additional information
relating to these financial results see "Recent Developments."
<TABLE>
<CAPTION>
PERIOD FROM PERIOD
JANUARY 1, FROM
1995 TO MAY 5,
JUNE 30, 1995 NINE MONTHS ENDED
1995 TO YEAR ENDED SEPTEMBER 30, JUNE 30,
FOR THE SEPTEMBER 30, ----------------------------- --------------------
PREDECESSOR(1) 1995 1996 1997 1998 1998 1999
-------------- ------------- ------- -------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
U.S. originated............. $ -- $ -- $ 7,838 $ 53,821 $116,383 $ 80,755 $121,591
European originated......... 367 547 4,053 16,366 67,863 36,391 158,104
------- ------- ------- -------- -------- --------- --------
Total revenues..... 367 547 11,891 70,187 184,246 117,146 279,695
Cost of revenues............ 938 1,022 12,742 65,718 178,952 114,473 257,253
------- ------- ------- -------- -------- --------- --------
Gross profit (deficit)...... (571) (475) (851) 4,469 5,294 2,673 22,442
------- ------- ------- -------- -------- --------- --------
Operating loss.............. (1,305) (1,560) (9,576) (11,360) (43,886) (30,181) (35,171)
Net Loss.................... (1,341) (1,725) (9,662) (14,031) (46,595) (32,515) (51,879)
OTHER FINANCIAL DATA:
EBITDA(2)................... $(1,108) $(1,418) $(8,433) $ (9,042) $(35,070) $ (24,867) $(18,276)
Cash flows from operating
activities................ 563 (1,624) (5,413) (8,361) (36,115) (26,304) (30,290)
Cash flows from investing
activities................ (545) (1,055) (1,074) (1,664) (184,692) (185,462) (18,232)
Cash flows from financing
activities................ -- 2,788 8,572 7,914 285,154 290,622 (742)
Capital expenditures........ 1,213 1,105 8,404 12,282 101,910 72,460 94,771
Ratio of earnings to fixed
charges(3)................ -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT JUNE 30,
---------------------------------------- --------------------
1995 1996 1997 1998 1998 1999
------ ------- ------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents.................... $ 109 $ 2,198 $ 1,016 $ 68,129 $ 80,433 $ 18,696
Marketable securities -- unrestricted... -- -- -- 38,698 56,864 --
Marketable
securities -- restricted(4)........... -- -- -- 74,518 87,131 61,280
Net property and equipment.............. 2,661 10,144 20,244 115,748 84,338 185,768
Total assets............................ 5,664 21,008 44,017 378,884 375,701 384,765
Total long-term obligations............. 1,906 9,194 20,973 308,137 305,429 304,166
Total capital accounts.................. 1,109 (1,715) (9,421) (38,575) (22,170) (106,137)
</TABLE>
- ------------------------------
(1) Data for periods prior to January 1, 1995 have not been presented because
amounts were insignificant and not meaningful. Cumulative revenue and net
losses from inception through December 31, 1994 were $35,758 and $287,564,
respectively, and both total assets and liabilities at December 31, 1994
were $2.6 million.
(2) EBITDA consists of earnings (losses) before interest expense, income taxes,
depreciation, amortization and foreign exchange (loss) gain. EBITDA should
not be considered as a substitute for operating earnings, net income, cash
flow or other combined statement of income or cash flow data computed in
accordance with generally accepted accounting principles or as a measure of
results of operations or liquidity. EBITDA is widely used as a measure of a
company's operating performance
13
<PAGE> 17
and its ability to service its indebtedness because it assists in comparing
performance on a consistent basis across companies, which can vary
significantly. The following table reconciles net loss to EBITDA:
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM MAY 5, 1995 NINE MONTHS ENDED
JANUARY 1, 1995 TO YEAR ENDED SEPTEMBER 30, JUNE 30,
TO JUNE 30, 1995 SEPTEMBER 30, ----------------------------- -------------------
(PREDECESSOR) 1995 1996 1997 1998 1998 1999
---------------- ------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss.................... $(1,341) $(1,725) $(9,662) $(14,031) $(46,595) $(32,515) $(51,879)
Foreign exchange (loss)
gain...................... (8) 85 (226) 1,335 391 655 1,346
Interest expense (income),
net....................... 44 80 312 1,336 14,460 8,945 22,044
Gain on settlement
agreement................. -- -- -- -- (791) (791) --
Income tax benefit.......... -- -- -- -- (11,351) (6,475) (6,682)
Depreciation and
amortization.............. 197 142 1,143 2,318 8,816 5,314 16,895
------- ------- ------- -------- -------- -------- --------
EBITDA...................... $(1,108) $(1,418) $(8,433) $ (9,042) $(35,070) $(24,867) $(18,276)
======= ======= ======= ======== ======== ======== ========
</TABLE>
- ------------------------------
(3) The ratio of earnings to fixed charges is computed by dividing pretax income
from operations before fixed charges by fixed charges. Fixed charges consist
of interest charges and that portion of rental expense FaciliCom believes to
be representative of interest. For the period January 1, 1995 through June
30, 1995 (Predecessor), the periods ended September 30, 1995, 1996, 1997 and
1998 and the nine months ended June 30, 1998 and 1999, earnings were
insufficient to cover fixed charges by $1.3 million, $1.7 million, $9.7
million, $14.0 million, $57.9 million, $39.0 million and $58.6 million,
respectively.
(4) Comprises amounts deposited in 1998 which are required to be used to fund
interest payments on the FaciliCom notes.
14
<PAGE> 18
UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION
The unaudited selected pro forma balance sheet data of World Access as of
June 30, 1999 set forth below give effect to the FaciliCom merger and certain
related transactions as if consummated on such date. The unaudited selected pro
forma statement of operations data of World Access for the year ended December
31, 1998 and the six months ended June 30, 1999 set forth below give effect to
the FaciliCom merger, the $75.0 million private placement of World Access common
stock and the exchange offer, as well as certain transactions that World Access
has completed in 1998 and 1999, as if consummated at the beginning of 1998. The
selected pro forma information set forth below is qualified in its entirety by,
and should be read in conjunction with, the Unaudited Pro Forma Condensed
Combined Financial Statements included herein and the historical financial
information of World Access, FaciliCom, NACT, Telco and Resurgens, which in the
case of FaciliCom, are included in this document and, in the case of World
Access, NACT, Telco and Resurgens, are incorporated in this prospectus by
reference.
The selected pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the transactions given retroactive
effect therein had been consummated as of the dates indicated, nor is it
necessarily indicative of future financial conditions or operating results. See
"Unaudited Pro Forma Combined Financial Statements."
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA:
Carrier service revenues.................................... $ 322,353 $ 367,808
Equipment sales............................................. 236,532 122,360
--------- ---------
Total sales............................................... 558,885 490,168
Cost of carrier services.................................... 340,234 350,785
Cost of equipment sold...................................... 138,783 68,690
Write-down of inventories................................... 9,292 --
Amortization of acquired technology......................... 4,806 2,400
--------- ---------
Total cost of sales....................................... 493,115 421,875
--------- ---------
Gross profit.............................................. 65,770 68,293
Engineering and development................................. 22,611 8,773
Selling, general and administrative......................... 120,455 52,205
Amortization of goodwill.................................... 40,585 20,473
In-process research and development......................... 20,985 --
Goodwill impairment......................................... 6,200 --
Provision for doubtful accounts............................. 18,939 4,270
Restructuring and other charges............................. 17,240 --
--------- ---------
Operating loss from continuing operations................. (181,245) (17,428)
Foreign exchange loss....................................... (391) (1,290)
Interest and other income................................... 14,556 4,268
Interest and other expense.................................. (58,908) (26,051)
--------- ---------
Loss from continuing operations before income taxes....... (225,988) (40,501)
Income taxes (benefit)...................................... (21,498) 1,781
--------- ---------
Loss from continuing operations........................... (204,490) (42,282)
Preferred stock dividends................................... -- 413
--------- ---------
Loss from continuing operations available to common
stockholders............................................ $(204,490) $ (42,695)
========= =========
Loss from continuing operations per common share(1):
Basic..................................................... $ (4.22) $ (0.85)
Diluted................................................... $ (4.22) $ (0.85)
Weighted average shares outstanding(1):
Basic..................................................... 48,460 50,102
Diluted................................................... 48,460 50,102
</TABLE>
- ---------------
(1) Represents basic and diluted earnings per share including shares of World
Access common stock issued in connection with the FaciliCom merger and
certain other transactions that World Access has completed as if consummated
on January 1, 1998, calculated in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 128. Due to the pro forma loss from
continuing operations for the year ended December 31, 1998 and the six
months ended June 30, 1999, potential
15
<PAGE> 19
common stock shares related to stock options, stock warrants, convertible
notes and convertible preferred stock have been excluded from the weighted
average shares outstanding as the inclusion of these potential common stock
shares would be anti-dilutive.
<TABLE>
<CAPTION>
AT
JUNE 30, 1999
-------------
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA:
Current Assets
Cash and equivalents...................................... $ 123,442
Accounts receivable....................................... 195,884
Marketable securities -- restricted....................... 31,755
Inventories............................................... 45,216
Other current assets...................................... 60,996
----------
Total Current Assets.............................. 457,293
Property and equipment...................................... 248,093
Goodwill and other intangibles.............................. 874,149
Marketable securities -- restricted......................... 29,525
Other assets................................................ 25,348
----------
Total Assets...................................... $1,634,408
==========
Current Liabilities
Short-term debt............................................. $ 34,122
Accounts payable............................................ 184,816
Other accrued liabilities................................... 84,220
----------
Total Current Liabilities......................... 303,158
Long-term debt.............................................. 429,894
Noncurrent liabilities...................................... 10,204
----------
Total Liabilities................................. 743,256
----------
Stockholders' Equity
Common and preferred stock................................ 517
Capital in excess of par value............................ 1,009,773
Accumulated deficit....................................... (119,138)
----------
Total Stockholders' Equity........................ 891,152
----------
Total Liabilities and Stockholders' Equity........ $1,634,408
==========
</TABLE>
16
<PAGE> 20
COMPARATIVE PER SHARE DATA
(UNAUDITED)
Set forth below are historical income (loss) per share from continuing
operations and book value per common share data of World Access and FaciliCom
and the income (loss) per share from continuing operations and book value per
common share data of World Access on a pro forma basis to give effect to the
FaciliCom merger and certain related transactions and to the acquisition of a
majority interest in NACT in February 1998 and subsequent merger with NACT in
October 1998 and to the acquisition of Telco and the acquisition of Resurgens
(the "Resurgens Acquisition") completed in the fourth quarter of 1998. No common
stock dividends were paid by World Access during the periods presented below.
The pro forma information assumes the issuances of 5,308,000 shares of World
Access common stock to be issued in connection with the private placement of
$75.0 million of World Access common stock, 1,062,000 shares of World Access
common stock to be issued to the holders of the FaciliCom notes, and the release
of 7,500,000 shares of World Access common stock held in escrow in connection
with the Resurgens Acquisition which will be released upon consummation of our
merger with FaciliCom. It does not assume the conversion of the Series C
preferred stock (conversion price of $20.38 per share) due to its anti-dilutive
effect. We issued 1,430,000, 2,790,000, 7,042,000 and 3,687,500 shares of World
Access common stock as part of the consummation of the acquisition of a majority
interest in NACT, the merger with NACT, Telco acquisition and the Resurgens
Acquisition, respectively. Equivalent pro forma information for FaciliCom is not
meaningful and therefore not presented because the FaciliCom merger
consideration will be in the form of cash and/or World Access common stock and
Series C preferred stock. The pro forma per share data is not necessarily
indicative of actual results had the FaciliCom merger, the $75.0 million private
placement and the exchange of FaciliCom Notes for World Access Notes occurred on
such dates or of future expected results.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
------------------ -------------
<S> <C> <C>
WORLD ACCESS -- HISTORICAL
Income (loss) per share from continuing operations
Basic..................................................... $ (5.19) $ 0.22
Diluted................................................... (5.19) 0.22
Book value per common share(1).............................. 10.06 9.85
WORLD ACCESS -- PRO FORMA
Loss per share from continuing operations(2)
Basic..................................................... $ (4.22) $ (0.85)
Diluted................................................... (4.22) (0.85)
Book value per common share(3).............................. 10.41 11.13
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1998 JUNE 30, 1998
------------------ -------------
<S> <C> <C>
FACILICOM -- HISTORICAL
Net loss per share(4)
Basic..................................................... $(206.41) $(229.55)
Diluted................................................... (206.41) (229.55)
Book value per share(1)..................................... (170.88) (467.72)
</TABLE>
- ------------------------------
(1) Calculated by dividing historical stockholders' equity by the number of
outstanding common shares. Historical stockholders' equity for World Access
at June 30, 1999 does not include the issuance of preferred stock. The
outstanding common shares do not include shares issuable upon exercise of
stock options, stock warrants, conversion of outstanding convertible
securities, or outstanding shares which have been placed in escrow in
connection with previous acquisitions.
(2) Pro forma income (loss) per share from continuing operations is presented on
a basic and diluted basis computed as pro forma income (loss) from
continuing operations divided by the weighted average number of shares
outstanding, assuming shares issued in each of the transactions were
outstanding since the beginning of each period presented. The outstanding
common shares do not include shares issuable upon exercise of stock options,
stock warrants, or conversion of outstanding convertible securities.
(3) Calculated by dividing pro forma stockholders' equity by the number of
outstanding shares of World Access common stock expected to be outstanding
as of the consummation of the FaciliCom merger, and does not include shares
issuable upon the exercise of stock options, stock warrants, the conversion
of outstanding convertible securities, or outstanding shares which have been
placed in escrow in connection with previous acquisitions. Pro forma
stockholders' equity at June 30, 1999 does not include the issuance of
preferred stock.
(4) The calculation of net loss per share assumes FaciliCom's reorganization
occurred on October 1, 1997. See FaciliCom's Consolidated Financial
Statements included elsewhere in this prospectus.
17
<PAGE> 21
RISK FACTORS
You should consider carefully the following factors, in addition to the
other information contained in this prospectus.
RISK FACTORS RELATED TO THE EXCHANGE OFFER AND CONSENT SOLICITATION
IF YOU DO NOT EXCHANGE YOUR FACILICOM NOTES, YOUR RIGHTS UNDER THE FACILICOM
INDENTURE WILL BE SUBSTANTIALLY DIMINISHED AND THE MARKET PRICE OF THOSE NOTES
MAY DECLINE.
The holders of a majority in interest of the FaciliCom notes have agreed to
tender their FaciliCom notes in the exchange offer. If you do not exchange your
FaciliCom notes in the exchange offer, you will continue to hold your FaciliCom
notes and be subject to the terms of the FaciliCom indenture under which the
FaciliCom notes were issued. However, if the conditions to the exchange offer
are met and the exchange is consummated, the FaciliCom indenture will be amended
and supplemented by a second supplemental indenture implementing the proposed
amendments. The second supplemental indenture will substantially reduce the
covenants with which World Access, as successor to FaciliCom after the merger,
would otherwise have to comply under the FaciliCom indenture, as more fully
described under "The Proposed Amendments." The elimination of those covenants
would, among other things, permit us to take actions that could increase our
credit risk and thereby adversely affect the market price of FaciliCom notes.
Your right to require us to repurchase your FaciliCom notes at 101% of the
principal amount upon completion of the merger and the right of holders of
FaciliCom notes to approve the merger will be eliminated. We do not currently
intend, nor are we required, to purchase any FaciliCom notes not exchanged in
the exchange offer.
In addition, the tender of FaciliCom notes in the exchange offer will
reduce the principal amount of FaciliCom notes outstanding, which may have an
adverse effect upon, and increase the volatility of, the market price of the
FaciliCom notes remaining outstanding after the merger due to a reduction in
liquidity.
AS A HOLDING COMPANY, WE MAY BE UNABLE TO MAKE PAYMENTS ON THE EXCHANGE NOTES IF
OUR SUBSIDIARIES ARE UNABLE TO DISTRIBUTE MONEY TO US
We are a holding company with few direct operations and few assets of
significance other than the stock of our subsidiaries. As a holding company, we
will be dependent on the cash flows of our subsidiaries to meet our obligations,
including the payment of principal and interest on the exchange notes. Our
subsidiaries are separate legal entities that will have no obligation to pay any
amounts due under the exchange notes. Generally, creditors of a subsidiary will
have a superior claim to the assets and earnings of such subsidiary than the
claims of creditors of the parent company, except to the extent the claims of
the parent's creditors are guaranteed by the subsidiary. Our subsidiaries have
not guaranteed the payment of the exchange notes. The exchange notes therefore
will be effectively subordinated to the claims of the creditors of our
subsidiaries, including trade creditors and holders of indebtedness of our
subsidiaries. After giving effect to our merger with FaciliCom, our consolidated
subsidiaries will have aggregate liabilities of approximately $428.3 million,
which includes $164.0 million of indebtedness.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE EXCHANGE NOTES WILL BE JUNIOR TO OUR
CREDIT FACILITY AND OUR EXISTING AND FUTURE SECURED INDEBTEDNESS
The exchange notes are unsecured and, therefore, will be subordinated to
all of our existing and future secured indebtedness, including indebtedness
under our credit facility, to the extent of the value of the assets securing the
indebtedness. As of November 2, 1999, we had no outstanding indebtedness under
our credit facility. Consequently, in the event of bankruptcy, liquidation,
dissolution, reorganization or a similar proceeding, our assets will be
available to satisfy obligations of secured debt before any payment may be made
on the exchange notes. Accordingly, there might be a limited amount of assets or
no assets available to satisfy your claims as a holder of the exchange notes.
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<PAGE> 22
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO PURCHASE THE
EXCHANGE NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY OUR INDENTURE GOVERNING
THE EXCHANGE NOTES
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding exchange notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to repurchase the notes or the restrictions in our credit
facility will not allow such repurchases.
BECAUSE OF THE LACK OF A PUBLIC MARKET FOR THE NOTES, YOU MAY BE UNABLE TO
RESELL YOUR EXCHANGE NOTES
Although the exchange notes will be eligible for trading in the PORTAL
market, they will not be listed on any securities exchange or automated
quotations system. We cannot assure you that an active trading market for the
exchange notes will develop.
In addition, the liquidity of the trading market in the exchange notes, and
the market price quoted for the exchange notes, may be adversely affected by the
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 generally. As a result, you may be unable to resell your exchange
notes.
YOU MAY BE SUBJECT TO FEDERAL INCOME TAXATION AS A RESULT OF TENDERING YOUR
FACILICOM NOTES
We believe that FaciliCom noteholders will recognize gain on the exchange
offer only to the extent of the cash payment. However, due to the inherently
factual nature of these issues, our tax counsel is unable to render any tax
opinion to us with respect to the federal income tax consequences to you of the
exchange offer and consent solicitation. If either (1) the FaciliCom notes or
the exchange notes are determined by the IRS not to be "securities" for purposes
of the Internal Revenue Code of 1986, as amended, or (2) the exchange does not
qualify as an "exchange" for purposes of the Code, and if you tender your
FaciliCom notes, you would recognize gain or loss under the Code equal to the
difference between the fair market value of the exchange consideration you
receive from us and your tax basis in the FaciliCom notes you tendered (as more
fully described in "Federal Income Tax Considerations").
In addition, even if your receipt of exchange notes is not a taxable event
for you, the IRS may take the position that your receipt of the exchange shares
may be, in addition to the cash payment, a taxable event for you. Under these
circumstances, your receipt of the exchange shares and the cash payment may not
be eligible to be taxed as capital gain, which typically is subject to taxation
at reduced rates, and may instead be taxed as ordinary income, which may be
subject to taxation at higher rates. The tax treatment of your receipt of the
exchange shares and the cash payment is more fully described in "Federal Income
Tax Considerations."
RISK FACTORS RELATED TO THE FACILICOM MERGER
WE MAY NOT BE ABLE TO MEET OUR OBLIGATIONS ON OUTSTANDING INDEBTEDNESS BECAUSE
OF OUR INCREASED FINANCIAL LEVERAGE, AND WE WILL BE SUBJECT TO SIGNIFICANT
OPERATING AND FINANCIAL RESTRICTIONS
Immediately subsequent to the consummation of the merger, we will have a
higher degree of financial leverage than we had prior to the merger. At June 30,
1999, we had $140.7 million of long-term debt and a total debt to equity ratio
of 62.8%, and FaciliCom had $304.2 million of long-term debt and negative
stockholders' equity. Based on our pro forma balance sheet at June 30, 1999, as
a result of the consummation of the merger, the exchange offer and certain other
transactions, we would have long-term debt of $429.9 million and a total debt to
equity ratio of 83.4%.
The indenture governing the exchange notes and FaciliCom's revolving credit
facility will limit our ability to incur additional indebtedness and contain
other significant operating and financial restrictions, such as limits on our
ability to create liens, sell assets, engage in mergers or consolidations, make
investments and pay dividends. In addition, our $75.0 million revolving line of
credit contains provisions that will also limit our operations. For example, we
will need to obtain the lender's consent and sometimes prepay a portion of the
outstanding debt under this credit facility before we can issue securities,
enter into
19
<PAGE> 23
acquisitions for cash or securities, dispose of assets or incur additional debt.
Under this credit facility, we must also maintain certain operating ratios and
achieve specified financial thresholds.
We cannot assure you that we will be able to meet the obligations on our
outstanding indebtedness. Giving effect to the FaciliCom merger and related
transactions and the exchange in full of the FaciliCom notes for the exchange
notes, we anticipate that our 1999 pro forma debt service payments will be
approximately $61.0 million. If we are unable to generate sufficient cash flow
or to otherwise obtain funds necessary to meet our obligations, or if we do not
comply with the various covenants under our indebtedness, we will be in default
under the terms of that debt. If we default, the holders of our indebtedness can
accelerate the maturity of the indebtedness that is owed to them, which could
cause defaults under our other indebtedness.
WE WILL NEED INCREASED CASH FLOW TO FUND CAPITAL EXPENDITURES
If our available cash flow substantially decreases as a result of lower
telecommunications prices or otherwise, we may have limited ability to continue
to make capital expenditures for the acquisition and development of our
international telecommunications network. Historically, we and FaciliCom have
financed these expenditures primarily with cash flow from operations and
proceeds from debt and equity financings, asset sales and sales of partial
interests in foreign concessions. If our cash flow from operations is not
sufficient to satisfy our capital expenditure requirements, we may not be able
to obtain additional debt or equity financing or other sources of capital to
meet these requirements. If we are not able to fund our capital expenditures, we
may be forced to reduce or forfeit our interests in some of our properties.
OUR INABILITY TO ACHIEVE ANTICIPATED BENEFITS FROM INTEGRATION OF OPERATIONS
COULD RESULT IN SUBSTANTIAL COSTS AND MAY DAMAGE OUR RELATIONSHIPS WITH OUR KEY
CUSTOMERS AND EMPLOYEES
The merger is expected to create a more competitive company. However, we
cannot assure you that we will be able to integrate our operations without
encountering difficulties or experiencing the loss of key employees or that we
will realize the cost savings and synergies expected from integration. The
merger requires the integration in a timely manner of two companies that
previously operated independently. The workforce will have to be combined and
offices consolidated. Some employees may be required to relocate as part of this
process. Our ability to consolidate our purchasing and obtain more favorable
prices from suppliers may be limited by changes in the purchasing power or
practices of our competitors and other market dynamics. In addition, the
consolidation of our operations will require substantial attention from
management. The diversion of management's attention and any difficulties we
encounter in the transition and integration process could have a material
adverse effect on our revenues, levels of expenses and operating results and
damage our relationship with key customers and employees.
WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY
We believe that efficiencies will be achieved by combining our operations
following the merger. After the merger, we anticipate that our cost of
transmission will decrease as we will be able to transmit a portion of our long
distance traffic on FaciliCom's existing transmission networks. In addition,
following consummation of the merger, we plan to integrate the existing World
Access and FaciliCom networks, which should result in a reduction in our cost of
providing telecommunication services. We also expect to reduce our operator
service expenses, eliminate duplicative network switching centers and reduce our
selling, general and administrative expenses. Notwithstanding these anticipated
benefits, we cannot assure you that the anticipated changes in our operations
will result in the profitability of our operations in the future.
WE WILL INCUR SIGNIFICANT MERGER-RELATED CHARGES
We estimate that, as a result of the merger, we will incur significant
consolidation and integration expenses. In addition, we expect that we will
incur merger-related expenses of approximately $12.5 million, consisting of
investment banking, legal and accounting fees and financial printing and other
related
20
<PAGE> 24
charges, including fees and expenses associated with the exchange of notes
described in this prospectus. The foregoing amounts are preliminary and the
actual amounts may be higher or lower. Moreover, we may incur additional
unanticipated expenses in connection with the integration of our and FaciliCom's
businesses.
VOTING INTERESTS OF OUR STOCKHOLDERS WILL BE SUBSTANTIALLY DILUTED
Following the consummation of the FaciliCom merger, including the issuance
of $75.0 million of World Access common stock in a private placement, the
issuance of Series C Preferred Stock, the issuance of common stock in the
exchange offer, the release of escrowed shares and the grant of World Access
stock options to purchase approximately 520,000 shares of World Access common
stock, the current World Access stockholders will own shares representing
approximately 67.9% of our total voting power and will own 60.6% of our total
outstanding shares on a fully diluted basis. The consummation of the merger and
related transactions will result in a substantial dilution of the voting and
equity interests of current World Access stockholders.
HOLDERS OF SERIES C PREFERRED STOCK MAY BE ABLE TO MATERIALLY INFLUENCE THE
OUTCOME OF STOCKHOLDER VOTES
Following the consummation of the merger, including the issuance of $75.0
million of World Access common stock in a private placement, the issuance of
common stock in the exchange offer and the release of escrowed shares, the
holders of the Series C preferred stock will collectively own shares
representing approximately 24.1% of the voting power of World Access voting
stock. In addition, the holders of the Series C preferred stock, voting as a
separate series, will be entitled to elect up to four members of our board of
directors, subject to maintaining specified levels of stock ownership, and will
have approval rights, voting as a separate series, with respect to certain
reorganizations, consolidations or mergers. This concentration of voting power
may enable such holders to materially influence the outcome of matters submitted
to a vote of these stockholders and may have the effect of delaying, deferring
or preventing a change of control pursuant to a transaction which might
otherwise be beneficial to our stockholders.
RISK FACTORS RELATED TO OUR BUSINESS AND OPERATIONS
FUTURE ACQUISITIONS MAY SIGNIFICANTLY DECREASE OUR STOCKHOLDERS' PERCENTAGE
OWNERSHIP, REDUCE OUR PROFITABILITY AND HINDER OUR ABILITY TO RAISE CAPITAL
We may issue securities in future acquisitions that could significantly
reduce our stockholders' equity ownership and reduce our earnings on a per share
basis. We also may incur additional debt and amortization expense related to
goodwill and other intangible assets acquired in future acquisitions. This
additional debt and amortization expense may reduce significantly our
profitability and hinder our ability to raise capital in the future.
IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED MANAGEMENT AND TECHNICAL
PERSONNEL, WE MAY NOT BE ABLE TO SUCCESSFULLY OPERATE OUR BUSINESS
We will be highly dependent on the services of several key executive
officers and technical employees, particularly John D. Phillips, our Chairman of
the Board, President and Chief Executive Officer, and Walter J. Burmeister,
FaciliCom's President and Chief Executive Officer. In addition, we will need to
hire additional skilled personnel to support the continued growth of our
business. Neither we nor FaciliCom maintains "key person" insurance, and none of
FaciliCom's current executive officers are bound by an employment agreement. The
market for skilled personnel, especially those with the technical abilities we
and FaciliCom require, is currently very competitive, and we will have to
compete with much larger companies with significantly greater resources to
attract and retain these persons. If we are unable to retain the services of Mr.
Phillips, Mr. Burmeister and other key management and technical personnel, or to
attract qualified personnel in the future, we may not be able to successfully
operate our business.
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<PAGE> 25
OUR SUBSTANTIAL INDEBTEDNESS COULD SEVERELY RESTRICT OUR OPERATIONAL FLEXIBILITY
Our substantial indebtedness could have important consequences to you. For
example, it could:
- increase our vulnerability to general adverse economic conditions;
- limit our ability to pursue our acquisition business strategy;
- limit our ability to obtain necessary financing or bonding, and to fund
future working capital, capital expenditures and other general corporate
requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the telecommunications industry;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants related
to our indebtedness, our ability to borrow additional funds.
OUR SIGNIFICANT RELIANCE ON INTERNATIONAL SALES COULD RESULT IN LOST REVENUE AND
INCREASED COSTS BECAUSE OF INTERNATIONAL REGULATORY CHANGES, POLITICAL AND
ECONOMIC INSTABILITY AND DIFFICULTY IN COLLECTION EFFORTS
On a pro forma basis giving effect to the FaciliCom merger and certain
other transactions, international sales would have represented approximately
22.4% of our total revenues for the six months ended June 30, 1999 and 15.9% of
our total revenues in the year ended December 31, 1998. We intend to increase
our international sales, which are subject to inherent risks, including:
- unexpected changes in legal or regulatory requirements, tariffs, exchange
rates, or other barriers;
- difficulties in staffing and managing international operations;
- longer payment cycles;
- unstable political and economic environments;
- greater difficulty in accounts receivable collection;
- potentially adverse tax consequences; and
- dependence on foreign partners.
WE MAY NOT BE ABLE TO LEASE TRANSMISSION FACILITIES AT HISTORICAL RATES
Our future profitability will be based in part on our ability to transmit
long distance telephone calls over transmission facilities, also referred to in
the industry as network facilities, leased from others on a cost-effective
basis. As a result of the merger, we will be able to utilize both our network
facilities and FaciliCom's network facilities. However, a substantial portion of
transmission capacity used by World Access and FaciliCom is obtained on a
variable, per minute and short-term basis, subjecting us to the possibility of
unanticipated price increases and service cancellations. Since we will not
generally have long-term arrangements for the purchase or resale of
international long distance services, and since rates fluctuate significantly
over short periods of time, our gross margins are subject to significant
fluctuations over short periods of time. Our gross margins also may be
negatively impacted in the longer term by competitive pricing pressures.
22
<PAGE> 26
TERMINATION OF OUR CARRIER SERVICE AGREEMENT WITH WORLDCOM NETWORK SERVICES
COULD MATERIALLY ADVERSELY AFFECT OUR REVENUES
We anticipate that the carrier service agreement with WorldCom Network
Services pursuant to which WorldCom Network Services purchases international
long distance services on a wholesale basis will continue in effect for us after
the merger. WorldCom Network Services presently provides a significant portion
of our service revenues. Termination of the carrier service agreement, or any
reduction in services provided thereunder, could materially decrease our
revenues. WorldCom Network Services is obligated to purchase from us at least
$25.0 million a month of such services, provided the services are of acceptable
quality and the rates quoted are at least equal to the rates WorldCom Network
Services is obtaining from other third party providers. The carrier service
agreement is for a one-year term but automatically renews each month, subject to
a one-year termination notice. On a pro forma basis after giving effect to the
merger and certain other transactions, revenues attributable to the carrier
service agreement for the first six months of 1999 would have comprised
approximately 28.2% of our total revenues for this period.
TECHNICAL DIFFICULTIES WITH OR FAILURES IN OUR NETWORK COULD RESULT IN
DISSATISFIED CUSTOMERS AND LOSS OF REVENUE
Technical difficulties with or failures in our telecommunications network
could result in dissatisfied customers and lost revenue. For example, a failure
in a portion of our network could prevent us from delivering telephone calls
initiated by our customers. Additionally, technical difficulties with the
network could cause the loss of call detail record information, which is the
basis for our ability to process and substantiate customer billings. Components
of World Access' telecommunications group's network have failed in the past,
which have had a material adverse effect on the telecommunications group's
operating results. We cannot assure you that similar or other failures will not
occur in the future.
REGULATION OF CUSTOMERS MAY MATERIALLY ADVERSELY AFFECT OUR REVENUES BY
DECREASING THE VOLUME OF TRAFFIC WE RECEIVE FROM MAJOR CUSTOMERS
Our customers will also be subject to actions taken by domestic or foreign
regulatory authorities that may affect the ability of customers to deliver
traffic to us. Regulatory sanctions have been imposed on some of our and
FaciliCom's customers in the past. Future regulatory actions could materially
adversely affect the volume of traffic received from a major customer, which
could materially decrease our revenues.
EXISTING AND FUTURE GOVERNMENTAL REGULATION IN THE U.S. AND IN THE OTHER
COUNTRIES IN WHICH WE OPERATE OR IN WHICH WE MAY OPERATE COULD INCREASE OUR
COSTS OR RESTRICT OUR OPERATIONS IN A MANNER THAT COULD REDUCE OUR PROFITABILITY
National and local laws and regulations governing telecommunications
services differ significantly among the countries in which we currently operate
and in which we may operate. In the United States, our business is subject to
the Communications Act of 1934 and the rules issued under the Communications Act
by the Federal Communications Commission, including regulations which limit the
conditions under which a carrier may connect international private lines to the
telephone network and which limit the arrangements U.S. international carriers
may enter into with foreign carriers for exchanging telecommunications traffic.
To the extent we provide intrastate services, our business is also subject to
the applicable laws and regulations of the individual states. We are also
subject to the laws and regulations of the various foreign countries in which we
operate. The interpretation and enforcement of these laws and regulations varies
and could limit our ability to provide communications services in some of the
markets in which we operate, or make it more costly for us to conduct our
operations. In addition, future regulatory, judicial and legislative changes may
have a material adverse effect on us. While each of World Access and FaciliCom
believes it is in substantial compliance with all applicable U.S. and foreign
laws and regulations, U.S. or foreign regulators or third parties, including our
competitors, may allege that we have failed to comply with applicable laws and
regulations. If we fail to comply with national, local or foreign regulations,
whether existing or future, we could become subject to fines, penalties, the
forfeiture of
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<PAGE> 27
our authorizations, the termination of our arrangements with foreign carriers,
or other adverse actions. These penalties could substantially increase our costs
or prevent us from providing our services.
Governments of many countries exercise substantial influence over various
aspects of the telecommunications market. In some cases, the government owns or
controls companies that are or may become our competitors or companies, such as
national telephone companies, upon which we and our foreign partners may depend
for required interconnections to local telephone networks and other services.
Accordingly, government actions in the future could have a material adverse
effect on our operations. In highly regulated countries in which we are not
dealing directly with the dominant local exchange carrier, the dominant carrier
may have the ability to route service to us or our foreign partner and, if this
occurs, we may have limited or no recourse. In countries where competition is
not yet fully established and we are dealing with an alternative operator,
foreign laws may prohibit or impede new operators from offering services in
these markets.
We currently plan to expand our foreign operations as these markets
increasingly permit competition. The nature, extent and timing of our foreign
operations, however, will be determined, in part, by the actions taken by
foreign governments to permit competition and the response of incumbent carriers
to these efforts. The regulatory authorities in these countries may not provide
us with practical opportunities to compete in the near future, or at all, and we
may not be able to take advantage of any such liberalization in a timely manner.
RECENT FCC ACTIONS MAY ADVERSELY AFFECT US BY INCREASING COMPETITION, WHICH MAY
INCREASE PRICING PRESSURES AND DECREASE DEMAND FOR OUR SERVICES
Recent FCC rulemaking orders and other actions have lowered the entry
barriers for new carriers and resale international carriers by streamlining the
processing of new applications and by eliminating the international settlements
policy for arrangements with foreign carriers that lack market power and on
other selected routes. In addition, the FCC's rules implementing the World Trade
Organization Basic Telecommunications Agreement presume that competition will be
advanced by the U.S. entry of carriers and resale carriers from World Trade
Organization member countries, thus further increasing the number of potential
competitors in the U.S. market and the number of carriers which may also offer
end-to-end services.
In addition, the Telecommunications Act of 1996 permits the FCC to forbear
enforcement of the tariff provisions in that act, which apply to all interstate
and international carriers, and the U.S. Court of Appeals for the District of
Columbia Circuit is currently reviewing an FCC order directing all domestic
interstate carriers to de-tariff their offerings. The FCC's order, which is
stayed pending the court's review, only applies to our domestic services.
However, subject to the court's decision, the FCC may also forbear from
enforcing its current tariff rules for U.S. international carriers, or order
these carriers to de-tariff their services. In that event, we would have greater
flexibility in pricing our international service offerings and to compete,
although any such FCC action likely would grant other non-dominant international
carriers equivalent freedom. The FCC also routinely reviews the contribution
rate for various levels of regulatory fees, including the rate for fees levied
to support universal service, which fees may be increased in the future for
various reasons, including the need to support the universal service programs
mandated by The Telecommunications Act of 1996, the total costs for which are
still under review by the FCC. We expect that competition will continue to
intensify as a result of the new competitive opportunities created by the
Telecommunications Act of 1996 and the implementation of the World Trade
Organization agreement. Such increased competition may increase pricing
pressures, reduce our margins and decrease demand for our services.
Our World Access Telecommunications Group also competes with MCI WorldCom,
Pacific Gateway Exchange, Inc. and other foreign and U.S.-based long distance
providers, including the regional Bells, which presently have FCC authority to
resell and route international telecommunications services originating outside
of their respective in-region states. Many of the long distance providers and
telecommunications equipment manufacturers with whom we and FaciliCom compete
have significantly
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<PAGE> 28
more extensive engineering, manufacturing, marketing, financial and technical
resources than World Access and FaciliCom. We are uncertain whether we can
continue to compete successfully with our competitors.
FCC INTERVENTION REGARDING THE SETTLEMENT RATES CHARGED BY FOREIGN CARRIERS MAY
DISRUPT OUR TRANSMISSION ARRANGEMENTS TO CERTAIN COUNTRIES
The FCC recently has sought to reduce the foreign routing costs of U.S.
international carriers by prescribing maximum or benchmark settlement rates
which foreign carriers may charge U.S. carriers for routing telecommunications
traffic. The FCC's benchmarks order was recently upheld by the U.S. Court of
Appeals for the District of Columbia Circuit. The FCC's action may reduce our
settlement costs, although the costs of other U.S. international carriers also
may be reduced in a similar fashion. The FCC has not stated how it will enforce
the new settlement benchmarks if U.S. carriers are unsuccessful in negotiating
settlement rates at or below the prescribed benchmarks. Any future FCC
intervention could disrupt our transmission arrangements to certain countries or
require us to modify our existing arrangements.
DELAYS AND INCONSISTENCIES IN IMPLEMENTATION OF THE WORLD TRADE ORGANIZATION
AGREEMENT AND OTHER COMPETITIVE DIRECTIVES MAY ADVERSELY AFFECT OUR BUSINESS IN
SOME FOREIGN COUNTRIES
Under the World Trade Organization agreement, the U.S. and 68 other
countries agreed to open their telecommunications markets to competition and
foreign ownership effective February 5, 1998. These World Trade Organization
member countries, which have increased to 72, represent approximately 90% of
worldwide telecommunications traffic. Although the World Trade Organization
agreement has been implemented, to some degree, by most of the 72 signatory
countries, some signatory countries have not yet fully implemented their World
Trade Organization commitments. Our ability to expand our operations
internationally will be limited if any signatory country to the World Trade
Organization agreement fails to implement its obligations on a timely basis.
These factors and other obstacles which could develop in connection with the
deregulation of telecommunications services could have a material adverse effect
on our operations by slowing down our rate of expansion.
The national governments of the European Union member states in which we
currently operate, and in which we may operate in the future, were required to
pass legislation to liberalize the telecommunications markets within their
countries to implement European Commission directives. Most of the member states
have now implemented the required legislation. In certain cases this has been
done on an inconsistent, and sometimes unclear, basis. In addition, the
legislation and/or its implementation have, in certain circumstances, imposed
significant obstacles on the ability of carriers to proceed with the licensing
process. These barriers include requirements that carriers:
- post significant bonds or make significant capital commitments to build
infrastructure;
- complete extensive application documentation; and
- pay substantial license fees.
Implementation has also been slow in certain member states as a result of
their failure to dedicate the resources necessary to have a functioning
regulatory body in place. These factors and other obstacles which could develop
in connection with deregulation of telecommunications services could have a
material adverse effect on our operations by slowing down the rate of our
expansion.
AS WE EXPAND OUR FOCUS ON RETAIL CUSTOMERS AND EMERGING CARRIERS, OUR LEVEL OF
UNCOLLECTIBLE DEBT MAY INCREASE
As a wholesale provider of international long distance services, we will
depend upon traffic from other long distance providers, and upon the collection
of receivables from these customers. If we experience difficulties in the
collection of our accounts receivable from our major customers, our cash flow
may be substantially reduced. In addition, we may expend considerable resources
to collect receivables from customers who fail to make timely payments.
25
<PAGE> 29
In the experience of World Access and FaciliCom, a higher percentage of the
revenues generated by retail customers and from emerging carriers is
uncollectible. Therefore, if the percentage of our revenues derived from retail
operations and from sales to emerging carriers increases, our level of
uncollectible debt is likely to increase.
WE MAY SUSTAIN MATERIAL LIABILITY AS A RESULT OF STOCKHOLDER SUITS AGAINST US
Following our announcement in January 1999 regarding earnings expectations
for the quarter and year ended December 31, 1998 and the subsequent decline in
the price of World Access common stock, a number of stockholders filed class
action complaints against us. The plaintiffs alleged violations of the federal
securities laws and have requested an unspecified amount of damages in their
complaints. We may have to pay substantial damages if the plaintiffs are
successful in their actions.
WE MAY LOSE MARKET SHARE AND FACE PRICING PRESSURES IF WE ARE NOT ABLE TO
COMPETE SUCCESSFULLY WITH OTHER TELECOMMUNICATIONS FIRMS
The segments of the telecommunications industry in which we operate are
intensely competitive. We believe that competition will continue to increase,
placing downward pressure on prices, thus adversely affecting our gross margins.
Many of the long distance providers and telecommunications equipment
manufacturers with whom we compete have significantly more extensive
engineering, manufacturing, marketing, financial and technical resources than
we. We are uncertain whether we can continue to compete successfully with our
competitors.
Additionally, the telecommunications industry is in a period of rapid
technological evolution, marked by the introduction of competitive product and
service offerings, such as the utilization of the Internet for international
voice and data communications. Technological developments by our competitors may
challenge our competitive position or increase the amount of expenditures that
will be required for us to respond to a rapidly changing technological
environment.
IF WE ARE UNABLE TO PROTECT AND MAINTAIN THE COMPETITIVE ADVANTAGE OF OUR
INTELLECTUAL PROPERTY RIGHTS, WE MAY INCUR SIGNIFICANT LICENSING COSTS OR BE
PRECLUDED FROM MANUFACTURING OR SELLING OUR PRODUCTS
We rely on contractual rights, trade secrets, trademarks and copyrights to
establish and protect our proprietary rights in our products. In the future, we
may be required to bring or defend against litigation to enforce any patents
issued or assigned to us, to protect trademarks, trade secrets and other
intellectual property rights we own, to defend against claimed infringement of
the rights of others and to determine the scope and validity of the proprietary
rights of others. Regardless of the ultimate outcome, any litigation could be
costly and could divert management's attention from the operations of our
business. Adverse determinations in litigation could result in the loss of our
proprietary rights, subject us to significant liabilities, require us to seek
licenses from third parties or prevent us from manufacturing or selling our
products, any of which could have a material adverse effect on our business,
financial condition and results of operations.
WE MAY INCUR SUBSTANTIAL COSTS IF A THIRD PARTY CLAIMS THAT ANY OF OUR PRODUCTS
INFRINGE UPON ITS PATENTS
Software comprises a substantial portion of the technology in our products.
The scope of protection accorded to patents covering software-related inventions
is evolving and is subject to a degree of uncertainty that may increase our risk
of litigation and costs if we discover the existence of third party patents
related to our software products or if such patent rights are asserted against
us in the future.
Although we presently hold several patents for certain of our existing
products and have several patent applications pending, not all of our products
are covered by patents. We have not conducted a formal patent search relating
generally to the technology used in our products. In addition, since a patent
application in the United States is not publicly disclosed until the patent is
issued and foreign patent applications generally are not publicly disclosed for
at least a portion of the time that they are pending, applications may have been
filed which, if issued as patents, would relate to our products.
26
<PAGE> 30
WE MAY FACE LIABILITY UNDER THE FOREIGN CORRUPT PRACTICES ACT
Our international operations are subject to the Foreign Corrupt Practices
Act, which generally prohibits U.S. companies and their intermediaries from
bribing foreign officials for the purpose of obtaining or keeping business. We
may face liability under the Foreign Corrupt Practices Act as a result of past
or future actions taken without our knowledge by agents, strategic partners and
other intermediaries.
THE LOSS OF, OR A MATERIAL REDUCTION IN ORDERS BY, ONE OR MORE OF OUR EQUIPMENT
GROUP'S KEY CUSTOMERS COULD MATERIALLY DECREASE OUR REVENUES
A small number of customers historically has accounted for a significant
percentage of our equipment group's total sales. For the six months ended June
30, 1999, one customer accounted for 10.1% of our equipment group's total sales
and our top ten customers accounted for 51.8% of total sales. For the year ended
December 31, 1998, no customer individually accounted for more than 10.0% of our
equipment group's total sales and our top ten customers accounted for 30.1% of
our equipment group's total sales. Our customers typically are not obligated
contractually to purchase any quantity of products or services in any particular
period. The loss of, or a material reduction in orders by, one or more key
customers could materially decrease our revenues.
RAPID TECHNOLOGICAL DEVELOPMENT AND NEW PRODUCTS INTRODUCED BY OUR COMPETITORS
COULD MAKE OUR PRODUCTS OBSOLETE
Our failure to introduce new products and services and to respond to
industry changes on a timely and cost effective basis could make our products
obsolete and could impair our ability to meet the demands of our customers. The
introduction and marketing of new or enhanced products and services require us
to manage the transition from existing products in order to minimize disruption
in customer purchasing patterns. There can be no assurance that we will
successfully manage the transition to new or enhanced products or services.
Further, there can be no assurance that products, services or technologies
developed by others will not render our products, services or technologies
obsolete.
From time to time, we or our competitors may announce new products,
services, capabilities or technologies that have the potential to replace or
shorten the life cycle of our existing product and service offerings. There can
be no assurance that announcements of product enhancements or new product or
service offerings will not cause customers to defer purchasing our existing
products or cause resellers to return products. Any such deferrals,
cancellations or returns could materially decrease our revenues.
OUR NEW PRODUCTS MAY CONTAIN UNDETECTED ERRORS RESULTING IN THE LOSS OR DELAY OF
MARKET ACCEPTANCE OF OUR PRODUCTS
Products as complex as ours may contain undetected errors or failures when
first introduced or as new versions are released. Such errors have occurred in
our products in the past. The occurrence of these errors could result in the
following:
- the loss or delay in market acceptance of our products;
- the diversion of development resources;
- damage to our reputation; or
- increased service or warranty costs.
OUR RELIANCE ON THIRD PARTY SUPPLIERS FOR CERTAIN PRODUCTS AND KEY COMPONENTS
COULD HINDER OUR ABILITY TO SATISFY CUSTOMER DEMANDS OR OUR GROWTH OBJECTIVES
Failure to obtain products and key components from third party suppliers on
a timely and cost effective basis could have a material adverse effect on our
business, financial condition and results of operations. We purchase
substantially all of our components and other parts from suppliers on a purchase
order basis and do not maintain long-term supply arrangements. We obtain several
components, primarily custom hybrid integrated circuits, from a single source.
Accordingly, there can be no assurance that we
27
<PAGE> 31
will be able to continue to obtain sufficient quantities of products or key
components as required or that these products or key components, if obtained,
will be available to us on commercially favorable terms.
DELAYS AND COSTS INCURRED IN ACHIEVING COMPLIANCE WITH GOVERNMENT REGULATIONS
AND EVOLVING INDUSTRY STANDARDS COULD ADVERSELY AFFECT OUR REVENUES
Any products' failure to comply with the various existing and evolving
regulations and industry standards or the delays and costs incurred in achieving
compliance with these regulations and standards could materially decrease our
revenues, increase our costs and reduce our profitability. Our products must
meet a significant number of voice and data communications regulations and
standards, some of which are evolving as new technologies are deployed. In the
United States, these products and services must comply with various regulations
promulgated by the FCC, as well as with standards established by Bell
Communications Research. Internationally, our products and services must comply
with standards established by telecommunications authorities in various
countries, as well as with recommendations of the International
Telecommunications Union.
WE MAY LOSE REVENUE OR INCUR ADDITIONAL COSTS BECAUSE OF A FAILURE TO ADEQUATELY
ADDRESS THE YEAR 2000 ISSUE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000.
We are in the final phase of completing our Year 2000 Readiness Plan which
is the remediation phase. Until we have completed our verification testing of
our remediation efforts, we cannot be certain that our efforts to address Year
2000 issues are appropriate, adequate or complete. In addition, we may be
adversely affected by Year 2000 problems experienced by suppliers or customers.
Although we are conducting an external review of third parties with whom we do
business, we are limited in our ability to determine the ability of these
parties to address Year 2000 issues.
As a result, we may suffer various consequences, including:
- a significant number of operational inconveniences and inefficiencies for
us, our customers and our suppliers that may divert our time and
attention and financial and human resources from our ordinary business
activities;
- serious system failures (or serious system failures by companies on which
we rely) that may require significant efforts by us, our customers and
our suppliers to prevent or alleviate material business disruptions; and
- a significant loss of revenues or a significant amount of unanticipated
expenses.
RISK FACTORS RELATED TO OUR COMMON STOCK
THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND COULD CONTINUE TO FLUCTUATE
SUBSTANTIALLY
Our common stock is traded on Nasdaq. The market price of our common stock
has been volatile and could fluctuate substantially based on a variety of
factors, including the following:
- announcements of new products or technological innovations by us or
others;
- variations in our results of operations;
- the gain or loss of significant customers;
- the timing of acquisitions of businesses or technology licenses;
- legislative or regulatory changes;
- general trends in the industry;
28
<PAGE> 32
- market conditions; and
- analysts' estimates and other events in our industry.
SIGNIFICANT VARIANCE IN OUR QUARTERLY OPERATING RESULTS MAY CONTINUE TO
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK
In future quarters, our results of operations may fail to meet the
expectations of market analysts and investors, which may adversely affect the
price of our common stock. Our quarterly operating results have varied
significantly in the past and are expected to do so in the future.
In response to competitive pressures or new product and service
introductions, we may take certain pricing or marketing actions that could
materially adversely affect our quarterly operating results. We base our expense
levels, in part, on our expectations of future sales. If future sales levels are
below expectations, then we may be unable to adjust spending sufficiently in a
timely manner to compensate for the unexpected sales shortfall.
Accordingly, we believe that you should not rely upon period-to-period
comparisons of our operating results as an indication of our future performance.
In addition, the operating results of any quarterly period are not indicative of
results that you should expect for a full fiscal year. Historically, we have
generated a disproportionate amount of our operating revenues toward the end of
each quarter, making precise prediction of revenues and earnings particularly
difficult and resulting in risk of variance of actual results from those
forecast at any time.
SALE OF SHARES BY FACILICOM STOCKHOLDERS COULD ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK
The Series C preferred stock is freely convertible into our common stock at
any time and the holders of our common stock issuable upon conversion of the
Series C preferred stock are not contractually prohibited from selling all or
any portion of that stock at any time. In addition, the FaciliCom stockholders
have demand and piggyback registration rights which would permit a public resale
of that stock. If we are unable to pay all or any portion of the $56.0 million
of the merger consideration in cash, we will be required to issue to the
stockholders and certain optionholders of FaciliCom at the closing of the merger
and thereafter the number of shares of our common stock that will result upon
resale in net proceeds of $56.0 million. The FaciliCom stockholders may resell a
substantial portion of their stockholdings after the consummation of the merger
resulting in an adverse effect on the trading price of our common stock.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS COULD MAKE IT LESS LIKELY THAT OUR
STOCKHOLDERS RECEIVE A PREMIUM FOR THEIR SHARES IN AN UNSOLICITED TAKEOVER
ATTEMPT
Certain provisions of our restated certificate of incorporation and our
restated bylaws could discourage unsolicited acquisition proposals or delay or
prevent a change in control resulting in our stockholders receiving a lower
premium for their shares in any such attempt or in our market price per share
and the voting and other rights of our stockholders being adversely affected.
Currently, those provisions include a classified Board of Directors, a
prohibition on written consents in lieu of meetings of the stockholders and the
authorization to issue up to 150,000,000 shares of common stock and up to
10,000,000 shares of preferred stock, with the Board having the authority to
designate the rights, preferences and limitations of the preferred stock.
29
<PAGE> 33
RECENT DEVELOPMENTS
WORLD ACCESS THIRD QUARTER RESULTS
On October 28, 1999, we announced the financial results of our third
quarter of 1999. The unaudited financial information of World Access presented
below, in the opinion of World Access management, includes all the significant
normal and recurring adjustments necessary for a fair presentation of the
financial position and results of operations for the periods presented (in
thousands, except per share data).
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF CONTINUING OPERATIONS DATA:
Carrier service revenues.................................... $130,470 $ 629 $329,361 $ 1,892
Equipment sales............................................. 72,569 35,619 194,929 92,303
-------- ------- -------- --------
Total Sales........................................ 203,039 36,248 524,290 94,195
Cost of carrier services.................................... 112,508 590 287,777 1,631
Cost of services network.................................... 4,006 38 13,969 114
Cost of equipment sold...................................... 42,234 18,395 110,924 47,748
Amortization of acquired technology......................... 1,200 -- 3,600 --
-------- ------- -------- --------
Total Cost of Sales................................ 159,948 19,023 416,270 49,493
-------- ------- -------- --------
Gross Profit....................................... 43,091 17,225 108,020 44,702
Research and development.................................... 4,509 1,778 13,282 4,256
Selling, general and administrative......................... 15,596 4,938 43,105 11,493
Amortization of goodwill.................................... 3,346 927 9,715 2,402
Provision for doubtful accounts............................. 1,410 166 2,840 410
In-process research and development......................... -- -- -- 35,400
Restructuring and other charges............................. -- -- -- 590
-------- ------- -------- --------
Operating Income (Loss)............................ 18,230 9,416 39,078 (9,849)
Gain on sale of securities.................................. 8,704 -- 8,704 --
Interest and other income................................... 1,123 857 2,629 2,827
Interest expense............................................ (2,790) (1,641) (7,394) (4,599)
-------- ------- -------- --------
Income (Loss) From Continuing Operations Before
Income Taxes and Minority Interests.............. 25,267 8,632 43,017 (11,621)
Income taxes................................................ 11,013 3,473 20,370 9,379
-------- ------- -------- --------
Income (Loss) From Continuing Operations Before
Minority Interests............................... 14,254 5,159 22,647 (21,000)
Minority interests in earnings of subsidiary................ -- 1,090 -- 2,623
-------- ------- -------- --------
Income (Loss) From Continuing Operations(1)........ 14,254 4,069 22,647 (23,623)
Net income (loss) from discontinued operations.............. (49) 2,962 (702) 2,922
Write-down of discontinued operations to net realizable
value..................................................... -- -- (13,662) --
-------- ------- -------- --------
Net Income (Loss).................................. 14,205 7,031 8,283 (20,701)
Preferred stock dividends................................... 784 -- 1,197 --
-------- ------- -------- --------
Net Income (Loss) Available to Common
Stockholders..................................... $ 13,421 $ 7,031 $ 7,086 $(20,701)
======== ======= ======== ========
Income (Loss) Per Common Share:
Basic:
Continuing Operations................................... $ 0.37 $ 0.19 $ 0.59 $ (1.16)
Discontinued Operations................................. -- 0.14 (0.39) 0.14
-------- ------- -------- --------
Net Income (Loss)....................................... $ 0.37 $ 0.33 $ 0.20 $ (1.02)
======== ======= ======== ========
Diluted:
Continuing Operations(1)................................ $ 0.33 $ 0.19 $ 0.56 $ (1.16)
Discontinued Operations................................. -- 0.13 (0.35) 0.14
-------- ------- -------- --------
Net Income (Loss)....................................... $ 0.33 $ 0.32 $ 0.21 $ (1.02)
======== ======= ======== ========
Weighted Average Shares Outstanding:
Basic..................................................... 36,509 21,249 36,245 20,346
======== ======= ======== ========
Diluted................................................... 43,491 25,144 40,048 20,346
======== ======= ======== ========
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
ASSETS
Current Assets:
Cash and equivalents...................................... $107,841 $ 55,176
Accounts receivable....................................... 123,382 70,485
Inventories............................................... 40,337 48,591
Other current assets...................................... 55,041 58,566
-------- --------
Total Current Assets.............................. 326,601 232,818
Property and equipment...................................... 63,390 63,602
Goodwill and other intangibles.............................. 306,930 298,780
Other assets................................................ 30,683 18,612
-------- --------
Total Assets...................................... $727,604 $613,812
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt........................................... $ 13,755 $ 17,989
Accounts payable.......................................... 75,438 36,418
Other accrued liabilities................................. 47,595 52,825
-------- --------
Total Current Liabilities......................... 136,788 107,232
Long-term debt.............................................. 140,926 137,864
Noncurrent liabilities...................................... 7,986 8,133
-------- --------
Total Liabilities................................. 285,700 253,229
-------- --------
Stockholders' Equity........................................ 441,904 360,583
-------- --------
Total Liabilities and Stockholders' Equity........ $727,604 $613,812
======== ========
</TABLE>
- ---------------
(1) Income from continuing operations for the three and nine months ended
September 30, 1999 includes a one-time net gain of approximately $5.3
million or $0.12 per diluted share from the sale of securities.
FACILICOM FISCAL FOURTH QUARTER RESULTS
On November 4, 1999, FaciliCom announced the results of their fourth
quarter of fiscal 1999. The unaudited financial information of FaciliCom
presented below, in the opinion of FaciliCom management, include all the
significant normal and recurring adjustments necessary for a fair presentation
of the financial position and results of operations for the periods presented
(in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ----------------------
1999 1998 1999 1998
-------- -------- ----------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $124,071 $ 67,100 $403,766 $184,246
Cost of revenues...................................... 111,325 64,479 368,578 178,952
-------- -------- -------- --------
Gross margin........................................ 12,746 2,621 35,188 5,294
Selling, general and administrative................... 14,676 12,514 55,030 34,347
Staff restructuring expense........................... 634 -- 634 --
Stock-based compensation expense...................... 3,247 311 3,611 6,017
Depreciation and amortization......................... 12,863 3,502 29,758 8,816
-------- -------- -------- --------
Operating loss...................................... (18,674) (13,706) (53,845) (43,886)
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ----------------------
1999 1998 1999 1998
-------- -------- ----------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest expense...................................... (8,717) (8,073) (34,407) (22,612)
Interest income....................................... 710 2,558 4,356 8,152
Other income.......................................... -- -- -- 791
Exchange gain (loss).................................. (244) 264 (1,590) (391)
-------- -------- -------- --------
Los before income taxes............................. (26,925) (18,957) (85,486) (57,946)
Income tax benefit.................................... 4,313 4,877 10,995 11,351
-------- -------- -------- --------
Net loss............................................ $(22,612) $(14,080) $(74,491) $(46,595)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1999 1998
----------- --------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, equivalents and investments........................... $ 61,323 $181,345
Property and equipment, gross............................... 215,599 126,165
Total assets................................................ 370,166 378,884
Total long-term obligations (net of current portion)........ 328,421 305,137
Stockholders' equity (deficit).............................. (126,830) (38,575)
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Forward-looking statements are
statements other than historical information or statements of current condition.
Some forward looking statements may be identified by use of such terms as
"believes," "anticipates," "intends," or "expects." These forward-looking
statements relate to our plans, objectives and expectations for future
operations. In light of the risks and uncertainties inherent in all such
projected operational matters, the inclusion of forward-looking statements in
this prospectus should not be regarded as a representation by us or any other
person that our objectives or plans will be achieved or that any of our
operating expectations will be realized.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes or the exchange shares in exchange for the outstanding FaciliCom notes. We
are making this exchange offer solely in connection with our merger with
FaciliCom.
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<PAGE> 36
CAPITALIZATION
The following table sets forth our consolidated capitalization as of June
30, 1999 on an actual basis, and as adjusted to give effect to our merger with
FaciliCom and the issuance of the exchange notes in the exchange offer. You
should read this table in conjunction with FaciliCom's "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in this
prospectus and FaciliCom's consolidated financial statements and notes thereto,
included in this prospectus, as well as our Management's Discussion and Analysis
of Financial Condition and Results of Operations and our consolidated financial
statements and notes thereto, each incorporated by reference from our Form 10-K,
as amended, for the year ended December 31, 1998. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 98,996 $ 123,442
======== ==========
Long-term debt (including current portion):
Revolving credit facility borrowings...................... $ 5,900 $ 15,900
13.25% Senior Notes due 2008.............................. -- 285,000
4.5% Convertible Subordinated Notes due 2002.............. 115,000 115,000
Capital lease obligations................................. 30,713 46,207
Other..................................................... 1,400 1,909
-------- ----------
Total long-term debt, including current portion... 153,013 464,016
Stockholders' equity........................................ 425,792 891,152
-------- ----------
Total capitalization.............................. $578,805 $1,355,168
======== ==========
</TABLE>
For a description of our 4.5% Convertible Subordinated Notes due 2008 and
our revolving credit facility, see Note I to the consolidated financial
statements in our Form 10-K for the year ended December 31, 1998, as amended,
incorporated by reference in this prospectus.
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<PAGE> 37
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the merger of FaciliCom with and into World Access, we
have entered into an agreement with FaciliCom and the holders of a majority in
interest of the FaciliCom notes in which we agreed, among other things, to use
our reasonable best efforts to file a registration statement relating to an
offer to exchange the FaciliCom notes for the exchange consideration, which
includes the exchange notes, the exchange shares and a cash payment, as more
fully described below under "-- Terms of the Exchange Offer."
We have also agreed to:
- distribute a copy of this prospectus to each of the holders of FaciliCom
notes;
- keep the exchange offer open for at least 20 business days after the date
on which notice of the exchange offer is first mailed to holders of the
FaciliCom notes; and
- after the expiration of the exchange offer, accept for exchange all
FaciliCom notes properly tendered and not validly withdrawn.
In exchange, under the terms of this agreement, each holder of the
FaciliCom notes party to the agreement has agreed to (subject to certain
conditions):
- exchange all of their FaciliCom notes for the exchange consideration in
the exchange offer; and
- consent to the proposed amendments to the FaciliCom indenture.
In addition, we have agreed, upon the completion of the merger and the
exchange and consent solicitation, to:
- transfer on a pro rata basis securities and/or funds held in the
collateral account established and maintained for the benefit of the
holders of the FaciliCom notes to a collateral account for the benefit of
the holders of the exchange notes; and
- make interest payments on the FaciliCom notes and the exchange notes from
those collateral accounts until they are exhausted.
The FaciliCom notes were issued on January 28, 1998 pursuant to an
indenture between FaciliCom and The State Street Bank and Trust Company, dated
as of January 28, 1998, as amended and supplemented by the first supplemental
indenture. This indenture, as supplemented, is referred to in this prospectus as
the FaciliCom indenture.
IN ORDER TO TENDER YOUR FACILICOM NOTES, YOU WILL BE REQUIRED, AS A
CONDITION TO A VALID TENDER, TO GIVE YOUR CONSENT TO THE PROPOSED AMENDMENTS TO
THE FACILICOM INDENTURE. BY PROPERLY TENDERING YOUR FACILICOM NOTES, YOU WILL
ALSO BE CONSENTING TO THE PROPOSED AMENDMENTS TO THE FACILICOM INDENTURE.
FURTHERMORE, IN ORDER TO GIVE YOUR CONSENT TO THE PROPOSED AMENDMENTS, YOU MUST
VALIDLY TENDER, AND NOT VALIDLY WITHDRAW, YOUR FACILICOM NOTES. IF YOU WITHDRAW
YOUR TENDER OF FACILICOM NOTES, YOUR CONSENT TO THE AMENDMENTS WILL ALSO BE
DEEMED WITHDRAWN. IF THE PROPOSED AMENDMENTS BECOME EFFECTIVE, EACH NON-
EXCHANGING HOLDER OF FACILICOM NOTES WILL BE BOUND BY THE PROPOSED AMENDMENTS TO
THE FACILICOM INDENTURE EVEN THOUGH THE HOLDER DID NOT CONSENT. SEE "-- THE
CONSENT SOLICITATION" BELOW AND "THE PROPOSED AMENDMENTS" FOR A DESCRIPTION OF
THE PROPOSED AMENDMENTS TO THE FACILICOM INDENTURE.
34
<PAGE> 38
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any FaciliCom
notes properly tendered and not withdrawn prior to the expiration date. We are
offering to exchange $1,000 original principal amount of exchange notes for
$1,000 original principal amount of FaciliCom notes. Unless otherwise agreed to
by us, FaciliCom notes may be tendered only in integral multiples of $1,000. The
exchange notes will have terms substantially identical to the FaciliCom notes
except that:
- we, and not FaciliCom, are responsible for payment of all amounts due on
the exchange notes;
- the interest rate we will pay on the exchange notes is 13.25% per annum;
- we will be obligated to make an offer to purchase the exchange notes at a
price of 100% of the principal amount with the cash proceeds from any
individual asset sale that exceeds $15.0 million;
- the amounts we must pay to redeem the exchange notes prior to 2006 are
greater than the equivalent amounts under the FaciliCom notes; and
- the covenants in the indenture governing the terms of the exchange notes
allow us more flexibility to, among other things, incur indebtedness,
make some restricted payments, enter into some transactions with our
affiliates, permit restrictions on the payment of dividends, conduct our
telecommunications equipment business and undertake some asset sales than
was allowed under the FaciliCom indenture.
The exchange notes will be issued under and entitled to the benefits of an
indenture, to be entered into between us and First Union National Bank, as
trustee. For a description of the indenture, see "Description of the Exchange
Notes."
In addition to exchange notes, in exchange for FaciliCom notes tendered and
accepted for exchange in the exchange offer, we will also issue the exchange
shares and the cash payment. The exchange shares will consist of our common
stock, par value $.01 per share, having an aggregate market value of $50 per
$1,000 original principal amount of FaciliCom notes. The number of exchange
shares that each holder of FaciliCom notes will receive will be determined as
follows:
- the aggregate principal amount of each holder's tendered and accepted
FaciliCom notes will be multiplied by 0.05; and
- the product of such multiplication will be divided by the market price of
the exchange shares.
The market price of the exchange shares will be the average closing price of the
exchange shares on Nasdaq over the five consecutive trading days up to and
including the trading day prior to the last full trading day before the closing
of the merger between us and FaciliCom. The cash payment will be made in the
amount of $10 per $1,000 original principal amount of FaciliCom notes.
The exchange notes will bear interest at the rate of 13.25% per annum
commencing on the exchange date, payable semiannually in arrears on January 15
and July 15 of each year, commencing January 15, 2000 (or July 15, 2000, if the
exchange date is subsequent to January 1, 2000), to the person in whose name the
exchange note is registered at the close of business on the preceding January 1
or July 1, as the case may be. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
Accrued and unpaid interest on the FaciliCom notes tendered and accepted on
the exchange date will be paid to the person in whose name such notes are
tendered or such other person as indicated on the letter of transmittal.
Interest on the FaciliCom notes tendered in the exchange offer will cease to
accrue interest on the day prior to the exchange date. Payment will be made on
January 15, 2000, or July 15, 2000 if the exchange date has not occurred prior
to January 1, 2000.
As of the date of this prospectus, $300 million aggregate original
principal amount of the FaciliCom notes are outstanding. This prospectus and the
letter of transmittal are being sent to all registered holders
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of FaciliCom notes. There will be no fixed record date for determining
registered holders of FaciliCom notes entitled to participate in the exchange
offer.
We intend to conduct the exchange offer in accordance with the provisions
of the agreement among us, FaciliCom and the holders of a majority in interest
of the FaciliCom notes, the applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations of the SEC. FaciliCom notes that are
not tendered in the exchange offer will remain outstanding and continue to
accrue interest and will be entitled to the rights and subject to the terms and
conditions of the FaciliCom indenture, as amended and supplemented. However, if
the conditions to the exchange offer are met and the exchange is consummated,
the FaciliCom indenture will be further amended and supplemented by a second
supplemental indenture which will materially reduce the obligations of FaciliCom
(and us as the surviving corporation after the merger) under the FaciliCom
indenture. See "-- The Consent Solicitation" below and, for a description of the
proposed amendments to the FaciliCom indenture, see "The Proposed Amendments."
We will be deemed to have accepted for exchange properly tendered FaciliCom
notes when we have given oral or written notice of the acceptance to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the exchange notes from us and delivering the
exchange consideration to such holders. Subject to the terms of the agreement
among us, FaciliCom and the holders of a majority in interest of the FaciliCom
notes, we expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any FaciliCom notes not previously accepted for
exchange, upon the occurrence of any of the conditions specified below under the
caption "-- Certain Conditions to the Exchange Offer."
Holders who tender FaciliCom notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
FaciliCom notes. We will pay all charges and expenses, other than some
applicable taxes described below, in connection with the exchange offer. You
should read the section labeled "-- Fees and Expenses" below for more details
regarding fees and expenses incurred in the exchange offer.
THE CONSENT SOLICITATION
As part of the exchange offer, we are also soliciting consents from the
holders of the FaciliCom notes to certain amendments to the FaciliCom indenture
under which the FaciliCom notes were issued. The proposed amendments materially
reduce the obligations of FaciliCom (and us as the surviving corporation after
the merger) under the FaciliCom indenture by, among other things:
(1) removing restrictions on FaciliCom's ability to:
- consolidate and/or merge;
- incur additional debt;
- make payments to affiliates;
- make dividend payments;
- sell capital stock of its subsidiaries;
- enter into transactions with shareholders;
- create liens on its property;
- sell assets;
- transfer its existing business; and
- enter into sale-leaseback transactions; and
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(2) eliminating FaciliCom's obligations to:
- hold money for payment of the FaciliCom notes in trust;
- pay taxes;
- maintain its properties;
- maintain insurance coverage; and
- provide the holders of FaciliCom notes with financial statements.
If the consents of the holders of a majority of the aggregate original
principal amount of the FaciliCom notes are received, the FaciliCom indenture
will be amended in accordance with the proposed amendments described more fully
under "The Proposed Amendments."
FaciliCom and the trustee under the FaciliCom indenture will execute a
second supplemental indenture after certification to the FaciliCom trustee that
the required consents have been received and the satisfaction or waiver of the
other conditions to the execution of the second supplemental indenture. We will
give oral or written notice to the exchange agent of our acceptance and shall be
deemed to have accepted for exchange validly tendered FaciliCom notes only after
such oral or written notice of acceptance has been given to the exchange agent
and the second supplemental indenture has been executed. If the proposed
amendments become effective, each non-exchanging holder of FaciliCom notes will
be bound by the applicable proposed amendments even though the holder did not
consent to the proposed amendments.
WE WILL MAKE NO SEPARATE PAYMENT, OTHER THAN THE EXCHANGE CONSIDERATION IN
EXCHANGE FOR THE FACILICOM NOTES, FOR CONSENTS DELIVERED IN THE CONSENT
SOLICITATION WHICH IS PART OF THE EXCHANGE OFFER.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATIONS
The exchange offer will expire at 12:00 p.m., New York City time, on
December 7, 1999, unless, in our sole discretion, we extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
FaciliCom notes of the extension no later than 9:00 a.m., New York City time, on
the first business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting for exchange any FaciliCom notes;
- to extend the exchange offer or to terminate the exchange offer and to
refuse to accept FaciliCom notes not previously accepted if any of the
conditions set forth below under "-- Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
- subject to the terms of the agreement among us, FaciliCom and the holders
of a majority in interest of the FaciliCom notes, to amend the terms of
the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of FaciliCom notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly
disclose the amendment in a manner reasonably calculated to inform the holders
of FaciliCom notes of the amendment.
Without limiting the manner in 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 public announcement, other than by making a timely
release to a financial news service.
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CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The exchange offer is conditioned upon:
- the consummation of the merger of World Access and FaciliCom;
- the tender by the holders of at least a majority of the aggregate
principal amount of FaciliCom notes in the exchange offer and the
acceptance by World Access of such tenders; and
- the consent by the holders of at least a majority of the aggregate
principal amount of FaciliCom notes to the proposed amendments to the
FaciliCom indenture.
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any FaciliCom notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any FaciliCom notes for exchange if:
- the trustee under the FaciliCom indenture has objected to, or taken any
action that could adversely affect, the consummation of the exchange
offer or the consent solicitation or our ability to effect the proposed
amendments to the FaciliCom indenture;
- the trustee under the FaciliCom indenture has taken any action that
challenges the validity or effectiveness of the procedures we used in the
exchange offer or consent solicitation;
- the exchange offer, or the making of any exchange by a holder of
FaciliCom notes, in our reasonable judgment, would violate applicable law
or any applicable interpretation of the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency, or any statute, rule,
regulation, judgment, order, stay, decree or injunction has been
promulgated, enacted or entered, with respect to the exchange offer that,
in our judgment, could reasonably be expected to impair our ability to
proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the FaciliCom
notes of any holder that has not made to us the representations described under
"-- Procedures for Tendering."
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any FaciliCom notes by giving oral or written notice of the
extension to their holders. During any extensions, all FaciliCom notes
previously tendered will remain subject to the exchange offer, and we may accept
them for exchange. We will return any FaciliCom notes that we do not accept for
exchange for any reason without expense to their tendering holders as promptly
as practicable after the expiration or termination of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any FaciliCom notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the FaciliCom notes
as promptly as practicable. In the case of any extension, the notice will be
issued no later than 9:00 a.m., New York City time, on the first business day
after the previously scheduled expiration date.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in
part at any or at various times in our sole discretion. If we fail at any time
to exercise any of the foregoing rights, this failure will not constitute a
waiver of such right. Each such right will be deemed an ongoing right that we
may assert at any time or at various times.
In addition, we will not accept for exchange any FaciliCom notes tendered,
and will not issue exchange notes in exchange for any such FaciliCom notes, if
at such time any stop order has been threatened or is in effect with respect to
the registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939.
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PROCEDURES FOR TENDERING
Only a holder of FaciliCom notes may tender FaciliCom notes in the exchange
offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile to the exchange agent prior to
the expiration date; or
- comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
- the exchange agent must receive FaciliCom notes along with the letter of
transmittal;
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of the FaciliCom notes into the
exchange agent's account at DTC according to the procedure for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "-- Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between that holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal, including, but not limited to, the agreement by such
holders to deliver good and marketable title to the tendered FaciliCom notes
free and clear of all liens, charges, claims, encumbrances, interests and
restrictions of any kind.
The method of delivery of FaciliCom notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or FaciliCom notes to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.
Any beneficial owner whose FaciliCom notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If such beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the letter of transmittal
and delivering its FaciliCom notes, either:
- make appropriate arrangements to register ownership of the FaciliCom
notes in such owner's name; or
- obtain a properly completed bond power from the registered holder of
FaciliCom notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below 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 another "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act, unless the FaciliCom notes tendered pursuant
thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of an eligible guarantor institution.
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If the letter of transmittal is signed by a person other than the
registered holder of any FaciliCom notes listed on the FaciliCom notes, the
FaciliCom notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the FaciliCom notes and an eligible guarantor
institution must guarantee the signature on the bond power.
If the letter of transmittal or any FaciliCom 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, these persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the FaciliCom notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, to the effect that:
- DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering FaciliCom notes that are
the subject of the book-entry confirmation;
- the participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the applicable notice of guaranteed delivery); and
- the agreement may be enforced against the participant.
We will determine in our sole discretion all questions of the validity,
form, eligibility (including time of receipt) and acceptance of tendered
FaciliCom notes and the withdrawal of tendered FaciliCom notes. Our
determination will be final and binding. We reserve the absolute right to reject
any FaciliCom notes not properly tendered or any FaciliCom notes our acceptance
of which would, in the opinion of our counsel, be unlawful. We also reserve the
right to waive any defects, irregularities or conditions of tender as to
particular FaciliCom 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 FaciliCom notes must be cured
within a specified time as we shall determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of FaciliCom notes,
neither we, the exchange agent nor any other person will incur any liability for
failure to give this notification. Tenders of FaciliCom notes will not be deemed
made until the defects or irregularities have been cured or waived. Any
FaciliCom 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 to the exchange agent without cost to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In all cases, we will issue the exchange consideration in exchange for
FaciliCom notes that we have accepted for exchange under the exchange offer only
after the exchange agent timely receives:
- FaciliCom notes or a timely book-entry confirmation of such FaciliCom
notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
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By signing the letter of transmittal, each tendering holder of FaciliCom
notes will represent to us that, among other things:
- any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes; and
- the holder is not our "affiliate," as defined in Rule 405 of the
Securities Act or, if the holder is our affiliate, it will comply with
any applicable registration and prospectus delivery requirements of the
Securities Act.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the FaciliCom notes at DTC for purposes of the exchange offer promptly after
the date of this prospectus; and any financial institution participating in
DTC's system may make book-entry delivery of FaciliCom notes by causing DTC to
transfer the FaciliCom notes into the exchange agent's account at DTC in
accordance with DTC's procedures for transfer. Holders of FaciliCom notes who
are unable to deliver confirmation of the book-entry tender of their FaciliCom
notes into the exchange agent's account at DTC or all other documents required
by the letter of transmittal to the exchange agent on or prior to the expiration
date must tender their FaciliCom notes according to the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their FaciliCom notes but whose FaciliCom notes
are not immediately available or who cannot deliver their FaciliCom notes, the
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under DTC's Automated Tender Offer Program
prior to the expiration date may tender if:
- the tender is made through an eligible guarantor institution;
- prior to the expiration date, the exchange agent receives from an
eligible guarantor institution either a properly completed and duly
executed notice of guaranteed delivery (by facsimile transmission, mail
or hand delivery) or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth the name and address of the holder, the registered
number(s) of the FaciliCom notes and the principal amount of the
FaciliCom notes tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three (3) Nasdaq trading days after the
expiration date, the letter of transmittal (or facsimile thereof)
together with the FaciliCom notes or a book-entry confirmation, and any
other documents required by the letter of transmittal will be deposited
by the eligible guarantor institution with the exchange agent; and
- the exchange agent receives such properly completed and executed letter
of transmittal (or facsimile thereof), as well as all tendered FaciliCom
notes in proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal, within three (3)
Nasdaq trading days after the expiration date.
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UPON WRITTEN REQUEST TO THE EXCHANGE AGENT, A NOTICE OF GUARANTEED DELIVERY
WILL BE SENT TO HOLDERS WHO WISH TO TENDER THEIR FACILICOM NOTES ACCORDING TO
THE GUARANTEED DELIVERY PROCEDURES SET FORTH ABOVE.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of FaciliCom notes
may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one
of the addresses set forth below under "-- Exchange Agent"; or
- holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any such notice of withdrawal must:
- specify the name of the person who tendered the FaciliCom notes to be
withdrawn;
- identify with specificity the FaciliCom notes to be withdrawn (including
the principal amount of the FaciliCom notes); and
- where certificates for FaciliCom notes have been transmitted, specify the
name in which the FaciliCom notes were registered, if different from that
of the withdrawing holder.
If certificates for FaciliCom notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
guarantor institution unless the holder is an eligible guarantor
institution.
If FaciliCom 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
FaciliCom notes and otherwise comply with the procedures of this facility. We
will determine all questions as to the validity, form and eligibility (including
time of receipt) of the notices, and our determination shall be final and
binding on all parties. We will deem any FaciliCom notes so withdrawn not to
have been validly tendered for exchange for purposes of the exchange offer. Any
FaciliCom notes that have been tendered for exchange but that are not exchanged
for any reason will be returned to their holder without cost to the holder (or,
in the case of FaciliCom notes tendered by book-entry transfer into the exchange
agent's account at DTC according to the procedures described above, the
FaciliCom notes will be credited to an account maintained with DTC for FaciliCom
notes) as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn FaciliCom notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering" above at any time on or prior to the expiration date.
If you withdraw your tender of FaciliCom notes, your consent to the
proposed amendments under the second supplemental indenture will also be deemed
to be withdrawn. You may not withdraw your consent without withdrawing your
tender of FaciliCom notes.
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EXCHANGE AGENT
First Union National Bank has been appointed as exchange agent for the
exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for the notice of guaranteed delivery to the exchange
agent addressed as follows:
First Union National Bank
1525 West W.T. Harris Boulevard
3C3 NC-1153
Charlotte, North Carolina 28262
By Facsimile Transmission (for eligible guarantor institutions only):
(704) 590-7628
For Confirmation and/or Information Call:
(704) 590-7408
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, facsimile, telephone or in person by our officers and regular
employees and those of our affiliates.
Except as described herein, we will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offer. We will, however, pay
the exchange agent reasonable and customary fees for its services and reimburse
it for its related reasonable out-of-pocket expenses.
We have agreed to pay Donaldson, Lufkin & Jenrette Securities Corporation
compensation of approximately $1.5 million and Lehman Brothers Inc. compensation
of approximately $750,000 for their financial advisory services in connection
with the exchange offer and consent solicitation. This compensation is payable
on the exchange date upon completion of the exchange offer. We have also agreed
to reimburse Donaldson, Lufkin & Jenrette and Lehman Brothers for their
reasonable out-of-pocket expenses, including reasonable fees and expenses of
legal counsel, and we have agreed to indemnify them against some liabilities,
including some liabilities under the federal securities laws. Donaldson, Lufkin
& Jenrette has provided in the past, and currently is providing, other
investment banking and financial advisory services to us.
We will pay other cash expenses to be incurred in connection with the
exchange offer, including:
- SEC registration fees;
- fees and expenses of the trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
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ACCOUNTING TREATMENT OF THE EXCHANGE OFFER
The exchange notes will be recorded by World Access based on the fair value
of the exchange notes. Any difference (discount or premium) between the fair
value and par value of the exchange notes will be amortized over the life of the
exchange notes as an adjustment to interest expense.
NO DISSENTERS' RIGHTS
You will not have any right to dissent and receive an appraisal of your
FaciliCom notes in connection with the exchange offer or consent solicitation.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
FaciliCom notes under the exchange offer. The tendering holder, however, will be
required to pay any transfer taxes, whether imposed on the registered holder or
any other person, if:
- certificates representing FaciliCom notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
FaciliCom notes tendered;
- tendered FaciliCom notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
FaciliCom notes under the exchange offer, then the tendering holder will
be required to pay any transfer taxes, whether imposed on the registered
holder or any other persons. If satisfactory evidence of payment of these
taxes is not submitted with the letter of transmittal, the amount of the
transfer taxes will be billed to that tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The holders of a majority in interest of the FaciliCom notes have agreed to
tender their FaciliCom notes in the exchange offer. If you do not exchange your
FaciliCom notes for the exchange consideration in the exchange offer, you will
continue to hold your FaciliCom notes subject to the terms and conditions of the
FaciliCom indenture under which the FaciliCom notes were issued, as amended and
supplemented by the first supplemental indenture. However, if the conditions to
the exchange offer are met and the exchange is consummated, the FaciliCom
indenture will be further amended and supplemented by a second supplemental
indenture that will materially reduce the covenants to which FaciliCom is
subject under the indenture and you will no longer have the right to require us
to repurchase your FaciliCom notes at a purchase price of 101% of the principal
amount upon completion of our pending merger with FaciliCom or to approve the
merger. For a description of the proposed amendments to the FaciliCom indenture,
see "The Proposed Amendments."
If you do not tender your FaciliCom notes in the exchange offer, you will
not be entitled to receive the exchange consideration which includes exchange
notes with an interest rate of 13.25% per annum as compared to the 10 1/2% per
annum for the FaciliCom notes and more favorable offer to purchase and
redemption provisions as compared to the FaciliCom notes.
Our proposed merger with FaciliCom would violate several covenants
applicable to the FaciliCom notes allowing the holders of 25.0% of the aggregate
principal amount of the FaciliCom notes or the trustee under the FaciliCom
indenture to declare principal and accrued and unpaid interest on the FaciliCom
notes immediately due and payable. However, holders who tender their FaciliCom
notes in the exchange offer will effectively waive this right by consenting to
the proposed amendments to the FaciliCom indenture that delete the covenants
which would be breached. Upon effectiveness of the consent solicitation, the
proposed amendments will apply to all FaciliCom notes that are not tendered in
the exchange offer.
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OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered FaciliCom notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any FaciliCom notes that are
not tendered in the exchange offer.
Following the exchange offer, FaciliCom notes accepted by us for exchange
will be cancelled.
DESCRIPTION OF THE EXCHANGE NOTES
The exchange notes will be issued pursuant to an indenture to be entered
into between us, as issuer, and First Union National Bank, as Trustee. The
indenture will be subject to and governed by the Trust Indenture Act of 1939.
The following summary of the material provisions of the exchange notes, the
indenture and the Pledge Agreement does not purport to be complete and is
subject to, and is qualified by reference to, all the provisions of the exchange
notes, the indenture and the Pledge Agreement, including the definitions of
terms in those agreements and those terms made a part of the exchange notes and
the indenture by the Trust Indenture Act. Whenever particular sections or
defined terms of the indenture not otherwise defined in this prospectus are
referred to, these sections or defined terms are incorporated in this prospectus
by reference. Copies of the indenture and the Pledge Agreement have been filed
with the SEC as exhibits to the registration statement of which this prospectus
is a part. The definitions of certain terms used in the following summary are
set forth below under "-- Certain Definitions."
GENERAL
The exchange notes are senior obligations of World Access, limited to
$300,000,000 aggregate original principal amount, and will mature on January 15,
2008. The exchange notes bear interest commencing on the exchange date at the
rate of 13.25% per annum, payable semiannually in arrears on January 15 and July
15 of each year, commencing January 15, 2000, or July 15, 2000 if the exchange
date is subsequent to January 1, 2000, to the person in whose name the exchange
note is registered at the close of business on the preceding January 1 or July
1, as the case may be. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
Principal of, premium, if any, and interest on the exchange notes will be
payable, and the exchange notes may be exchanged or transferred, at the office
or agency of World Access, which initially will be the corporate trust
operations office of the Trustee at 1525 West W.T. Harris Boulevard, 3C3
NC-1153, Charlotte, North Carolina 28262, or, at the option of World Access
payment of interest may be made by check mailed to the address of the holders as
such address appears in the register; provided that all payments with respect to
global exchange notes the holders of which have given wire transfer instructions
to World Access will be required to be made by wire transfer of immediately
available funds to the accounts specified by the holders of those notes.
(Section 301)
The exchange notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. See "-- Book-Entry, Delivery and Form." No service charge will
be made for any registration of transfer or exchange of exchange notes, but
World Access may require payment of a sum sufficient to cover any transfer tax
or other similar governmental charge payable in connection therewith. (Section
302)
OPTIONAL REDEMPTION
Except as otherwise provided, the exchange notes will not be redeemable at
the option of World Access prior to January 15, 2003. At any time on or after
that date, the exchange notes may be redeemed at World Access' option, in whole
or in part, at any time or from time to time, on or after January 15,
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<PAGE> 49
2003 and prior to maturity, upon not less than 30 nor more than 60 days' prior
notice mailed by first class mail to each holder's last address as it appears in
the register, at the following redemption prices (expressed in percentages of
principal amount thereof), plus accrued and unpaid interest thereon to the
redemption date (subject to the right of holders of record on the relevant
regular record date to receive interest due on an interest payment date that is
on or prior to the redemption date), if redeemed during the 12-month period
commencing on January 15, of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C> <C>
2003........................................................ 106.625%
2004........................................................ 104.417%
2005........................................................ 102.208%
2006 (and thereafter)....................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2001, World Access may
on any one or more occasions redeem up to 35.0% of the originally issued
aggregate principal amount of exchange notes at a redemption price of 110.5% of
the aggregate principal amount thereof, plus accrued and unpaid interest thereon
to the Redemption Date, with the Net Cash Proceeds of one or more Public Equity
Offerings; provided, that at least 65.0% of the originally issued principal
amount of the exchange notes remains outstanding immediately after the
occurrence of such redemption; and provided further that notice of such
redemptions shall be given within 60 days of the closing of any such Public
Equity Offering. (Section 1101)
In the case of any partial redemption, selection of the exchange notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the exchange notes
are listed or, if the exchange notes are not listed on a national securities
exchange, on a pro rata basis, by lot or by such other method as the Trustee in
its sole discretion shall deem to be fair and appropriate; provided that the
principal amount of an exchange note shall not be reduced below $1,000. If any
exchange note is to be redeemed in part only, the notice of redemption relating
to such exchange 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.
SECURITY
On the exchange date, the pro rata portion of the total amount of FaciliCom
Pledged Securities and/or cash held in the FaciliCom Pledge Account based on the
percentage of the aggregate principal amount of the FaciliCom Notes exchanged
for exchange notes shall pursuant to the FaciliCom Pledge Agreement be released
from the FaciliCom Pledge Account to FaciliCom. Upon the consummation of the
merger, such Pledged Securities and/or cash will automatically be transferred to
World Access and deposited by World Access in the Pledge Account to be held
pursuant to the Pledge Agreement. Such Pledged Securities and/or cash will be
pledged by World Access to the Trustee for the benefit of the holders of the
exchange notes pursuant to the Pledge Agreement and will be held by the Trustee
in the Pledge Account pending disposition pursuant to the Pledge Agreement.
Pursuant to the Pledge Agreement, immediately prior to any scheduled interest
payment on the exchange notes, World Access may either deposit with the Trustee
from funds otherwise available to World Access cash sufficient to pay the
interest scheduled to be paid on such date, World Access may direct the Trustee
to release from the Pledge Account proceeds sufficient to pay interest then due
or World Access may elect to use any combination of deposited funds and Pledge
Account proceeds to pay interest then due. In the event that World Access
deposits additional funds with the Trustee, World Access may thereafter direct
the Trustee to release to World Access proceeds or Pledged Securities from the
Pledge Account in like amount. A failure by World Access to pay scheduled
interest on the exchange notes in a timely manner through any interest payment
date on or prior to January 15, 2001 will constitute an immediate Event of
Default under the indenture, with no grace or cure period.
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<PAGE> 50
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by World Access, to provide an
amount sufficient to provide for payment in full of any scheduled interest
payments on or prior to January 15, 2001 on the exchange notes assuming an
interest rate of 10 1/2% per annum instead of 13.25% per annum less the amount
of any scheduled interest previously paid on the exchange notes, the Trustee
will be permitted to release to World Access, at World Access' request, any such
excess amount.
The exchange notes are secured by a first priority security interest in the
Pledged Securities and in the Pledge Account and, accordingly, the Pledged
Securities and the Pledge Account will also secure repayment of the principal
amount of the exchange notes to the extent of such security.
Under the Pledge Agreement, assuming that World Access makes the scheduled
interest payments on or prior to January 15, 2001 on the exchange notes in a
timely manner, any remaining Pledged Securities will be released from the Pledge
Account and the exchange notes will be unsecured.
RANKING
The exchange notes will be unsecured (except as described above)
obligations of World Access and will rank senior in right of payment to any
existing and future obligations of World Access expressly subordinated in right
of payment to the exchange notes and pari passu in right of payment with all
other existing and future unsecured and unsubordinated obligations of World
Access, including trade payables. After giving effect to the Merger, World
Access will have approximately $464.0 million of Indebtedness (of which $187.1
will rank senior to and $1.9 million will rank pari passu with the exchange
notes, respectively). Because World Access is a holding company that conducts
its business through its Subsidiaries, all existing and future Indebtedness and
other liabilities and commitments of World Access's Subsidiaries, including
trade payables, will be effectively senior to the exchange notes. The indenture
limits, but does not prohibit, the incurrence of certain additional Indebtedness
by World Access and its Restricted Subsidiaries and does not limit the amount of
Indebtedness Incurred to finance the cost of Telecommunications Assets. World
Access anticipates that it and its Subsidiaries will Incur substantial
additional Indebtedness in the future. After giving effect to the Merger, World
Access' consolidated Subsidiaries will have aggregate liabilities of
approximately $428.3 million, which will include $164.0 million of Indebtedness.
COVENANTS
LIMITATION ON INDEBTEDNESS
(a) World Access will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that World Access
may Incur Indebtedness if immediately thereafter the ratio of:
(1) the aggregate principal amount (or accreted value, as the case may
be) of Indebtedness of World Access and its Restricted Subsidiaries on a
consolidated basis outstanding as of the Transaction Date to
(2) 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 5.0 to 1.
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<PAGE> 51
(b) The foregoing limitations of paragraph (a) of this covenant will not
apply to any of the following Indebtedness ("Permitted Indebtedness"), each of
which shall be given independent effect:
(1) Indebtedness of World Access evidenced by the exchange notes or
the FaciliCom Notes;
(2) Indebtedness of World Access or any Restricted Subsidiary
outstanding on the Exchange Date;
(3) Indebtedness of World Access or any Restricted Subsidiary under
one or more Credit Facilities, in an aggregate principal amount at any one
time outstanding not to exceed the greater of
(x) $135.0 million and
(y) 80.0% of Eligible Accounts Receivable at any one time
outstanding, subject to any permanent reductions required by any other terms of
the indenture;
(4) Indebtedness of World Access or any Restricted Subsidiary Incurred
to finance the cost (including the cost of design, development,
construction, acquisition, installation or integration) of
Telecommunications Assets;
(5) Indebtedness of a Restricted Subsidiary owed to and held by World
Access or another Restricted Subsidiary, except that
(A) any transfer of such Indebtedness by World Access or a
Restricted Subsidiary (other than to World Access or another Restricted
Subsidiary) and
(B) the sale, transfer or other disposition by World Access or any
Restricted Subsidiary of Capital Stock of a Restricted Subsidiary which
is owed Indebtedness of another Restricted Subsidiary
shall, in each case, be an incurrence of Indebtedness by such Restricted
Subsidiary, subject to the other provisions of the indenture;
(6) Indebtedness of World Access owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right to the payment and
performance to the obligations of World Access under the indenture and the
exchange notes, except that the limitations of paragraph (a) above shall
apply to such Indebtedness at such time as
(A) any transfer of such Indebtedness by a Restricted Subsidiary
(other than to another Restricted Subsidiary) and
(B) the sale, transfer or other disposition by World Access or any
Restricted Subsidiary of Capital Stock of a Restricted Subsidiary which
is owed such Indebtedness of World Access subject to other provisions of
the indenture;
(7) Indebtedness of World Access or a Restricted Subsidiary issued in
exchange for, or the net proceeds of which are used to refinance (whether
by amendment, renewal, extension or refunding), then outstanding
Indebtedness of World Access or a Restricted Subsidiary, other than
Indebtedness Incurred under clauses (3), (5), (6), (8), (9), (11) and (12)
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 (7) if:
(A) in case the exchange notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the exchange 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 exchange notes,
(B) in case the Indebtedness to be refinanced is subordinated in
right of payment to the exchange notes, such new Indebtedness, by its
terms or by the terms of any agreement or
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<PAGE> 52
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the
exchange notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the exchange notes and
(C) such new Indebtedness, determined as of the date of Incurrence
of such new Indebtedness, does not mature prior to the Stated Maturity
of the Indebtedness to be refinanced or refunded, and the Average Life
of such new Indebtedness is at least equal to the remaining Average Life
of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness of World Access be
refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (7);
(8) Indebtedness of:
(x) World Access not to exceed, at any one time outstanding, 2.00
times the Net Cash Proceeds from the issuance and sale, other than to a
Subsidiary, of Common Stock (other than Redeemable Stock) of World
Access (less the amount of such proceeds used to make Restricted
Payments as provided in clause (c) or (d) of the second paragraph of the
"Limitation on Restricted Payments" covenant) and
(y) World Access or Acquired Indebtedness of a Restricted
Subsidiary not to exceed, at one time outstanding, the Fair Market Value
of any Telecommunications Assets acquired by World Access in exchange
for Common Stock of World Access issued after the Exchange Date;
provided, however, that in determining the Fair Market Value of any such
Telecommunications Assets so acquired, if the estimated Fair Market
Value of such Telecommunications Assets exceeds:
(A) $2.0 million (as estimated in good faith by the Board of
Directors), then the Fair Market Value of such Telecommunications
Assets will be determined by a majority of the Board of Directors of
World Access, which determination will be evidenced by a resolution
thereof, and
(B) $10.0 million (as estimated in good faith by the Board of
Directors), then World Access will deliver the Trustee a written
appraisal as to the Fair Market Value of such Telecommunications
Assets prepared by a nationally recognized investment banking or
public accounting firm (or, if no such investment banking or public
accounting firm is qualified to prepare such an appraisal, by a
nationally recognized appraisal firm);
and provided further that such Indebtedness does not mature prior to the
Stated Maturity of the exchange notes and the Average Life of such
Indebtedness is longer than that of the exchange notes;
(9) Indebtedness of World Access or any Restricted Subsidiary:
(A) in respect of performance, surety or appeal bonds or letters of
credit supporting trade payables, in each case provided in the ordinary
course of business,
(B) under Currency Agreements and Interest Rate Agreements covering
Indebtedness of World Access; provided that such agreements do not
increase the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange rates or
interest rates or by reason of fees, indemnities and compensation
payable thereunder, and
(C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, including without
limitation, World Access' indemnification obligations pursuant to that
certain Indemnification Agreement dated August 19, 1999, by and between
World Access and Clay C. Long, Esq., trustee of the World Access
Charitable Trust, or from Guarantees or letters of credit, surety bonds
or performance bonds securing any obligations of World Access 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 World Access (other than Guarantees of
Indebtedness Incurred by any person acquiring all or
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<PAGE> 53
any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by World Access or any
Restricted Subsidiary in connection with such disposition;
(10) Indebtedness of World Access, to the extent that the net proceeds
thereof are promptly:
(A) used to repurchase exchange notes tendered in a Change of
Control Offer or
(B) deposited to defease all of the exchange notes as described
below under "Defeasance and Covenant Defeasance of Indenture";
(11) Indebtedness of a Restricted Subsidiary represented by a
Guarantee of the exchange notes permitted by and made in accordance with
the "Limitation on Issuances of Guarantees of Indebtedness by Restricted
Subsidiaries" covenant;
(12) Indebtedness of World Access and its Subsidiaries existing upon
the consummation of the Merger; and
(13) Indebtedness of World Access or any Restricted Subsidiary in
addition to that permitted to be incurred pursuant to clauses (1) through
(11) above in an aggregate principal amount not in excess of $10.0 million
(or, to the extent not denominated in United States dollars, the United
States Dollar Equivalent thereof) at any one time outstanding.
(c) For purposes of determining any particular amount of Indebtedness under
this "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 " -- Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries." For purposes of determining compliance with this
"Limitation on Indebtedness" covenant, 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, World Access, in its sole discretion may, at the time of such
Incurrence:
(1) classify such item of Indebtedness under and comply with either of
paragraph (a) or (b) of this covenant (or any of such definitions), as
applicable,
(2) classify and divide such item of Indebtedness into more than one
of such paragraphs (or definitions), as applicable, and
(3) elect to comply with such paragraphs (or definitions), as
applicable in any order. (Section 1011)
LIMITATION ON RESTRICTED PAYMENTS
World Access will not, and will not permit any Restricted Subsidiary to,
directly or indirectly:
(1) (A) declare or pay any dividend or make any distribution in
respect of World Access' Capital Stock to the holders thereof (other than
dividends or distributions payable solely in shares of Capital Stock (other
than Redeemable Stock) of World Access or in options, warrants or other
rights to acquire such shares of Capital Stock) or
(B) declare or pay any dividend or make any distribution in respect
of the Capital Stock of any Restricted Subsidiary to any Person other
than dividends and distributions including a distribution payable solely
in shares of Capital Stock (other than Redeemable Stock) payable to
World Access or any Restricted Subsidiary or to all holders of Capital
Stock of such Restricted Subsidiary on a pro rata basis;
(2) purchase, redeem, retire or otherwise acquire for value any shares
of Capital Stock of World Access (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or any
shares of Capital Stock of any Restricted Subsidiary (including options,
warrants and other rights to acquire such shares of Capital Stock) held by
any Affiliate of World Access
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<PAGE> 54
(other than a wholly owned Restricted Subsidiary) or any holder (or any
Affiliate thereof) of 5.0% or more of World Access' Capital Stock;
(3) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, of Indebtedness of World Access that is subordinated
in right of payment to the exchange notes; or
(4) make any Investment, other than a Permitted Investment, in any
Person
(such payments or any other actions described in clauses (1) through (4) being
collectively "Restricted Payments") if, at the time of, and after giving effect
to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing;
(B) World Access could not Incur at least $1.00 of Indebtedness under
paragraph (a) of the "Limitation on Indebtedness" covenant; and
(C) the aggregate amount of all Restricted Payments declared or made
from and after the Exchange Date would exceed the sum of:
(1) Cumulative Consolidated Cash Flow minus 200% of Cumulative
Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the issue or sale to
a Person, which is not a Subsidiary of World Access, of Capital
Stock of World Access (other than Redeemable Stock) or of debt
securities of World Access which have been converted into or
exchanged for such Capital Stock (except to the extent such Net
Cash Proceeds are used to Incur new Indebtedness outstanding
pursuant to clause (8) of paragraph (b) of the "Limitation on
Indebtedness" covenant); and
(3) to the extent any Permitted Investment that was made after the
Exchange Date is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (x) the cash return of capital with
respect to such Permitted Investment (less the cost of
disposition, if any) and (y) the initial amount of such Permitted
Investment.
The foregoing provision shall not be violated by reason of:
(a) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph;
(b) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the exchange notes including a premium, if any, and accrued and
unpaid interest with the net proceeds of, or in exchange for, Indebtedness
Incurred under clause (8) of paragraph (b) of the "Limitation on
Indebtedness" covenant;
(c) the repurchase, redemption or other acquisition of Capital Stock
of World Access in exchange for, or out of the Net Cash Proceeds of a
substantially concurrent:
(A) capital contribution to World Access or
(B) offering of shares of Capital Stock (other than Redeemable
Stock) of World Access
(except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (8) of paragraph (b) of the "Limitation on
Indebtedness" covenant);
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(d) the acquisition of Indebtedness of World Access which is
subordinated in right of payment to the exchange notes in exchange for, or
out of the proceeds of, a substantially concurrent:
(A) capital contribution to World Access or
(B) offering of shares of the Capital Stock of World Access (other
than Redeemable Stock)
(except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (8) of paragraph (b) of the "Limitation on
Indebtedness" covenant);
(e) payments or distributions to dissenting stockholders in accordance
with applicable law, pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of the
indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of World Access; and
(f) the declaration or payment of any dividend or distribution in
respect of, and in accordance with the terms of, World Access':
(A) 50,000 outstanding shares of 4.25% Cumulative Senior Perpetual
Convertible Preferred Stock, Series A, par value $0.01 per share (the
"Senior Preferred Stock"), and, in the event that The 1818 Fund III,
L.P. ("The 1818 Fund") exercises its option to purchase up to 20,000
additional shares of Senior Preferred Stock, then such additional shares
as well and
(B) 23,174 outstanding shares of 4.25% Cumulative Junior
Convertible Preferred Stock, Series B, par value $0.01 per share (the
"Junior Preferred Stock");
(g) the conversion of the Senior Preferred Stock, the Junior Preferred
Stock or World Access' Convertible Preferred Stock, Series C, par value
$0.01 per share, into Capital Stock of World Access in accordance with the
terms of such preferred stock;
(h) the exercise of employee or non-employee options to purchase the
Capital Stock of World Access; and
(i) other Restricted Payments not to exceed $2.0 million;
provided that, except in the case of clause (a), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payment referred to in clause (b) thereof)
and the Net Cash Proceeds from any capital contributions to World Access or
issuance of Capital Stock referred to in clauses (c) and (d) of the immediately
preceding paragraph, 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 Capital Stock of World Access are used
for the redemption, repurchase or other acquisition of the exchange 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 exchange notes. (Section 1012)
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
So long as any of the exchange notes are outstanding, World Access will
not, and will not permit any Restricted Subsidiary to, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to do any one of the
following:
(a) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
World Access or any other Restricted Subsidiary,
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(b) pay any Indebtedness owed to World Access or any other Restricted
Subsidiary,
(c) make loans or advances to World Access or any other Restricted
Subsidiary, or
(d) transfer any of its property or assets (including the Capital
Stock of any Restricted Subsidiary) to World Access or any other Restricted
Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(1) existing on the Exchange Date in the indenture or any other
agreements or instruments in effect on the Exchange Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced;
(2) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if the encumbrance or
restriction applies only in the event of a default with respect to a
financial covenant contained in such Indebtedness or agreement and such
encumbrance or restriction is not materially more disadvantageous to the
holders of the exchange notes than is customary in comparable financings
(as determined by World Access) and World Access determines that any such
encumbrance or restriction will not materially affect World Access' ability
to make principal or interest payments on the exchange notes;
(3) existing under or by reason of applicable law;
(4) existing with respect to any Person or the property or assets of
such Person acquired by World Access or any Restricted Subsidiary, existing
at the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired;
(5) in the case of clause (4) 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
World Access or any Restricted Subsidiary not otherwise prohibited by
the indenture, or
(C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of World Access
or any Restricted Subsidiary in any manner material to World Access or
any Restricted Subsidiary; or
(6) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent World Access or any
Restricted Subsidiary from:
(A) creating, incurring, assuming or suffering to exist any Liens
otherwise permitted in the "Limitation on Liens" covenant or
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(B) restricting the sale or other disposition of property or assets
of World Access or any of its Restricted Subsidiaries that secure
Indebtedness of World Access or any of its Restricted Subsidiaries.
(Section 1013)
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
World Access will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue, transfer, distribute, 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 or any other
Restricted Subsidiary (other than to World Access or a wholly owned Restricted
Subsidiary or in respect of any director's qualifying shares or sales of shares
of Capital Stock to foreign nationals mandated by applicable law or pursuant to
the exercise of employee or non-employee options to purchase the Capital Stock
of World Access) to any Person 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"). (Section
1014)
LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
World Access will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5.0% or more of any class of Capital Stock of World Access or any
Restricted Subsidiary or with any Affiliate of World Access or any Restricted
Subsidiary, unless the following conditions have been met:
(a) such transaction or series of transactions is on terms no less
favorable to World Access or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with a Person
that is not such a holder or an Affiliate;
(b) if such transaction or series of transactions involves aggregate
consideration in excess of $2.0 million, then such transaction or series of
transactions is approved by a majority of the Board of Directors of World
Access and is evidenced by a resolution therein; and
(c) if such transaction or series of transactions involves aggregate
consideration in excess of $10.0 million, then World Access or such
Restricted Subsidiary will deliver to the Trustee a written opinion as to
the fairness to World Access or such Restricted Subsidiary of such
transaction from a financial point of view from a nationally recognized
investment banking firm (or, if an investment banking firm is generally not
qualified to give such an opinion, by a nationally recognized appraisal
firm or accounting firm).
The foregoing limitation does not limit, and will not apply to:
(1) any transaction between World Access and any of its Restricted
Subsidiaries or between Restricted Subsidiaries;
(2) the payment of reasonable and customary regular fees to directors
of World Access who are not employees of World Access;
(3) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant;
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(4) loans and advances to officers or employees of World Access and
its Subsidiaries not exceeding at any one time outstanding $1.5 million in
the aggregate, made in the ordinary course of business;
(5) arrangements with Telecommunications Management Group, Inc.,
Armstrong Holdings, Inc. and/or its subsidiaries existing on the date of
the Original Indenture and listed on a schedule attached thereto as such
arrangement may be extended or renewed; provided that the terms of any
arrangement altered by any such extension or renewal may not be altered in
a manner adverse to World Access or the holders of the exchange notes;
(6) the issuance of up to 20,000 additional shares of Senior Preferred
Stock to The 1818 Fund pursuant to an option agreement existing on the date
of this indenture;
(7) the sale to and purchase by World Access from MCI WorldCom, Inc.
and its Affiliates of telecommunications services and equipment in the
ordinary course of business;
(8) the issuance and sale by World Access of Common Stock whether
pursuant to the conversion of the Senior Preferred Stock, the Junior
Preferred Stock or World Access' Convertible Preferred Stock, Series C, par
value $0.01 per share into Capital Stock of World Access, the exercise of
any employee or non-employee options to purchase the Capital Stock of World
Access; and
(9) World Access' and any of its Restricted Subsidiaries arrangements
with the World Access Charitable Trust listed on Schedule B attached
thereto as such arrangements exist on the Exchange Date and as such
arrangements may be amended; provided that the terms of any such amendments
are not materially adverse to World Access, any Restricted Subsidiary or
the Holders of the Notes. (Section 1015)
LIMITATION ON LIENS
Under the terms of the indenture, World Access 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 of its
assets or properties of any character (including, without limitation, licenses
and trademarks), or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, whether owned at the date of the indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereof, without making effective provision
for all of the exchange notes and all other amounts ranking pari passu with the
exchange notes to be directly secured equally and ratably with the obligation or
liability secured by such Lien, or, if such obligation or liability is
subordinated to the exchange notes and other amounts ranking pari passu with the
exchange notes, without making provision for the exchange notes and such other
amounts to be directly secured prior to the obligation or liability secured by
such Lien. (Section 1016)
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
World Access will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to any
property of World Access or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, World Access may enter into Sale-Leaseback
Transactions; provided, however, that (a) the Attributable Value of such
Sale-Leaseback Transaction shall be deemed to be Indebtedness of World Access
and (b) after giving pro forma effect to any such Sale-Leaseback Transaction and
the foregoing clause (a), other than any Sale-Leaseback Transactions involving
NACT's facility in Provo, Utah, World Access would be able to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Indebtedness." (Section 1021)
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LIMITATION ON ASSET SALES
World Access will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale, unless:
(a) World Access or the Restricted Subsidiary, as the case may be,
receives consideration at the time of such sale or other disposition at
least equal to the Fair Market Value of the assets sold or disposed of as
determined by the good faith judgment of the Board of Directors evidenced
by a Board Resolution and
(b) at least 80.0% of the consideration received for such sale or
other disposition consists of cash or cash equivalents or the assumption of
unsubordinated Indebtedness; provided that any securities, notes or other
obligations issued by an Investment Grade Company with a Total Equity
Market Capitalization in excess of $25 billion determined at the time any
commitment to effect any such Asset Sale is entered into that are received
by World Access or the Restricted Subsidiary, as the case may be, that are
converted within 180 days thereof into cash or cash equivalents shall be
deemed to be cash or cash equivalents; provided further that the amount of
cash or cash equivalents realized upon the sale of any such securities,
notes or other obligations must be included within the amount of Net Cash
Proceeds for purposes of clause (1)(B) of the next paragraph.
World Access shall, or shall cause the relevant Restricted Subsidiary to,
within 270 days after the date of receipt of the Net Cash Proceeds from an Asset
Sale:
(1) (A) apply an amount equal to such Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of World Access or Indebtedness of any
Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Restricted Subsidiaries or
(B) if the Net Cash Proceeds from such Asset Sale exceed $15.0
million, apply an amount equal to such Net Cash Proceeds to make an
offer to purchase (an "Offer to Purchase") from the holders of the
exchange notes on a pro rata basis an aggregate principal amount of
exchange notes equal to such Net Cash Proceeds, at a purchase price
equal to 100% of the principal amount of the exchange notes, plus, in
each case, accrued and unpaid interest to the date of purchase and less
the product of:
(a) the Market Value per share of the Common Stock of World
Access and
(b) the number of shares (including any portion of a share) of
such Common Stock determined by dividing $50 by the Market Price of
the Common Stock for each $1,000 in principal amount of exchange
notes accepted for purchase by World Access (the "Offer to Purchase
Payment"),
provided that the Company shall not be obligated to make any Offer to
Purchase after it has made one or more Offers to Purchase, which Offer
or Offers to Purchase, in the aggregate, were for an aggregate principal
amount of exchange notes equal to the aggregate principal amount of
exchange notes issued on the Exchange Date (regardless of the actual
aggregate principal amount of exchange notes actually tendered in such
Offer or Offers to Purchase), or
(C) if World Access has made sufficient Offers to Purchase such
that it has satisfied its obligation as described in the final proviso
to clause (B), invest an equal amount, or the amount not so applied
pursuant to clause (A), in property or assets of a nature or type or
that are used in a business (or in a company having property and assets
of a nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, World
Access and its Restricted Subsidiaries existing on the date of such
investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution)
and
(2) apply (no later than the end of the 270-day period referred to
above) such excess Net Cash Proceeds (to the extent not applied pursuant to
clause (1)) as provided in the following paragraphs of this "Limitation on
Asset Sales" covenant. The amount of such Net Cash Proceeds required to be
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applied (or to be committed to be applied) during such 270-day period
referred to above in the preceding sentence and not applied as so required
by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $10.0 million, World Access must, not later
than the 30th Business Day thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from the holders on a pro rata basis an aggregate
principal amount of exchange notes equal to the Excess Proceeds on such
date, at a purchase price equal to 100% of the principal amount of the
exchange notes, plus, in each case, accrued and unpaid interest to the date
of purchase less the product of:
(a) the Market Value per share of the Common Stock of World Access
and
(b) the number of shares (including any portion of a share) of such
Common Stock determined by dividing $50 by the Market Price of the
Common Stock for each $1,000 in principal amount of exchange notes
accepted for purchase by World Access ("Excess Proceeds Payment").
World Access shall commence an Offer to Purchase or an Excess Proceeds
Offer by mailing a notice to the Trustee and each holder stating:
(1) that the Offer to Purchase or Excess Proceeds Offer, as
applicable, is being made pursuant to this "Limitation on Asset Sales"
covenant and that all exchange notes validly tendered will be accepted for
payment on a pro rata basis;
(2) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Offer Payment Date");
(3) that any exchange note not tendered will continue to accrue
interest pursuant to its terms;
(4) that, unless World Access defaults in the payment of the Offer to
Purchase Payment or the Excess Proceeds Payment, as applicable, any
exchange note accepted for payment pursuant to the Offer to Purchase or
Excess Proceeds Offer, as applicable, shall cease to accrue interest on and
after the applicable Offer Payment Date;
(5) that holders electing to have an exchange note purchased pursuant
to the Offer to Purchase or the Excess Proceeds Offer, as applicable, will
be required to surrender the exchange note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the
exchange note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day immediately
preceding the applicable Offer Payment Date;
(6) that holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the applicable Offer Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
holder, the principal amount of exchange notes delivered for purchase and a
statement that such holder is withdrawing his election to have such
exchange notes purchased; and
(7) that holders whose exchange notes are being purchased only in part
will be issued new exchange notes equal in principal amount to the
unpurchased portion of the exchange notes surrendered; provided that each
exchange note purchased and each new exchange note issued shall be in a
principal amount of $1,000 or integral multiples thereof.
On the applicable Offer Payment Date, World Access shall:
(1) accept for payment on a pro rata basis exchange notes or portions
thereof tendered pursuant to the Offer to Purchase or the Excess Proceeds
Offer, as applicable;
(2) deposit with the Paying Agent money sufficient to pay the purchase
price of all exchange notes or portions thereof so accepted; and
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(3) deliver, or cause to be delivered, to the Trustee all exchange
notes or portions thereof so accepted together with an Officers'
Certificate specifying the exchange notes or portions thereof accepted for
payment by World Access.
The Paying Agent shall promptly mail to the holders of exchange notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such holders a new note equal in principal
amount to any unpurchased portion of the exchange note surrendered; provided
that each exchange note purchased and each new exchange note issued shall be in
a principal amount of $1,000 or integral multiples thereof. With respect to any
Excess Proceeds Offer, to the extent that the aggregate principal amount of
exchange notes tendered is less than the Excess Proceeds, World Access may use
any remaining Excess Proceeds for general corporate purposes. World Access will
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Offer Payment Date. For purposes of this "Limitation on
Asset Sales" covenant, the Trustee shall act as the Paying Agent.
World Access will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company undertakes an Offer to
Purchase or Excess Proceeds Offer under this "Limitation on Asset Sales"
covenant. (Section 1017)
LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES
World Access 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 World Access, other than Indebtedness under
Credit Facilities incurred under clause (3) of paragraph (b) in the "Limitation
on Indebtedness" covenant, unless:
(a) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the indenture providing for a Guarantee of the
exchange notes 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 exchange 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 exchange notes substantially to the same extent as such
Indebtedness is subordinated to the exchange notes and
(b) 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 World
Access or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Guarantee.
Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary may
provide by its terms that it will be automatically and unconditionally released
and discharged upon:
(1) any sale, exchange or transfer, to any Person not an Affiliate of
World Access, of all of World Access' and each Restricted Subsidiary's
Capital Stock in, or all or substantially all of the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited
by the indenture) or
(2) 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 1018)
BUSINESS OF WORLD ACCESS; RESTRICTION ON TRANSFERS OF EXISTING BUSINESS
World Access 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, World Access and any Restricted Subsidiary will not be permitted
to, directly or indirectly, transfer to any Unrestricted Subsidiary
(1) any of the licenses, material agreements or instruments, permits
or authorizations used in the Permitted Business of World Access and any
Restricted Subsidiary on the Exchange Date or
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(2) any material portion of the "property and equipment" (as such term
is used in World Access' consolidated financial statements) of World Access
or any Restricted Subsidiary used in the licensed service areas of World
Access and any Restricted Subsidiary as they exist on the Exchange Date.
(Section 1019)
LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
World Access will not make, and will not permit any of its Restricted
Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at the
time thereof, the aggregate amount of such Investments together with any other
Restricted Payments made after the Exchange Date would exceed the amount of
Restricted Payments then permitted to be made pursuant to the "Limitation on
Restricted Payments" covenant. Any Investments in Unrestricted Subsidiaries
permitted to be made pursuant to this covenant
(1) will be treated as the making of a Restricted Payment in
calculating the amount of Restricted Payments made by World Access or a
Subsidiary and
(2) may be made in cash or property (if made in property, the Fair
Market Value thereof as determined by the Board of Directors of World
Access (whose determination shall be conclusive and evidenced by a Board
Resolution) shall be deemed to be the amount of such Investment for the
purpose of clause (1)). (Section 1020)
PROVISION OF FINANCIAL STATEMENTS AND REPORTS
World Access will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not World Access has
a class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that World Access would be required to
file if it were subject to Section 13 or 15 of the Exchange Act. All such annual
reports shall include the geographic segment financial information required to
be disclosed by World Access under Item 101(d) of Regulation S-K under the
Securities Act. World Access 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 World Access files such reports and documents with the
Commission or the date on which World Access would be required to file such
reports and documents if World Access 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 World Access' cost copies of such reports and documents to any
prospective holder promptly upon request. (Section 1009)
REPURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder shall have the
right to require World Access to repurchase all or any part of its exchange
notes at a purchase price in cash pursuant to the offer described below (the
"Change of Control Offer") equal to 101.0% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase (subject to the right of
holders of record to receive interest on the relevant Interest Payment Date)
(the "Change of Control Payment").
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Within 30 days of the Change of Control, World Access will mail a notice to
the Trustee and each holder in the manner provided in the indenture stating,
among other things:
(1) that a Change of Control has occurred, that the Change of Control
Offer is being made pursuant to this "Repurchase of Exchange Notes upon a
Change of Control" covenant and that all validly tendered will be accepted
for payment;
(2) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro forma
historical income, cash flow and capitalization after giving effect to such
Change of Control);
(3) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Change of Control Payment Date");
(4) that any exchange note not tendered will continue to accrue
interest pursuant to its terms;
(5) that, unless World Access defaults in the payment of the Change of
Control Payment, any exchange note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on and after the
Change of Control Payment Date;
(6) that holders electing to have any note or portion thereof
purchased pursuant to the Change of Control Offer will be required to
surrender such exchange note, together with the form entitled "Option of
the Holder to Elect Purchase" on the reverse side of such exchange note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day immediately preceding the
Change of Control Payment Date;
(7) that holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
holder, the principal amount of exchange notes delivered for purchase and a
statement that such holder is withdrawing his election to have such
exchange notes purchased; and
(8) that holders whose exchange notes are being purchased only in part
will be issued new exchange notes equal in principal amount to the
unpurchased portion of the exchange notes surrendered; provided that each
note purchased and each new note issued shall be in a principal amount of
$1,000 or integral multiples thereof.
On the Change of Control Payment Date, World Access shall:
(a) accept for payment exchange notes or portions thereof tendered
pursuant to the Change of Control Offer;
(b) deposit with the Paying Agent money sufficient to pay the purchase
price of all exchange notes or portions thereof so accepted; and
(c) deliver, or cause to be delivered, to the Trustee, all exchange
notes or portions thereof so accepted together with an Officer's
Certificate specifying the exchange notes or portions thereof accepted for
payment by World Access.
The Paying Agent shall promptly mail, to the holders of exchange notes so
accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such holders a new exchange note equal
in principal amount to any unpurchased portion of the exchange notes
surrendered; provided that each exchange note purchased and each new exchange
note issued shall be in a principal amount of $1,000 or integral multiples
thereof. World Access will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. For purposes of this "Repurchase of Exchange Notes upon a Change of
Control" covenant, the Trustee shall act as Paying Agent.
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World Access shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by World Access and purchases all
exchange notes validly tendered and not withdrawn under such Change of Control
Offer.
World Access will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that a Change of Control occurs and
World Access is required to repurchase the exchange notes under this "Repurchase
of Exchange Notes upon a Change of Control" covenant. (Section 1010)
If World Access is unable to repay all of its Indebtedness that would
prohibit repurchase of the exchange notes or is unable to obtain the consents of
the holders of Indebtedness, if any, of World Access outstanding at the time of
a Change of Control whose consent would be so required to permit the repurchase
of exchange notes, then World Access will have breached such covenant. This
breach will constitute an Event of Default under the indenture if it continues
for a period of 30 consecutive days after written notice is given to World
Access by the Trustee or the holders of at least 25.0% in aggregate principal
amount of the exchange notes outstanding. In addition, the failure by World
Access to repurchase exchange 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 World Access will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of exchange notes) required by the foregoing covenant (as
well as may be contained in other securities or Indebtedness of World Access
which might be outstanding at the time). The above covenant requiring World
Access to repurchase the exchange notes will, unless the consents referred to
above are obtained, require World Access to repay all Indebtedness then
outstanding which by its terms would prohibit such note repurchase, either prior
to or concurrently with such note repurchase.
CONSOLIDATION, MERGER AND SALE OF ASSETS
World Access will not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into World Access and World Access 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 World
Access or World Access and its Restricted Subsidiaries, taken as a whole, to any
other Person or Persons, unless:
(1) either (A) World Access will be the continuing Person, (B) the
Person (if other than World Access) formed by such consolidation or into
which World Access is merged or that acquired or leased such property and
assets of World Access will be a corporation organized and validly existing
under the laws of the United States of America or any jurisdiction thereof
and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, all of the obligations of World Access with
respect to the exchange notes and under the indenture or (C) in the case of
any such transaction or series of transactions entered into by any
Restricted Subsidiary, the Person into which the Restricted Subsidiary is
merged is another Restricted Subsidiary;
(2) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, World Access, or any Person becoming the successor obligor of the
exchange notes, shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of World Access immediately prior to such
transaction;
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(4) immediately after giving effect to such transaction on a pro forma
basis, World Access, or any Person becoming the successor obligor of the
exchange notes, as the case may be, could Incur at least $1.00 of
Indebtedness under paragraph (a) of the "Limitation on Indebtedness"
covenant; and
(5) World Access delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (3) and (4)) and an Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with;
provided, however, that clauses (3) and (4) above do not apply if, in the good
faith determination of the Board of Directors of World Access, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of World Access; and
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations. (Section 801)
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
indenture:
(a) default in the payment of interest on any exchange note when due
and payable as to any Interest Payment Date falling on or prior to January
15, 2001; or
(b) default in the payment of interest on any exchange note when due
and payable as to any Interest Payment Date following after January 15,
2001, and any such failure continued for a period of 30 days; or
(c) default in the payment of principal of (or premium, if any, on)
any exchange note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise; or
(d) default in the payment of principal or interest on any exchange
note required to be purchased pursuant to an Offer to Purchase or an Excess
Proceeds Offer as described under "Limitation on Asset Sales" or pursuant
to a Change of Control Offer as described under "Repurchase of Exchange
Notes upon a Change of Control"; or
(e) failure to perform or comply with the provisions described under
"Consolidation, Merger and Sale of Assets"; or
(f) default in the performance of or breach of any other covenant or
agreement of World Access in the indenture or under the exchange notes
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with elsewhere in the "Events of
Default" section) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the holders of
25.0% or more in aggregate principal amount of the exchange notes then
outstanding; or
(g) there occurs with respect to any issue or issues of Indebtedness
of World Access or any Restricted Subsidiary having an outstanding
principal amount of $5.0 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created:
(x) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled by expiration of any
applicable grace period and/or
(y) the failure to make a principal payment at the final (but not
any interim) fixed maturity date thereon and such defaulted payment
shall not have been made, waived or extended by the expiration of any
applicable grace period; or
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(h) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5.0 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against World Access or any Restricted Subsidiary and shall not be
paid or discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $5.0 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(i) a court having jurisdiction in the premises enters a decree or
order for
(A) relief in respect of World Access 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 World Access or any of its
Significant Subsidiaries or for all or substantially all of the property
and assets of World Access or any of its Significant Subsidiaries or
(C) the winding up or liquidation of the affairs of World Access 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
(j) World Access 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 World Access or any of its Significant Subsidiaries
or for all or substantially all of the property and assets of World
Access or any of its Significant Subsidiaries or
(C) effects any general assignment for the benefit of creditors; or
(k) World Access asserts in writing that the Pledge Agreement ceases
to be in full force and effect before payment in full of the obligations
thereunder. (Section 501)
If an Event of Default (other than an Event of Default specified in clause
(i) or (j) above) occurs and is continuing under the indenture, the Trustee or
the holders of at least 25.0% in aggregate principal amount of the exchange
notes then outstanding, by written notice to World Access (and to the Trustee if
such notice is given by the holders), may, and the Trustee at the request of
such holders shall, declare the principal of, premium, if any, accrued and
unpaid interest on the exchange notes to be immediately due and payable. Upon a
declaration of acceleration, such principal of, premium, if any, and accrued
interest shall become immediately due and payable. In the event of a declaration
of acceleration because an Event of Default set forth in clause (g) above has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the default triggering such Event of
Default pursuant to clause (g) shall be remedied or cured by World Access and/or
the relevant Significant Subsidiaries or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in clause (i) or (j) above occurs, the
principal of, premium, if any, and accrued interest on the exchange 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
holders of at least a majority in aggregate principal amount of the outstanding
exchange notes,
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by written notice to World Access and to the Trustee, may waive all past
defaults and rescind and annul a declaration of acceleration and its
consequences if
(1) all existing Events of Default, other than the nonpayment of the
principal of, premium, if any, accrued and unpaid interest on the exchange
notes that have become due solely by such declaration of acceleration, have
been cured or waived (subject to certain limitations) and
(2) the rescission, in the opinion of counsel, would not conflict with
any judgment or decree of a court of competent jurisdiction.
For information as to the waiver of defaults, see "-- Modification and Waiver."
(Section 502)
The holders of at least a majority in aggregate principal amount of the
outstanding exchange notes may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of holders of exchange notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from holders of exchange
notes. No holder may pursue any remedy with respect to the indenture or the
exchange notes unless:
(1) the holder gives the Trustee written notice of a continuing Event
of Default;
(2) the holders of at least 25.0% in aggregate principal amount of
outstanding exchange notes make a written request to the Trustee to pursue
the remedy;
(3) such holder or holders offer the Trustee indemnity satisfactory to
the Trustee against any costs, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the holders of a majority in aggregate
principal amount of the outstanding exchange notes do not give the Trustee
a direction that is inconsistent with the request.
However, such limitations do not apply to the right of any holder of an exchange
note to receive payment of the principal of, premium, if any, or interest on,
such note or to bring suit for the enforcement of any such payment, on or after
the due date expressed in the exchange notes, which right shall not be impaired
or affected without the consent of the holder. (Sections 507, 508 and 512)
The indenture will require certain officers of World Access to certify, on
or before a date not more than 120 days after the end of each fiscal year, that
a review has been conducted of the activities of World Access and World Access'
performance under the indenture and that World Access 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.
World Access will also be obligated to notify the Trustee of any default or
defaults in the performance of any covenants or agreements under the indenture.
For these purposes, such compliance shall be determined without regard to any
grace period or notice requirement under the indenture. (Section 1008)
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DEFEASANCE AND COVENANT DEFEASANCE OF INDENTURE
World Access may, at its option and at any time, elect to have the
obligations of World Access under the exchange notes discharged with respect to
the outstanding exchange notes ("defeasance"). Such defeasance means that World
Access will be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding exchange notes and to have satisfied all its
other obligations under such exchange notes and the indenture insofar as such
exchange notes are concerned except for:
(1) the rights of holders of outstanding exchange notes to receive
payments (solely from monies deposited in trust) in respect of the
principal of, premium, if any, and interest on such exchange notes when
such payments are due,
(2) World Access' obligations to issue temporary exchange notes,
register the transfer or exchange of any exchange notes, replace mutilated,
destroyed, lost or stolen exchange notes, maintain an office or agency for
payments in respect of the exchange notes and segregate and hold such
payments in trust,
(3) the rights, powers, trusts, duties and immunities of the Trustee
and
(4) the defeasance provisions of the indenture.
Alternatively, World Access may, at its option and at any time, elect to have
the obligations of World Access released with respect to certain covenants and
other provisions set forth in the indenture, and any omission to comply with
such obligations will not constitute a Default or an Event of Default with
respect to the exchange notes ("covenant defeasance"). (Sections 1301, 1302 and
1303)
In order to exercise either defeasance or covenant defeasance:
(a) World Access must irrevocably deposit or cause to be deposited
with the Trustee, as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the holders of the exchange
notes, cash in United States dollars, U.S. Government Obligations (as
defined in the indenture), or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge (i) the principal of,
premium, if any, and interest on the outstanding exchange notes on the
Stated Maturity (or upon redemption, if applicable) of such principal,
premium, if any, or installment of interest and (ii) any mandatory sinking
fund payments or similar payments applicable to the outstanding exchange
notes on the day on which such payments are due and payable;
(b) no Default or Event of Default with respect to the exchange notes
will have occurred and be continuing on the date of such deposit or,
insofar as an event of bankruptcy under clause (i) or (j) of "Events of
Default" above is concerned, at any time during the period ending on the
123rd day after the date of such deposit;
(c) such defeasance or covenant defeasance will not result in a breach
or violation of, or constitute a default under any material agreement or
instrument (other than the indenture) to which World Access is a party or
by which it is bound;
(d) in the case of defeasance, World Access shall have delivered to
the Trustee an Opinion of Counsel stating that World Access has received
from, or there has been published by, the Internal Revenue Service a
ruling, or since January 15, 1998, there has been a change in applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the holders of the outstanding
exchange notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(e) in the case of covenant defeasance, World Access shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
holders of the exchange notes outstanding will not recognize income, gain
or loss for federal income tax purposes as a result of such covenant
defeasance and will
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be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant
defeasance had not occurred; and
(f) World Access shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with. (Section 1304)
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
exchange notes, as expressly provided for in the indenture) as to all
outstanding exchange notes when:
(1) either:
(A) all the exchange notes theretofore authenticated and delivered
(except lost, stolen or destroyed exchange notes which have been
replaced or repaid and exchange notes for whose payment money has
theretofore been deposited in trust or segregated and held by World
Access and thereafter repaid to World Access or discharged from such
trust) have been delivered to the Trustee for cancellation or
(B) all exchange notes not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed exchange notes which have
been replaced or paid) (i) have become due and payable (ii) will become
due and payable at their Stated Maturity within 1 year or (iii) are to
be called for redemption within 1 year under arrangements satisfactory
to the Trustee, and in the case of (i), (ii) or (iii), World Access has
irrevocably deposited or caused to be deposited with the Trustee funds
in an amount sufficient to pay and discharge the entire Indebtedness on
the exchange notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the
exchange notes to the date of deposit together with irrevocable
instructions from World Access directing the Trustee to apply such funds
to the payment thereof at maturity or redemption, as the case may be;
(2) World Access had paid all other sums payable under the indenture
by World Access; and
(3) World Access has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have
been complied with.
MODIFICATION, WAIVER AND AMENDMENT
Modifications and amendments of the indenture may be made by World Access
and the Trustee with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding exchange notes; provided, however,
that no such modification or amendment may, without the consent of each holder
affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any exchange note,
(2) reduce the principal amount of, or premium, if any, or interest on
any exchange note or extend the time for payment of interest on, or alter
the redemption provisions of, any exchange note,
(3) change the place or currency of payment of principal of, or
premium, if any, or interest on any exchange note,
(4) impair the right of any holder of the exchange notes to receive
payment of, principal of and interest on such holder's exchange notes on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any exchange note,
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(5) reduce the above-stated percentage of outstanding exchange notes
the consent of whose holders is necessary to modify, amend, waive,
supplement or consent to take any action under the indenture or the
exchange notes,
(6) waive a default in the payment of principal of, premium, if any,
or accrued and unpaid interest on the exchange notes,
(7) reduce or change the rate or time for payment of interest on the
exchange notes,
(8) modify any provisions of any Guarantees in a manner adverse to the
holders of the exchange notes or
(9) reduce the percentage or aggregate principal amount of outstanding
exchange notes the consent of whose holders is necessary for waiver of
compliance with certain provisions of the indenture or for waiver of
certain defaults.
Compliance with certain provisions of the indenture may be waived with the
consent of the holders of not less than a majority in aggregate principal amount
of the outstanding exchange notes.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
The exchange notes and the indenture are governed and construed in
accordance with the laws of the State of New York. World Access submits to the
jurisdiction of the U.S. federal and New York state courts located in the
Borough of Manhattan, City and State of New York for purposes of all legal
actions and proceedings instituted in connection with the exchange notes and the
indenture.
CONCERNING THE TRUSTEE
The indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of World Access, 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 the Trustee acquires any conflicting
interest, it must eliminate such conflict as soon as practicable, but in any
event within 90 days.
The holders of a majority in aggregate principal amount of the outstanding
exchange notes 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 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 man 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 indenture
at the request of any holder of exchange notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the indenture. Reference is made to the
indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or assumed in
connection with an Asset Acquisition by World Access or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary or such Asset Acquisition; provided that Indebtedness 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 such Asset Acquisition shall not be
considered as Indebtedness.
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"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:
(1) an investment by World Access or any of its Restricted
Subsidiaries in any other Person pursuant to which such Person shall become
a Restricted Subsidiary of World Access or shall be merged into or
consolidated with World Access or any of its Restricted Subsidiaries or
(2) an acquisition by World Access or any of its Restricted
Subsidiaries of the property and assets of any Person (other than World
Access or any of its Restricted Subsidiaries) that constitute substantially
all of a division or line of business of such Person.
"Asset Disposition" is defined to mean the sale or other disposition by
World Access or any of its Restricted Subsidiaries (other than to World Access
or another Restricted Subsidiary of World Access) of:
(1) all or substantially all of the Capital Stock of any Restricted
Subsidiary of World Access or
(2) all or substantially all of the assets that constitute a division
or line of business of World Access or any of its Restricted Subsidiaries.
"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 World Access or any of
its Restricted Subsidiaries to any Person (other than World Access or any of its
Restricted Subsidiaries) of:
(1) all or any of the Capital Stock of any Restricted Subsidiary
(other than in respect of any director's qualifying shares or investments
by foreign nationals mandated by applicable law),
(2) all or substantially all of the property and assets of an
operating unit or business of World Access or any of its Restricted
Subsidiaries or
(3) any other property and assets of World Access or any of its
Restricted Subsidiaries outside the ordinary course of business of World
Access or such Restricted Subsidiary
and, in each case, that is not governed by the provisions of the indenture
applicable to mergers, consolidations and sales of assets of World Access and
which, in the case of any of clause (1), (2) or (3) above, whether in one
transaction or a series of related transactions,
(a) have a Fair Market Value in excess of $1.0 million or
(b) are for net proceeds in excess of $1.0 million;
provided that sales or other dispositions of inventory, receivables and other
current assets in the ordinary course of business shall not be included within
the meaning of "Asset Sale."
"Attributable Value" is defined to mean, as to any particular lease under
which any Person is at the time liable other than a Capitalized Lease
Obligation, and at any date as of which the amount thereof is to be determined,
the total net amount of rent required to be paid by such Person under such lease
during the remaining term thereof (whether or not such lease is terminable at
the option of the lessee prior to the end of such term), including any period
for which such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall be
the aggregate amount of rent payable by the lessee with respect to such period
after excluding
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amounts required to be paid on account of insurance, taxes, assessments,
utility, operating and labor costs and similar charges. "Attributable Value"
means, as to a Capitalized Lease Obligation under which any Person is at the
time liable and at any date as of which the amount thereof is to be determined,
the capitalized amount thereof that would appear on the face of a balance sheet
of such Person in accordance with GAAP.
"Average Life" is defined to mean, with respect to any Indebtedness, as at
any date of determination, the quotient obtained by dividing
(1) the sum of the products of
(a) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness and
(b) the amount of each such principal payment by
(2) the sum of all such principal payments.
"Board of Directors" is defined to mean the board of directors of World
Access or its equivalent, including managers of a limited liability company,
general partners of a partnership or trustees of a business trust, or any duly
authorized committee thereof.
"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of the indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligation" is defined to mean any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of the indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Change of Control" is defined to mean such time as
(1) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50.0% of the
total voting power of the then outstanding Voting Stock of World Access on
a fully diluted basis;
(2) 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 World Access'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;
(3) 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 World Access and
its Subsidiaries taken as a whole to any such "person" or "group" (other
than to World Access or a Restricted Subsidiary);
(4) the merger or consolidation of World Access with or into another
corporation or the merger of another corporation with or into World Access
in one or a series of related transactions with the effect that immediately
after such transaction any such "person" or "group" of persons or entities
shall have become the beneficial owner of securities of the surviving
corporation of such merger or
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consolidation representing a majority of the total voting power of the then
outstanding Voting Stock of the surviving corporation; or
(5) the adoption of a plan relating to the liquidation or dissolution
of World Access.
"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) of such Person's common stock, whether
now outstanding or issued after the date of the indenture, including, without
limitation, all series and classes of such common stock.
"Consolidated Cash Flow" is defined to mean, for any period, the sum of the
amounts for such period of
(1) Consolidated Net Income,
(2) Consolidated Interest Expense,
(3) income taxes, to the extent such amount was deducted in
calculating Consolidated Net Income (other than income taxes (either
positive or negative) attributable to extraordinary and non-recurring gains
or losses or sales of assets),
(4) depreciation expense, to the extent such amount was deducted in
calculating Consolidated Net Income,
(5) amortization expense, to the extent such amount was deducted in
calculating Consolidated Net Income, and
(6) all other non-cash items reducing Consolidated Net Income
(excluding any non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period), less all non-cash
items increasing Consolidated Net Income, all as determined on a
consolidated basis for World Access and its Restricted Subsidiaries in
conformity with GAAP.
"Consolidated Fixed Charges" is defined to mean, for any period,
Consolidated Interest Expense plus dividends declared and payable on Preferred
Stock.
"Consolidated Interest Expense" is defined to mean, for any period, the
aggregate amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by World Access or
any of its Restricted Subsidiaries) and all but the principal component of
rentals in respect of Capitalized Lease Obligations paid, accrued or scheduled
to be paid or to be accrued by World Access and its Restricted Subsidiaries
during such period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication:
(1) all extraordinary gains or losses,
(2) net income (or loss) of any Person combined in such Person or one
of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination,
(3) gains or losses (on an after-tax basis) in respect of any Asset
Sales by such Person or one of its Restricted Subsidiaries,
(4) the net income of any Restricted Subsidiary of such Person to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at
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the time permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulations applicable to that Restricted Subsidiary
or its stockholders,
(5) any gain or loss realized as a result of the cumulative effect of
a change in accounting principles,
(6) any amount paid or accrued as dividends on Preferred Stock of
World Access or Preferred Stock of any Restricted Subsidiary owned by
Persons other than World Access and any of its Restricted Subsidiaries and
(7) the net income (or loss) of any Person (other than net income (or
loss) attributable to a Restricted Subsidiary) in which any Person (other
than World Access or any of its Restricted Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to World Access or any of its Restricted
Subsidiaries by such other Person during such period.
"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 World Access and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory exchange notes receivable from
the sale of the Capital Stock of World Access or any of its Subsidiaries, each
item to be determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Credit Facilities" is defined to mean one or more debt facilities or
commercial paper 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 Exchange 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 World Access and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"Cumulative Consolidated Fixed Charges" are defined to mean the
Consolidated Fixed Charges of World Access and its Restricted Subsidiaries for
the period beginning on the Exchange Date through and including the end of the
last fiscal quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, determined on a consolidated basis in accordance
with GAAP.
"Cumulative Consolidated Interest Expense" is defined to mean, for the
period beginning on the Exchange Date through and including the end of the last
fiscal quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, Consolidated Interest Expense of World Access and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement and agreement designed to
provide protection against fluctuations in currency (or currency unit) values.
"Default" 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 receivable
(net of any reserves and allowances for doubtful accounts in accordance with
GAAP) of any Person that are not more than 60 days
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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
GAAP.
"Eligible Institution" is defined to mean a commercial banking institution
that has combined capital and surplus of not less than $500.0 million or its
equivalent in foreign currency, and has outstanding debt with a rating of "A-3"
or higher according to Moody's Investors Service, Inc., or "A-" or higher
according to Standard & Poor's Ratings Services (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) at the time as of which any
investment or rollover therein is made.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Exchange Date" means the date of the consummation of the registered
exchange offer under which holders of the FaciliCom Notes tendered such notes in
exchange for the exchange notes.
"FaciliCom Notes" means the 10 1/2% Series B Senior Notes due 2008 issued
by FaciliCom pursuant to the Original Indenture.
"FaciliCom Pledge Account" means an account established with the FaciliCom
Trustee in its name as trustee under the Original Indenture pursuant to the
terms of the FaciliCom Pledge Agreement.
"FaciliCom Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of January 28, 1998, from FaciliCom to the FaciliCom Trustee
governing the FaciliCom Pledge Account and the disbursements of funds therefrom.
"FaciliCom Pledged Securities" means the securities purchased by FaciliCom
with the portion of the net proceeds from the original offering of the FaciliCom
Notes consisting of U.S. Government Obligations and which were deposited in the
FaciliCom Pledge Account pursuant to the FaciliCom Pledge Agreement.
"FaciliCom Trustee" means State Street Bank and Trust Company, as trustee
under the Original Indenture.
"Fair Market Value" is defined to mean, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"GAAP" is defined to mean generally accepted accounting principles in the
United States as in effect from time to time, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession of the United States.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-
or-pay, or to maintain financial statement conditions or otherwise) or
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in
part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Incur" or "Incurrence" 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
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payment of, contingently or otherwise, such Indebtedness, including an
Incurrence of Indebtedness by reason of the acquisition of more than 50.0% of
the Capital Stock of any Person; provided that neither the accrual of interest
nor the accretion of original issue discount shall be considered an Incurrence
of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication):
(1) all indebtedness of such Person for borrowed money,
(2) all obligations of such Person evidenced by bonds, debentures,
exchange notes or other similar instruments,
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto),
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except Trade Payables,
(5) all obligations of such Person as lessee under Capitalized Lease
Obligations and the Attributable Value under any Sale-Leaseback Transaction
of such Person,
(6) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of
(A) the Fair Market Value of such asset at such date of
determination or
(B) the amount of such Indebtedness,
(7) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person,
(8) the maximum fixed redemption or repurchase price of Redeemable
Stock of such Person at the time of determination and
(9) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation; provided:
(x) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and
(y) that Indebtedness shall not include any liability for federal,
state, local or other taxes.
"Interest Rate Agreement" is defined to mean interest rate swap agreements,
interest rate cap agreements, interest rate insurance, and other arrangements
and agreements designed to provide protection against fluctuations in interest
rates.
"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 GAAP, recorded as
accounts receivable on the balance sheet of World Access or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes,
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debentures or other similar instruments issued by, such 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,
(1) "Investment" shall include:
(a) the Fair Market Value of the assets (net of liabilities) of any
Restricted Subsidiary of World Access at the time that such Restricted
Subsidiary of World Access 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 World Access and
(b) the Fair Market Value, in the case of a sale of Capital Stock
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 World Access and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value at the time of such transfer, in
each case as determined by the Board of Directors in good faith.
"Investment Grade Company" means a Person whose debt securities are rated
BBB- or higher by Standard & Poor's Ratings Service. Inc. or Baa3 or higher by
Moody's Investor Service, Inc. (or an equivalent rating by another nationally
recognized rating agency).
"Junior Preferred Stock" has the meaning set forth under "-- Limitation on
Restricted Payments."
"Lien" is defined to mean any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance upon or with respect to
any property of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Market Price" means, the average closing price of the shares of World
Access's Common Stock on the principal trading market of such Common Stock over
the five consecutive trading days up to and including the trading day prior to
the last full trading day before the closing of the Merger.
"Market Value" means the average of the closing price of the applicable
security on such security's principal trading market over the five consecutive
trading days up to and including the trading day prior to the last full trading
day before the initiation of any Offer to Purchase described in clause (1)(B) of
the second paragraph under "-- Limitation on Asset Sales" or the time any
commitment to effect an Asset Sale is entered into as described under
"-- Limitation on Asset Sales."
"Marketable Securities" is defined to mean:
(1) U.S. Government Obligations which have a remaining weighted
average life to maturity of not more than one year from the date of
Investment therein;
(2) any time deposit account, money market deposit and certificate of
deposit maturing not more than 180 days after the date of acquisition
issued by, or time deposit of, an Eligible Institution;
(3) certificates of deposit, Eurodollar time deposits and bankers'
acceptances with maturity of 90 days or less and overnight bank deposits of
any financial institution that is organized under the laws of the United
States of America or any state hereof, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $300.0
million (or, to the extent non-United States dollar-denominated, the United
States Dollar Equivalent of such amount) and has
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outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act);
(4) commercial paper maturing not more than 180 days after the date of
acquisition issued by a corporation (other than an Affiliate of World
Access) with a rating, at the time as of which any investment therein is
made, of "P-1" or higher according to Moody's Investors Service, Inc., or
"A-1" or higher according to Standard & Poor's Ratings Services (or such
similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act));
(5) auction rate preferred securities whose rates are reset based on
market levels for a par security not more than 90 days after the date of
acquisition with a rating, at the time as of which any investment therein
is made, of "A-3" or higher according to Moody's Investors Service, Inc.,
or "A-" or higher according to Standard & Poor's Ratings Services (or such
similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act)) and issued by a corporation that is not an Affiliate of
World Access;
(6) any banker's acceptance or money market deposit accounts issued or
offered by an Eligible Institution;
(7) repurchase obligations with a term of not more than seven days for
U.S. Government Obligations entered into with an Eligible Institution; and
(8) any fund investing exclusively in investments of the types
described in clauses (1) through (7) above.
"Merger" means the merger of FaciliCom with and into World Access pursuant
to the Agreement and Plan of Merger dated August 17, 1999 between World Access
and FaciliCom.
"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 World Access or any Restricted Subsidiary of World
Access) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of:
(1) brokerage commissions and other fees and expenses (including
fees and expenses of counsel and investment bankers) related to such
Asset Sale,
(2) provisions for all taxes payable as a result of such Asset Sale
without regard to the consolidated results of operations of World Access
and its Restricted Subsidiaries, taken as a whole (after taking into
account any available offsetting tax credits or deductions and any tax
sharing arrangements),
(3) 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
(4) appropriate amounts to be provided by World Access or any
Restricted Subsidiary of World Access as a reserve against any
liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP, and
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(b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the
extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
such obligations are financed or sold with recourse to World Access or any
Restricted Subsidiary of World Access) 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.
"Original Indenture" means the Indenture, dated as of January 28, 1998,
among FaciliCom and the FaciliCom Trustee, as supplemented by the First
Supplemental Indenture thereto, pursuant to which FaciliCom issued the FaciliCom
Notes.
"Original Issue Date" means January 28, 1998, the date FaciliCom issued the
FaciliCom Notes.
"Permitted Business" is defined to mean any business involving voice, data
and other telecommunications services or equipment.
"Permitted Investment" is defined to mean:
(1) 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, World Access or a Restricted Subsidiary;
(2) any Investment in Marketable Securities or Pledged Securities;
(3) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
(4) loans or advances to officers and employees made in the ordinary
course of business that do not in the aggregate exceed $1.0 million at any
time outstanding;
(5) stock, obligations or securities received in satisfaction of
judgments;
(6) Investments in any Person received as consideration for Asset
Sales to the extent permitted under the "Limitation on Asset Sales"
covenant;
(7) Investments in any Person at any one time outstanding (measured on
the date each such Investment was made without giving effect to subsequent
changes in value) in an aggregate amount not to exceed the greater of:
(A) $15.0 million or
(B) 5.0% of World Access's total consolidated assets;
(8) Investments in deposits with respect to leases or utilities
provided to third parties in the ordinary course of business;
(9) Investments in Currency Agreements and Interest Rate Agreements on
commercially reasonable terms entered into by World Access or any of its
Restricted Subsidiaries in the ordinary course of business in connection
with the operation of the business of World Access or its Restricted
Subsidiaries; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(10) repurchases or redemptions by World Access of Capital Stock from
officers and other employees of World Access or any of its Subsidiaries or
their authorized representatives upon the death, disability or termination
of employment of such individuals, in an aggregate amount not exceeding
$1.0 million in any calendar year and $3.0 million from the date of the
indenture; and
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(11) Investments in evidences of Indebtedness, securities or other
property received from another Person by World Access or any of its
Restricted Subsidiaries in connection with any bankruptcy proceeding or by
reason of a composition or readjustment of debt or a reorganization of such
Person or as a result of foreclosure, perfection or enforcement of any Lien
in exchange for evidences of Indebtedness, securities or other property of
such person held by World Access or any of its Subsidiaries, or for other
liabilities or obligations of such Person to World Access or any of its
Subsidiaries that were created, in accordance with the terms of the
indenture.
"Permitted Liens" is defined to mean:
(1) Liens for taxes, assessments, governmental charges or claims that
are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(2) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other similar Liens arising
in the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made;
(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(5) 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 World
Access or any of its Restricted Subsidiaries;
(6) Liens (including extensions and renewals thereof) upon real or
personal property purchased or leased after the Original Issue Date;
provided that
(a) such Lien is created solely for the purpose of securing
Indebtedness Incurred in compliance with the "Limitation on
Indebtedness" covenant
(x) to finance the cost (including the cost of design,
development, construction, acquisition, installation or integration)
of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later
of the acquisition, the completion of construction or the
commencement of full operation of such property or
(y) to refinance any Indebtedness 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 and any improvements
on such item;
(7) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of World Access and its
Restricted Subsidiaries, taken as a whole;
(8) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of World Access or its
Restricted Subsidiaries relating to such property or assets;
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(9) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation or operating lease;
(10) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(11) Liens on property of, or on shares of stock or Indebtedness of,
any corporation existing at the time such corporation becomes, or becomes a
part of, any Restricted Subsidiary; provided that such Liens do not extend
to or cover any property or assets of World Access or any Restricted
Subsidiary other than the property or assets acquired and were not created
in contemplation of such transaction;
(12) Liens in favor of World Access or any Restricted Subsidiary;
(13) Liens arising from the rendering of a final judgment or order
against World Access or any Restricted Subsidiary of World Access that does
not give rise to an Event of Default;
(14) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(15) 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;
(16) 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;
(17) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
World Access or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of World Access and its
Restricted Subsidiaries prior to the Exchange Date;
(18) Liens existing on the Original Issue Date or securing the
exchange notes or the FaciliCom Notes or any Guarantee of the exchange
notes or the FaciliCom Notes;
(19) Liens granted after the Exchange Date on any assets or Capital
Stock of World Access or its Restricted Subsidiaries created in favor of
the holders;
(20) Liens securing Indebtedness which is incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause (8) of
paragraph (b) of the "Limitation on Indebtedness" covenant; provided that
such Liens do not extend to or cover any property or assets of World Access
or any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; and
(21) Liens securing Indebtedness under Credit Facilities incurred in
compliance with clause (3), or securing Indebtedness to finance the cost of
Telecommunications Assets under clause (4) of paragraph (b) of the
"Limitation on Indebtedness" covenant.
"Person" is defined to mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge Account" is defined to mean an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities.
"Pledge Agreement" is defined to mean the Collateral Pledge and Security
Agreement, dated as of the date of the indenture, from World Access to the
Trustee, governing the Pledge Account and the disbursement of funds therefrom.
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"Pledged Securities" is defined to mean the FaciliCom Pledged Securities or
portion thereof which are to be released from the FaciliCom Pledge Account to
FaciliCom, and deposited in, the Pledge Account pursuant to the FaciliCom Pledge
Agreement.
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations, rights or other equivalents (however
designated, whether voting or non-voting) of such person's preferred or
preference stock, whether now outstanding or issued after the date of the
indenture, including, without limitation, all series and classes of such
preferred or preference stock.
"Pro Forma Consolidated Cash Flow" is defined to mean, for any period, the
Consolidated Cash Flow of World Access for such period calculated on a pro forma
basis to give effect to any Asset Disposition or Asset Acquisition not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Disposition or Asset Acquisition had taken place on the first day of such
period.
"Public Equity Offering" is defined to mean an underwritten primary public
offering of Common Stock of World Access pursuant to an effective registration
statement under the Securities Act.
"Redeemable Stock" is defined to mean any class or series of Capital Stock
of any Person that by its terms (or by the terms of any security into which it
is exchangeable) or otherwise is:
(1) required to be redeemed on or prior to the date that is 123 days
after the date of the Stated Maturity of the exchange notes,
(2) redeemable at the option of the holder of such class or series of
Capital Stock at any time on or prior to the date that is 123 days after
the date of the Stated Maturity of the exchange notes or
(3) convertible into or exchangeable for Capital Stock referred to in
clause (1) or (2) above or Indebtedness having a scheduled maturity on or
prior to the date that is 123 days after the date of the Stated Maturity of
the exchange notes;
provided that any Capital Stock that would not constitute Redeemable Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring on or prior to the date that is 123 days
after the date of the Stated Maturity of the exchange notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Exchange Notes upon a Change of Control" covenants described
above and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provisions on or prior to
the date that is 123 days after the date of World Access's repurchase of such
exchange notes as are required to be repurchased pursuant to the "Limitation on
Asset Sales" and "Repurchase of Exchange Notes upon a Change of Control"
covenants described above.
"Restricted Subsidiary" is defined to mean any Subsidiary of World Access
other than an Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person is defined to mean an
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by such person of any property or asset of such
person which has been or is being sold or transferred by such person after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangements may be terminated by the lessee
without payment of a penalty.
"Significant Subsidiary" is defined to mean a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
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"Stated Maturity" is defined to mean,
(1) 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
(2) 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, any
corporation, association or other business entity including, without limitation,
partnerships and limited liability companies, of which more than 50.0% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such person.
"Telecommunications Assets" is defined to mean, with respect to any Person,
equipment used in the telecommunications business or ownership rights with
respect to IRUs, MAOUs or minimum investment units (or similar ownership
interests) in fiber optic cable and international or domestic telecommunications
switches or other transmission facilities (or Common Stock of a Person that
becomes a Restricted Subsidiary, the assets of which consist primarily of any
such Telecommunications Assets), in each case purchased or acquired through
Indebtedness, provided that such Indebtedness does not exceed the Fair Market
Value of such assets, by World Access or a Restricted Subsidiary after the
Original Issue Date.
"Total Equity Market Capitalization" of any Person means, as of any date of
determination, the product of:
(1) the aggregate number of outstanding shares of Common Stock of such
Person on such date on a fully-diluted basis and
(2) the average closing price of such Common Stock over the five
consecutive trading days immediately preceding such date.
If no closing price exists with respect to shares of any such class, the value
of such shares shall be determined by the Board of Directors in good faith and
evidenced by a resolution of the Board of Directors filed with the Trustee.
"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by World Access 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 World Access 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.
"United States Dollar Equivalent" is defined to mean, with respect to any
monetary amount in a currency other than the United States dollar, at any time
for the determination thereof, the amount of United States dollars obtained by
converting such foreign currency involved in such computation into United States
dollars at the spot rate for the purchase of United States dollars with the
applicable foreign currency as quoted by Reuters at approximately 11:00 a.m.
(New York City time) on the date not more than two business days prior to such
determination. For purposes of determining whether any Indebtedness can be
incurred (including Permitted Indebtedness), any Investment can be made and any
transaction described in the "Limitation on Transactions with Stockholders and
Affiliates" covenant can be undertaken (a "Tested Transaction"), the United
States Dollar Equivalent of such Indebtedness, Investment or transaction
described in the "Limitation on Transactions with Stockholders and Affiliates"
covenant will be determined on the date incurred, made or undertaken and no
subsequent change in the United States Dollar Equivalent shall cause such Tested
Transaction to have been incurred, made or undertaken in violation of the
indenture.
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"Unrestricted Subsidiary" is defined to mean
(1) any Subsidiary of World Access that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Restricted Subsidiary of World Access
(including any newly acquired or newly formed Subsidiary of World Access) to be
an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, World Access or any Restricted
Subsidiary; provided that
(A) the Subsidiary to be so designated has total assets of $1,000 or
less or
(B) if such Subsidiary has assets greater than $1,000, that such
designation would be permitted under the "Limitation on Restricted
Payments" covenant described above, and such Subsidiary is not liable,
directly or indirectly, with respect to any Indebtedness other than
Unrestricted Subsidiary Indebtedness.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of World Access; provided that immediately after giving
effect to such designation:
(x) World Access could Incur $1.00 of additional Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant described
above and
(y) no Default or Event of Default shall have occurred and be
continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" is defined to mean any Indebtedness
of any Unrestricted Subsidiary:
(1) as to which neither World Access nor any Restricted Subsidiary is
directly or indirectly liable (by virtue of World Access or any such
Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness) and
(2) which, upon the occurrence of a default with respect thereto, does
not result in, or permit any holder of any Indebtedness of World Access or
any Restricted Subsidiary to declare, a default of such Indebtedness of
World Access or any Restricted Subsidiary or cause the payment thereof to
be accelerated or payable prior to its Stated Maturity.
"U.S. Government Obligations" is defined to mean securities that are:
(x) direct obligations of the United States for the timely payment of
which its full faith and credit is pledged or
(y) obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the United States the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
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"Voting Stock" is defined to mean with respect to any person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
person.
"World Access Charitable Trust" means that certain World Access Charitable
Trust dated August 19, 1999, by and between World Access Investment Corp., a
Delaware corporation and Clay C. Long, Esq., as trustee, in favor of World
Access Foundation, Inc., a Georgia nonprofit corporation.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will initially be represented by one or more permanent
global exchange notes in definitive, fully registered book-entry form, without
interest coupons. The global exchange notes will be deposited on the Exchange
Date with, or on behalf of, DTC and registered in the name of DTC or a nominee
of DTC. As described below under "-- Certificated Exchange Notes," owners of
beneficial interests in a global exchange note may receive physical delivery of
certificated exchange notes only in the limited circumstances described therein.
The Global Exchange Notes. World Access expects that pursuant to
procedures established by DTC (1) upon deposit of the global exchange notes, DTC
or its custodian will credit, on its internal system, the corresponding
principal amount of global exchange notes to the respective accounts of persons
who have accounts with such depositary and (2) ownership of the global exchange
notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
notes, DTC or such nominee will be considered the sole owner or holder of the
global exchange notes represented by the applicable global exchange notes for
all purposes under the indenture. No beneficial owner of an interest in the
global exchange notes will be able to transfer such interest except in
accordance with DTC's applicable procedures in addition to those provided for
under the indenture with respect to the exchange notes.
Payments of the principal of, premium (if any) and interest on, the global
exchange notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of World Access, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the global
exchange notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interest.
World Access expects that DTC or its nominee, upon receipt of any payment
of the principal of, premium (if any) and interest on, the global exchange
notes, will credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of such global
exchange note, as shown on the records of DTC or its nominee. World Access also
expects that payments by participants to owners of beneficial interests in any
such global exchange notes held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Accordingly, the
ability to transfer interests in the exchange notes represented by a global
exchange note to such persons may be limited.
DTC has advised World Access that DTC will take any action permitted to be
taken by a holder of exchange notes (including the presentation of exchange
notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the applicable global
exchange note is credited and only in respect of the aggregate principal amount
of exchange notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under
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the indenture, DTC will exchange the applicable global exchange note for
certificated notes, which it will distribute to its participants.
DTC has advised World Access as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. "Participants" include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global exchange notes among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither World Access nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Exchange Notes. If (1) World Access notifies the Trustee in
writing that the DTC is no longer willing or able to act as a depository and
World Access does not appoint a qualified successor within 90 days or (2) World
Access, at its option, notifies the Trustee in writing that it elects to cause
the issuance of exchange notes in definitive form under the indenture, then,
upon surrender by the relevant registered owner of its global exchange note,
certificated exchange notes in such form will be issued to each person that such
registered owner and DTC identify as the beneficial owner of the related
exchange notes. In addition, subject to certain conditions, any person having a
beneficial interest in the global exchange note may, upon request to the
Trustee, exchange such beneficial interest for exchange notes in the form of
certificated exchange notes. Upon any such issuance, the Trustee is required to
register such certificated exchange notes in the name of, and cause the same to
be delivered to, such person or persons (or the nominee of any thereof) in fully
registered form.
Neither World Access nor the Trustee shall be liable for any delay by the
related registered owner or DTC in identifying the beneficial owners of the
related exchange notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from such registered owner or of DTC
for all purposes (including with respect to the registration and delivery, and
the principal amount of the exchange notes to be issued).
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COMPARISON OF THE EXCHANGE NOTES AND THE FACILICOM NOTES
The following comparison of the exchange notes and the FaciliCom notes
summarizes the material differences between the exchange notes and the FaciliCom
notes and is not a complete description of all differences. See "Description of
the Exchange Notes" for a more complete discussion of the terms of the exchange
notes and the indenture. References in the following discussion to "World
Access" include the surviving company in the merger of World Access and
FaciliCom unless the context otherwise requires. Capitalized terms used in this
discussion have the meanings given to them in the indenture.
In connection with the exchange offer, World Access will enter into an
indenture with First Union National Bank, as trustee, pursuant to which the
exchange notes will be issued. The holders of the exchange notes will be
entitled to the benefits of the indenture, which will be substantially similar
to the FaciliCom indenture, under which the FaciliCom notes were issued.
Changes to the terms of the exchange notes as compared with the FaciliCom
notes include that the obligor under the exchange notes will be World Access,
Inc. and interest on the exchange notes will be payable at a rate of 13.25% per
annum.
In addition, as a result of the consummation of the merger of World Access
and FaciliCom, World Access would violate the "Limitation on Indebtedness,"
"Limitation on Restricted Payments," "Limitation on Transactions with
Stockholders and Affiliates," "Business of the Company; Restriction on Transfers
of Existing Business" and "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenants contained in the FaciliCom
indenture. The differences discussed in paragraphs 1(b), 2, 3, 5 and 7 below
modify the covenants to the extent required to effect the proposed merger. In
addition, World Access believes that, after the merger, it would be in the best
interests of the combined enterprise if the resulting entity could have
additional flexibility under the "Limitation on Indebtedness" and "Limitation on
Asset Sales" covenants as described in paragraphs 1(a), 4(a) and 6 below. World
Access is also proposing to increase some of the redemption prices for the
exchange notes when redeemed at the option of World Access and to undertake an
offer to repurchase the exchange notes following some Asset Sales as described
in paragraph 4(b) below. Forms of these covenants as they are proposed to be
amended are included under "-- Text of Changes to the Indenture" below.
1. (a) The first change to the "Limitation on Indebtedness" covenant
modifies the exception for indebtedness incurred under one or more credit
facilities to the greater of:
(x) the sum of FaciliCom's existing credit facility ($35.0 million)
and World Access' existing credit facility ($100.00 million) and
(y) 80% of eligible accounts receivable.
The FaciliCom indenture permitted the incurrence of the greater of
(A) $35.0 million and
(B) 80% of eligible accounts receivable.
(b) The second change to the "Limitation on Indebtedness" covenant is the
inclusion of Indebtedness of World Access existing at the time of the merger
among the types of Indebtedness permitted to exist under the covenant.
(c) Another change to the "Limitation on Indebtedness" covenant specifies
that Indebtedness arising from World Access' indemnification obligations under
the Indemnification Agreement, dated August 19, 1999, by and between World
Access and Clay C. Long, Esq., trustee of the World Access Charitable Trust, is
among the types of Indebtedness permitted to exist under the covenant.
2. The "Limitation on Restricted Payments" covenant would restrict the
payment of some dividends and distributions by World Access, subject to some
limited exceptions. World Access recently issued 50,000 shares of its Series A
preferred stock to The 1818 Fund for a purchase price of $50.0 million. In
addition, World Access recently acquired the assets of Comm/Net Holding
Corporation and its
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subsidiaries for a purchase price of approximately $27.0 million, consisting
primarily of 23,174 shares of World Access' Series B preferred stock. In
addition, The 1818 Fund has an option to purchase up to 20,000 additional shares
of Series A preferred stock for a purchase price of $1,000 per share prior to
June 30, 2000. Each share of preferred stock pays dividends equal to 4.25% of
the liquidation preference per annum. The dividend payments payable on the
outstanding shares of the Series A preferred stock and the Series B preferred
stock, which are expected to total approximately $3.1 million per annum
(approximately $4.0 million if The 1818 Fund exercises its option), would not be
permitted under the "Limitation on Restricted Payments" covenant in the
FaciliCom indenture. The change to this covenant allows World Access to continue
to make its dividend payments on these securities after the merger. The
"Limitation on Restricted Payments" covenant is also proposed to be modified to
permit the conversion of the Series A preferred stock, the Series B preferred
stock and Series C preferred stock to be issued in the merger into World Access
common stock in accordance with the terms of such preferred stock. A final
change to the "Limitation on Restricted Payments" covenant would permit the
exercise of employee or non-employee stock options to purchase World Access
capital stock.
3. The "Limitation on Transactions with Stockholders and Affiliates"
covenant in the FaciliCom indenture would prohibit World Access from, among
other things, engaging in any transaction with a holder of 5% or more of any
class of capital stock of World Access (referred to in this description as a "5%
stockholder") or with an Affiliate of World Access unless certain conditions are
met. The 1818 Fund, after giving effect to the merger and related transactions,
will be a holder of approximately 5.8% of the outstanding common stock of World
Access (7.9% if the option described above is exercised) and therefore a 5%
stockholder. As a result, after completion of the merger, the sale of the 20,000
shares of World Access' Series A preferred stock subject to the option held by
The 1818 Fund could violate the "Limitation on Transactions with Stockholders
and Affiliates" covenant.
In addition, World Access currently sells to and purchases from MCI
WorldCom, Inc. and its Affiliates telecommunications services and equipment in
the ordinary course of business. MCI WorldCom, as a result of the merger and
related transactions, will own approximately 8.1% of World Access' outstanding
common stock and will therefore be a 5% stockholder.
Under the changes to the "Limitation on Transactions with Stockholders and
Affiliates" covenant, the transactions described above will be exempted from the
prohibitions contained in this covenant. The "Limitation on Transactions with
Stockholders and Affiliates" covenant is also proposed to be modified to exempt
the issuance and sale by World Access of its common stock to its affiliates and
5% stockholders.
Another proposed change to the "Limitation on Transactions with
Stockholders and Affiliates" covenant would exempt the issuance and sale of
World Access common stock upon conversion of the Series A, Series B or Series C
preferred stock into capital stock of World Access or exercise of employee or
non-employee options to purchase World Access capital stock. A final proposed
change would permit certain arrangements between World Access and the World
Access Charitable Trust in existence on the exchange date.
4. (a) Under the "Limitation on Asset Sales" covenant in the FaciliCom
indenture, World Access or any Restricted Subsidiary could only conduct Asset
Sales if, among other things, 80% of the consideration received was cash or cash
equivalents or the assumption of unsubordinated Indebtedness. In order to
provide additional flexibility for World Access to negotiate a sale of some of
its assets to large, well-capitalized telecommunications equipment
manufacturers, which could prefer to issue equity or other securities as
consideration, the changes to the "Limitation on Asset Sales" covenant would
include within consideration constituting cash or cash equivalents, securities,
notes or other obligations as long as those securities, notes or other
obligations are issued by an investment grade company with a total equity market
capitalization in excess of $25 billion and are converted within 180 days into
cash or cash equivalents.
(b) As part of the modifications to the "Limitation on Asset Sales"
covenant, World Access also proposes to include an obligation for it to make an
Offer to Purchase the exchange notes following an Asset Sale if it does not
apply the net cash proceeds from such sale to repay Indebtedness. This
obligation would only apply if the net cash proceeds from any individual sale
exceed $15 million and would expire
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once World Access has made, in the aggregate, one or more Offers to Purchase for
an aggregate principal amount of exchange notes equal to the aggregate principal
amount of exchange notes issued on the exchange date. Any Offer to Purchase
would be made at a purchase price of 100% of the principal amount of the
exchange notes plus accrued and unpaid interest less, for each $1,000 principal
amount, the market value of the number of shares of World Access common stock
issued on the exchange date for each $1,000 principal amount of FaciliCom notes
exchanged. The purchase price for any Excess Proceeds Offer following an Asset
Sale would also be reduced by an amount corresponding to the market value of the
common stock.
5. The "Permitted Business" covenant in the FaciliCom indenture would
provide that World Access could engage only in a Permitted Business, which is
limited to telecommunications services. In addition to providing
telecommunications services, World Access develops, manufactures and markets a
variety of telecommunications products. As a result of the merger, World Access
would be in violation of the "Permitted Business" covenant as it appears in the
FaciliCom indenture. The definition of Permitted Business for the exchange
notes, therefore, has been modified to include any business involving
telecommunications equipment as well as services.
6. The definition of "Telecommunications Assets" applicable to the exchange
notes has been modified to permit the acquisition of such assets by World Access
by means of Indebtedness. Under subsection (b)(iv) of the "Limitation on
Indebtedness" covenant in the indenture, World Access is permitted to incur
Indebtedness in order to, among other things, acquire Telecommunications Assets.
In the FaciliCom indenture, however, the definition of Telecommunications Assets
is limited to such assets purchased or acquired through Capital Lease
Obligations by FaciliCom or a Restricted Subsidiary. The indenture for the
exchange notes permits World Access greater flexibility by broadening the means
by which World Access can make such acquisitions to include Indebtedness, so
long as the amount of such Indebtedness does not exceed the Fair Market Value of
the assets so acquired.
7. The "Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant has been modified for the exchange notes to
exempt restrictions of World Access existing on the exchange date so that World
Access will not be in default under the indenture.
8. As noted above, some of the redemption prices for the exchange notes
when redeemed at the option of World Access have been increased as compared to
the FaciliCom notes.
9. Under the "Limitation on Sale-Leaseback Transactions" covenant, World
Access may enter into a sale-leaseback transaction provided that, among other
things, World Access would be able to incur $1.00 of additional indebtedness
under Section 1011 under the FaciliCom indenture. A proposed change to the
"Limitation on Sale-Leaseback Transactions" covenant would exempt from this
requirement a sale-leaseback arrangement involving NACT Telecommunications,
Inc.'s facility in Provo, Utah.
TEXT OF CHANGES TO THE INDENTURE
Set forth below are the material provisions, covenants and definitions that
have been changed from the FaciliCom indenture. TEXT BEING ADDED IS IN BOLD AND
TEXT BEING DELETED IS IN BRACKETS. Additional technical and conforming changes
have also been made.
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SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with, or merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially as an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company and the Company shall not permit any of
its Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in the sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Restricted Subsidiaries, taken as a whole, to any
other Person or Persons, unless:
(1) either (A) the Company shall be the continuing Person or, (B) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and
assets of the Company (i) shall be a corporation organized and validly
existing under the laws of the United States of America or any jurisdiction
thereof and (ii) shall expressly assume, by an indenture supplemental
hereto, duly executed and delivered to the Trustee, all of the obligations
of the Company with respect to all the Notes and under this Indenture OR
(C) IN THE CASE OF ANY SUCH TRANSACTION OR SERIES OF TRANSACTIONS ENTERED
INTO BY ANY RESTRICTED SUBSIDIARY, THE PERSON INTO WHICH THE RESTRICTED
SUBSIDIARY IS MERGED IS ANOTHER RESTRICTED SUBSIDIARY;
(2) immediately after giving effect to such transaction on a pro forma
basis, no Default or Event of Default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, the Company, or any Person becoming the successor obligor of the
Notes, shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction;
(4) immediately after giving effect to such transaction on a pro forma
basis, the Company, or any Person becoming the successor obligor of the
Notes, as the case may be, could Incur at least $1.00 of Indebtedness under
paragraph (a) of Section 1011; and
(5) the Company delivers to the Trustee an Officer's Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (3) and (4) above) and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with;
provided, however, that clauses (3) and (4) above shall not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
SECTION 1011. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that the Company may
Incur Indebtedness if immediately thereafter the ratio of (i) the aggregate
principal amount (or accreted value, as the case may be) of Indebtedness of the
Company and its Restricted Subsidiaries on a consolidated basis outstanding as
of the Transaction Date to (ii) the Pro Forma Consolidated Cash Flow for the
preceding two full fiscal quarters multiplied by two, determined on a pro forma
basis as if any such Indebtedness had been Incurred and the proceeds thereof had
been applied at the beginning of such two fiscal quarters, would be greater than
zero and less than 5 to 1.
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(b) The foregoing limitations of paragraph (a) of this covenant will not
apply to any of the following Indebtedness ("Permitted Indebtedness"), each of
which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the Notes OR THE
FACILICOM NOTES;
(ii) Indebtedness of [the Company] FACILICOM or any OF ITS Restricted
[Subsidiary] SUBSIDIARIES outstanding on the [Issue] EXCHANGE Date;
(iii) Indebtedness of the Company or any Restricted Subsidiary under
one or more Credit Facilities, in an aggregate principal amount at any one
time outstanding not to exceed the greater of (x) $[35] 135.0 million and
(y) 80% of Eligible Accounts Receivable at any one time outstanding,
subject to any permanent reductions required by any other terms of this
Indenture;
(iv) Indebtedness of the Company or any Restricted Subsidiary Incurred
in connection with or to finance the cost (including the cost of design,
development, construction, acquisition, installation or integration) of
Telecommunications Assets;
(v) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that (A) any transfer of
such Indebtedness by the Company or a Restricted Subsidiary (other than to
the Company or another Restricted Subsidiary) or (B) the sale, transfer or
other disposition by the Company or any Restricted Subsidiary of Capital of
a Restricted Subsidiary which is owed Indebtedness of another Restricted
Subsidiary shall, in each case, be an Incurrence of Indebtedness by such
Restricted Subsidiary, subject to the other provisions of this Indenture;
(vi) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right to the payment and
performance to the obligations of the Company under this Indenture and the
Notes, except that the limitations of paragraph (a) of this Section 1011
shall apply to such Indebtedness at such time as (A) any transfer of such
Indebtedness by a Restricted Subsidiary (other than to another Restricted
Subsidiary) and (B) the sale, transfer or other disposition by the Company
or any Restricted Subsidiary of Capital Stock of a Restricted Subsidiary
which is owed such Indebtedness, subject to other provisions of this
Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary issued in
exchange for, or the net proceeds of which are used to refinance (whether
by amendment, renewal, extension or refunding), then outstanding
Indebtedness of the Company or a Restricted Subsidiary, other than
Indebtedness Incurred under clauses (iii), (v), (vi), (viii), (ix), (xi)
and (xii) of this paragraph, and any refinancing thereof in an amount not
to exceed the amount so refinanced or refunded (plus premiums, accrued
interest, and reasonable fees and expenses); provided that such new
Indebtedness shall only be permitted under this clause (vii) if (A) in case
the Notes are refinanced in part or the Indebtedness to be refinanced is
pari passu with the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made pari passu
with, or subordinate in right of payment to, the remaining Notes, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment
to the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is issued
or remains outstanding, is expressly made subordinate in right of payment
to the Notes at least to the extent that the Indebtedness to be refinanced
is subordinated to the Notes and (C) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, does not mature prior
to the Stated Maturity of the Indebtedness to be refinanced or refunded,
and the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness of the Company be
refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any one time
outstanding, 2.00 times the Net Cash Proceeds from the issuance and sale,
other than to a Subsidiary, of Common Stock (other than Redeemable Stock)
of the Company (less the amount of such proceeds used to make
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Restricted Payments as provided in clause (iii) or (iv) of the second
paragraph of Section 1012) and (y) the Company or Acquired Indebtedness of
a Restricted Subsidiary not to exceed, at one time outstanding, the [fair
market value] FAIR MARKET VALUE of any Telecommunications Assets acquired
by the Company in exchange for Common Stock of the Company issued after the
[Issue] EXCHANGE Date; provided, however, that in determining the [fair
market value] FAIR MARKET VALUE of any such Telecommunications Assets so
acquired, if the estimated [fair market value] FAIR MARKET VALUE of such
Telecommunications Assets exceeds (A) $2.0 million (as estimated in good
faith by the Board Of Directors), then the [fair market value] FAIR MARKET
VALUE of such Telecommunications Assets will be determined by a majority of
the Board of Directors of the Company, which determination will be
evidenced by a resolution thereof, and (B) $10.0 million (as estimated in
good faith by the Board of Directors), then the Company shall deliver the
Trustee a written appraisal as to the [fair market value] FAIR MARKET VALUE
of such Telecommunications Assets prepared by a nationally recognized
investment banking or public accounting firm (or, if no [such] NATIONALLY
RECOGNIZED investment banking or public accounting firm is qualified to
prepare such an appraisal, by a nationally recognized appraisal firm); and
provided further that such Indebtedness does not mature prior to the Stated
Maturity of the Notes and the Average Life of such Indebtedness is longer
than that of the Notes;
(ix) Indebtedness of the Company or any Restricted Subsidiary (A) in
respect of performance, surety or appeal bonds or letters of credit
supporting trade payables, in each case provided in the ordinary course of
business, (B) under Currency Agreements and Interest Rate Agreements
covering Indebtedness of the Company; provided that such agreements do not
increase the Indebtedness of the obligor outstanding at any time other than
as a result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder, and (C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, INCLUDING WITHOUT
LIMITATION, THE COMPANY'S INDEMNIFICATION OBLIGATIONS PURSUANT TO THAT
CERTAIN INDEMNIFICATION AGREEMENT DATED AUGUST 19, 1999, BY AND BETWEEN THE
COMPANY AND CLAY C. LONG, ESQ., TRUSTEE OF THE WORLD ACCESS CHARITABLE
TRUST, or from Guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition), in a
principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such disposition;
(x) Indebtedness of the Company, to the extent that the net proceeds
thereof are promptly (A) used to repurchase Notes tendered in a Change of
Control Offer or (B) deposited to defease all of the Notes pursuant to
Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by a
Guarantee of the Notes permitted by and made in accordance with Section
1018; [and]
(XII) INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES EXISTING UPON
THE CONSUMMATION OF THE MERGER; AND
(xiii) Indebtedness of the Company or any Restricted Subsidiary in
addition to that permitted to be incurred pursuant to clauses (i) through
(xi) above in an aggregate principal amount not in excess of $10 million
(or, to the extent not denominated in United States dollars, the United
States Dollar Equivalent thereof) at any one time outstanding.
(c) For purposes of determining any particular amount of Indebtedness under
this Section 1011, Guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included; provided, however, that the foregoing
shall not in any way be deemed to limit the provisions of Section 1018. For
purposes of determining compliance with this Section 1011, in the event that an
item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Company, in its sole discretion
may, at the time of such Incurrence, (i) classify such item of Indebtedness
under and
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comply with either of paragraph (a) or (b) of this covenant (or any of such
definitions), as applicable, (ii) classify and divide such item of Indebtedness
into more than one of such paragraphs (or definitions), as applicable, and (iii)
elect to comply with such paragraphs (or definitions), as applicable in any
order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, (i) (A) declare or pay any dividend or make any
distribution in respect of the Company's Capital Stock to the Holders thereof
(other than dividends or distributions payable solely in shares of Capital Stock
(other than Redeemable Stock) of the Company or in options, warrants or other
rights to acquire such shares of Capital Stock) or (B) declare or pay any
dividend or make any distribution in respect of the Capital Stock of any
Restricted Subsidiary to any Person other than dividends and distributions,
INCLUDING A DISTRIBUTION PAYABLE SOLELY IN SHARES OF CAPITAL STOCK (OTHER THAN
REDEEMABLE STOCK), payable to the Company or any Restricted Subsidiary or to all
holders of Capital Stock of such Restricted Subsidiary on a pro rata basis; (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of the Company (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person or any shares of Capital Stock
of any Restricted Subsidiary (including options, warrants and other rights to
acquire such shares of Capital Stock) held by any Affiliate of the Company
(other than a wholly owned Restricted Subsidiary) or any holder (or any
Affiliate thereof) of 5% or more of the Company's Capital Stock; (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Notes; or (iv) make any Investment, other than a Permitted Investment, in any
Person (such payments or any other actions described in clauses (i) through (iv)
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Company could not Incur at least $1.00 of Indebtedness under
paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments declared or made
from and after the [Closing] EXCHANGE Date would exceed the sum of:
(1) Cumulative Consolidated Cash flow minus 200% of Cumulative
Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the issue or sale
to a Person, which is not a Subsidiary of the Company, of Capital Stock
of the Company (other than Redeemable Stock) or of debt securities of
the Company which have been converted into or exchanged for such Capital
Stock (except to the extent such Net Cash Proceeds are used to Incur new
Indebtedness outstanding pursuant to clause (viii) of paragraph (b) of
Section 1011); and
(3) to the extent any Permitted Investment that was made after the
[Closing] EXCHANGE Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (i) the cash return of capital with
respect to such Permitted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Permitted Investment.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including a premium, if any, and accrued and unpaid interest [and Liquidated
Damages, if any,] with the net proceeds of, or in exchange for, Indebtedness
Incurred under clause (viii) of paragraph (b) of Section 1011; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company in
exchange for, or out of the Net Cash Proceeds of a substantially concurrent (A)
capital contribution to the Company or (B) offering of, shares of Capital Stock
(other than Redeemable Stock) of the Company
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(except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (viii) of paragraph (b) of Section 1011); (iv)
the acquisition of Indebtedness of the Company which is subordinated in right of
payment to the Notes in exchange for, or out of the proceeds of, a substantially
concurrent (A) capital contribution to the Company or (B) offering of, shares of
the Capital Stock of the Company (other than Redeemable Stock) (except to the
extent such proceeds are used to incur new Indebtedness outstanding pursuant to
clause (viii) of paragraph (b) of Section 1011); (v) payments or distributions
to dissenting stockholders in accordance with applicable law, pursuant to or in
connection with a consolidation, merger or transfer of assets that complies with
Article Eight; (VI) THE DECLARATION OR PAYMENT OF ANY DIVIDEND OR DISTRIBUTION
IN RESPECT OF, AND IN ACCORDANCE WITH THE TERMS OF, THE COMPANY'S (A) 50,000
OUTSTANDING SHARES OF 4.25% CUMULATIVE SENIOR PERPETUAL CONVERTIBLE PREFERRED
STOCK, SERIES A, PAR VALUE $0.01 PER SHARE (THE "SENIOR PREFERRED STOCK"), AND,
IN THE EVENT THAT THE 1818 FUND III, L.P. ("THE 1818 FUND") EXERCISES ITS OPTION
TO PURCHASE UP TO 20,000 ADDITIONAL SHARES OF SENIOR PREFERRED STOCK, THEN SUCH
ADDITIONAL SHARES AS WELL AND (B) 23,174 OUTSTANDING SHARES OF 4.25% CUMULATIVE
JUNIOR CONVERTIBLE PREFERRED STOCK, SERIES B, PAR VALUE $0.01 PER SHARE (THE
"JUNIOR PREFERRED STOCK"); (VII) THE CONVERSION OF THE SENIOR PREFERRED STOCK,
THE JUNIOR PREFERRED STOCK OR THE COMPANY'S CONVERTIBLE PREFERRED STOCK, SERIES
C, PAR VALUE $0.01 PER SHARE, INTO CAPITAL STOCK OF THE COMPANY IN ACCORDANCE
WITH THE TERMS OF SUCH PREFERRED STOCK; (VIII) THE EXERCISE OF EMPLOYEE OR
NON-EMPLOYEE OPTIONS TO PURCHASE THE CAPITAL STOCK OF THE COMPANY; AND [(vi)]
(IX) other Restricted Payments not to exceed $2 million; provided that, except
in the case of clause (i), no Default or Event of Default shall have occurred
and be continuing or occur as a consequence of the actions or payments set forth
therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof)
and the Net Cash Proceeds from any capital contributions to the Company or
issuance of Capital Stock referred to in clauses (iii) and (iv) of the
immediately preceding paragraph, shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this Section 1012 have been
met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this Section 1012 only to the extent such proceeds are not used for such
redemption, repurchase or other acquisition of the Notes.
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company shall not, and
shall not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to do any one of the
following:
(i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary;
(iii) make loans or advances to the Company or any other Restricted
Subsidiary; or
(iv) transfer any of its property or assets (INCLUDING CAPITAL STOCK
OF ANY RESTRICTED SUBSIDIARY) to the Company or any other Restricted
Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the [Closing] EXCHANGE Date in this Indenture or any
other agreements or instruments in effect on the [Closing]
EXCHANGE Date, and any extensions, refinancings, renewals or
replacements of such agreements; provided that the encumbrances
and restrictions in any such extensions, refinancings, renewals or
replacements are no less
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favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced;
(ii) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if the
encumbrance or restriction applies only in the event of a
default with respect to a financial covenant contained in such
Indebtedness or agreement and such encumbrance or restriction is
not materially more disadvantageous to the Holders than is
customary in comparable financing (as determined by the Company)
and the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to
make principal or interest payments on the Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or assets of
such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or
restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or
assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of this
Section 1013, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that
is, or is subject to, a lease, purchase mortgage obligation,
license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary
not otherwise prohibited by this Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to
the Company or any Restricted Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of,
or property and asserts of, such Restricted Subsidiary. Nothing
contained in this Section 1013 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in Section 1016
or (2) restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted
Subsidiaries.
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue, transfer, DISTRIBUTE, 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 or any other
Restricted Subsidiary (other than to the Company or a [wholly owned] WHOLLY
OWNED Restricted Subsidiary or in respect of any director's qualifying shares or
sales of shares of Capital Stock to foreign nationals mandated by applicable law
OR PURSUANT TO THE EXERCISE OF EMPLOYEE OR NON-EMPLOYEE OPTIONS TO PURCHASE THE
CAPITAL STOCK OF THE COMPANY) to any Person unless (A) the Net Cash Proceeds
from such issuance, transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 1017, (B) immediately after giving effect to
such issuance, transfer, conveyance, sale, lease or other disposition, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and (C)
any Investment in such Person remaining after giving effect to such issuance,
transfer, conveyance, sale, lease or other disposition would have been permitted
to be made under Section 1012 if made on the date of such issuance, transfer,
conveyance, sale, lease or other disposition (valued as provided in the
definition of "Investment" contained in Section 101).
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SECTION 1015. Limitation on Transactions with Stockholders and Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or any
Restricted Subsidiary or with any Affiliate of the Company or any Restricted
Subsidiary, unless the following conditions have been met:
(i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with a person
that is not such a holder or an Affiliate;
(ii) if such transaction or series of transactions involves aggregate
consideration in excess of $2.0 million, then such transaction or series of
transactions is approved by a majority of the Board of Directors of the
Company and is evidenced by a resolution therein; and
(iii) if such transaction or series of transactions involves aggregate
consideration in excess of $10.0 million, then the Company or such
Restricted Subsidiary shall deliver to the Trustee a written opinion as to
the fairness to the Company or such Restricted Subsidiary of such
transaction from a financial point of view from a nationally recognized
investment banking firm (or, if an investment banking firm is generally not
qualified to give such an opinion, by a nationally recognized appraisal
firm or accounting firm).
The foregoing limitation does not limit, and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) any Restricted Payments not prohibited by Section 1012; (iv) loans and
advances to officers or employees of the Company and its Subsidiaries not
exceeding at any one time outstanding $1.5 million in the aggregate, made in the
ordinary course of business; [and] (v) arrangements with TMG, Armstrong and/or
its subsidiaries existing on the date of [this] THE ORIGINAL Indenture and
listed on Schedule A attached thereto as such arrangements may be extended or
renewed; provided that the terms of any arrangement altered by any such
extension or renewal may not be altered in a manner adverse to the Company or
the Holders of the Notes; (VI) THE ISSUANCE OF UP TO 20,000 ADDITIONAL SHARES OF
SENIOR PREFERRED STOCK TO THE 1818 FUND PURSUANT TO AN OPTION AGREEMENT EXISTING
ON THE DATE OF THIS INDENTURE; (VII) THE SALE TO AND PURCHASE BY THE COMPANY
FROM MCI WORLDCOM, INC. AND ITS AFFILIATES OF TELECOMMUNICATIONS SERVICES AND
EQUIPMENT IN THE ORDINARY COURSE OF BUSINESS; (VIII) THE ISSUANCE AND SALE BY
THE COMPANY OF COMMON STOCK WHETHER PURSUANT TO THE CONVERSION OF THE SENIOR
PREFERRED STOCK, THE JUNIOR PREFERRED STOCK, THE COMPANY'S CONVERTIBLE PREFERRED
STOCK, SERIES C, PAR VALUE $0.01 PER SHARE, OR ANY OTHER CLASS OR SERIES OF
PREFERRED STOCK INTO CAPITAL STOCK OF THE COMPANY, THE EXERCISE OF ANY EMPLOYEE
OR NON-EMPLOYEE OPTIONS TO PURCHASE THE CAPITAL STOCK OF THE COMPANY; AND (IX)
THE COMPANY'S AND ANY OF ITS RESTRICTED SUBSIDIARIES' ARRANGEMENTS WITH THE
WORLD ACCESS CHARITABLE TRUST LISTED ON SCHEDULE B ATTACHED HERETO AS SUCH
ARRANGEMENTS EXIST ON THE EXCHANGE DATE AND AS SUCH ARRANGEMENTS MAY BE AMENDED;
PROVIDED THAT THE TERMS OF ANY SUCH AMENDMENTS ARE NOT MATERIALLY ADVERSE TO THE
COMPANY, ANY RESTRICTED SUBSIDIARY OR THE HOLDERS OF THE NOTES.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Sale unless (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
disposed of as determined by the good faith judgment of the Board of Directors
evidenced by a Board Resolution and (ii) at least 80% of the consideration
received for such sale or other disposition consists of cash or cash equivalents
or the assumption of unsubordinated Indebtedness; PROVIDED THAT ANY SECURITIES,
NOTES OR OTHER OBLIGATIONS ISSUED BY AN INVESTMENT GRADE COMPANY WITH A TOTAL
EQUITY MARKET CAPITALIZATION IN EXCESS OF $25 BILLION DETERMINED AT THE TIME ANY
COMMITMENT TO EFFECT ANY SUCH ASSET SALE IS ENTERED INTO WHICH ARE RECEIVED BY
THE COMPANY OR THE RESTRICTED SUBSIDIARY, AS THE CASE MAY BE, AND CONVERTED
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WITHIN 180 DAYS THEREOF INTO CASH OR CASH EQUIVALENTS SHALL BE DEEMED TO BE CASH
OR CASH EQUIVALENTS; PROVIDED FURTHER THAT THE AMOUNT OF CASH OR CASH
EQUIVALENTS REALIZED UPON THE SALE OF ANY SUCH SECURITIES, NOTES OR OTHER
OBLIGATIONS MUST BE INCLUDED WITHIN THE AMOUNT OF NET CASH PROCEEDS FOR PURPOSES
OF CLAUSE (I)(B) OF THE NEXT PARAGRAPH.
The Company shall, or shall cause the relevant Restricted Subsidiary to,
within 270 days after the date of receipt of the Net Cash Proceeds from an Asset
Sale, (i)(A) apply an amount equal to such Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or Indebtedness of any
Restricted Subsidiary, in each case owing to a Person other than the Company or
any of its Restricted Subsidiaries or (B) IF THE NET CASH PROCEEDS FROM SUCH
ASSET SALE EXCEED $15 MILLION, APPLY AN AMOUNT EQUAL TO SUCH NET CASH PROCEEDS
TO MAKE AN OFFER TO PURCHASE (AN "OFFER TO PURCHASE") FROM THE HOLDERS ON A PRO
RATA BASIS AN AGGREGATE PRINCIPAL AMOUNT OF NOTES EQUAL TO SUCH NET CASH
PROCEEDS, AT A PURCHASE PRICE EQUAL TO 100% OF THE PRINCIPAL AMOUNT OF THE
NOTES, PLUS, IN EACH CASE, ACCRUED AND UNPAID INTEREST TO THE DATE OF PURCHASE
AND LESS THE PRODUCT OF (A) THE MARKET VALUE PER SHARE OF THE COMMON STOCK OF
THE COMPANY AND (B) THE NUMBER OF SHARES (INCLUDING ANY PORTION OF A SHARE) OF
SUCH COMMON STOCK DETERMINED BY DIVIDING $50 BY THE MARKET PRICE OF THE COMMON
STOCK FOR EACH $1,000 IN PRINCIPAL AMOUNT OF NOTES ACCEPTED FOR PURCHASE BY THE
COMPANY (THE "OFFER TO PURCHASE PAYMENT"), PROVIDED THAT THE COMPANY SHALL NOT
BE OBLIGATED TO MAKE ANY OFFER TO PURCHASE AFTER IT HAS MADE ONE OR MORE OFFERS
TO PURCHASE, WHICH OFFER OR OFFERS TO PURCHASE, IN THE AGGREGATE, WERE FOR AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES EQUAL TO THE AGGREGATE PRINCIPAL AMOUNT OF
NOTES ISSUED ON THE EXCHANGE DATE (REGARDLESS OF THE ACTUAL AGGREGATE PRINCIPAL
AMOUNT OF NOTES ACTUALLY TENDERED IN SUCH OFFER OR OFFERS TO PURCHASE), OR (C)
IF THE COMPANY HAS MADE SUFFICIENT OFFERS TO PURCHASE SUCH THAT IT HAS SATISFIED
ITS OBLIGATION AS DESCRIBED IN THE FINAL PROVISO TO CLAUSE (B), invest an equal
amount, or the amount not so applied pursuant to clause (A), in property or
assets of a nature or type or that are used in a business (or in a company
having property and assets of a nature or type, or engaged in a business)
similar or related to the nature or type of the property and assets of, or the
business of, the Company and its Restricted Subsidiaries existing on the date of
such investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (ii)
apply (no later than the end of the 270-day period referred to above) such
excess Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as
provided in the following paragraphs of this Section 1017. The amount of such
Net Cash Proceeds required to be applied (or to be committed to be applied)
during such 270-day period referred to above in the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds".
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $10.0 million, the Company must, not later than the 30th
Business Day thereafter, make an offer (an "Excess Proceeds Offer") to purchase
from the Holders on a pro rata basis an aggregate principal amount of Notes
equal to the Excess Proceeds on such date, at a purchase price equal to 100% of
the principal amount of the Notes, plus, in each case, accrued and unpaid
interest [and Liquidated Damages, if any], to the date of purchase LESS THE
PRODUCT OF (A) THE MARKET VALUE PER SHARE OF THE COMMON STOCK OF THE COMPANY AND
(B) THE NUMBER OF SHARES (INCLUDING ANY PORTION OF A SHARE) OF SUCH COMMON STOCK
DETERMINED BY DIVIDING $50 BY THE MARKET PRICE OF THE COMMON STOCK FOR EACH
$1,000 IN PRINCIPAL AMOUNT OF NOTES ACCEPTED FOR PURCHASE BY THE COMPANY (the
"Excess Proceeds Payment").
The Company shall commence an OFFER TO PURCHASE OR AN Excess Proceeds Offer
by mailing a notice to the Trustee and each Holder stating: (i) that the OFFER
TO PURCHASE OR Excess Proceeds Offer, AS APPLICABLE, is being made pursuant to
this Section 1017 and that all Notes validly tendered will be accepted for
payment on a pro rata basis; (ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "[Excess Proceeds] OFFER Payment
Date"); (iii) that any Note not tendered will continue to accrue interest
pursuant to its terms; (iv) that, unless the Company defaults in the payment of
the OFFER TO PURCHASE PAYMENT OR THE Excess Proceeds Payment, AS APPLICABLE, any
Note accepted for payment pursuant to the OFFER TO PURCHASE OR THE Excess
Proceeds Offer, AS APPLICABLE, shall cease to accrue
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interest [and Liquidated Damages, if any,] on and after the APPLICABLE OFFER
[Excess Proceeds] Payment Date; (v) that Holders electing to have a Note
purchased pursuant to the OFFER TO PURCHASE OR THE Excess Proceeds Offer, AS
APPLICABLE, will be required to surrender the Note together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day immediately preceding the
APPLICABLE OFFER [Excess Payment] Payment Date; (vi) that Holders shall be
entitled to withdraw their election if the Paying Agent receives, not later than
the close of business on the third Business Day immediately preceding the
APPLICABLE OFFER [Excess Proceeds] Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof.
On the APPLICABLE OFFER [Excess Proceeds] Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to the OFFER TO PURCHASE OR THE Excess Proceeds Offer, AS APPLICABLE;
(ii) deposit with the Paying Agent money sufficient to pay the purchase price of
all Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officer's Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall upon Company Order promptly authenticate and mail to such Holders
a new Note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount of $1,000 or integral multiples thereof. WITH RESPECT TO
ANY EXCESS PROCEEDS OFFER, TO [To] the extent that the aggregate principal
amount of Notes tendered is less than the Excess Proceeds, the Company may use
any remaining Excess Proceeds for general corporate purposes. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the [Excess Proceeds] OFFER Payment Date. For purposes of this
Section 1017, the Trustee shall act as the Paying Agent.
The Company shall comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that [such Excess Proceeds are received
by] the Company UNDERTAKES AN OFFER TO PURCHASE OR EXCESS PROCEEDS OFFER under
this Section 1017. [and the Company is required to repurchase Notes as described
above.]
SECTION 1021. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to any
property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may enter into Sale-Leaseback
Transactions; provided, however, that (a) the Attributable Value of such
Sale-Leaseback Transaction shall be deemed to be Indebtedness of the Company and
(b) after giving pro forma effect to any such Sale-Leaseback transaction and the
foregoing clause (a), OTHER THAN ANY SALE-LEASEBACK TRANSACTION INVOLVING NACT
TELECOMMUNICATIONS, INC.'S FACILITY IN PROVO, UTAH, the Company would be able to
incur $1.00 of additional Indebtedness(other than Permitted Indebtedness)
pursuant to Section 1011.
SECTION 101. Definitions.
"EXCHANGE DATE" MEANS THE DATE OF ISSUANCE OF THE NOTES UPON THE
CONSUMMATION OF THE REGISTERED EXCHANGE OFFER PURSUANT TO WHICH HOLDERS OF THE
FACILICOM NOTES TENDERED SUCH NOTES IN EXCHANGE FOR THE NOTES ISSUED BY THE
COMPANY PURSUANT TO THIS INDENTURE.
"FACILICOM" MEANS FACILICOM INTERNATIONAL, INC., A DELAWARE CORPORATION.
"FACILICOM NOTES" MEANS THE 10 1/2% SERIES B SENIOR NOTES DUE 2008 ISSUED
BY FACILICOM PURSUANT TO THE ORIGINAL INDENTURE.
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"FACILICOM TRUSTEE" MEANS THE STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE UNDER THE ORIGINAL INDENTURE.
"INVESTMENT GRADE COMPANY" MEANS A PERSON WHOSE DEBT SECURITIES ARE RATED
BBB- OR HIGHER BY STANDARD & POOR'S RATINGS SERVICE. INC. OR BAA3 OR HIGHER BY
MOODY'S INVESTOR SERVICE, INC. (OR AN EQUIVALENT RATING BY ANOTHER NATIONALLY
RECOGNIZED RATING AGENCY).
"MARKET PRICE" MEANS, ON ANY GIVEN DAY, THE AVERAGE CLOSING PRICE OF THE
SHARES OF THE COMPANY'S COMMON STOCK ON THE PRINCIPAL TRADING MARKET OF SUCH
COMMON STOCK OVER THE FIVE CONSECUTIVE TRADING DAYS UP TO AND INCLUDING THE DAY
OF SUCH VALUATION.
"MARKET VALUE" MEANS THE AVERAGE OF THE CLOSING PRICE OF THE APPLICABLE
SECURITY ON SUCH SECURITY'S PRINCIPAL TRADING MARKET OVER THE FIVE CONSECUTIVE
TRADING DAYS UP TO AND INCLUDING THE TRADING DAY PRIOR TO THE LAST FULL TRADING
DAY BEFORE THE INITIATION OF ANY OFFER TO PURCHASE DESCRIBED IN CLAUSE (I) (B)
OR THE TIME ANY COMMITMENT TO EFFECT AN ASSET SALE IS ENTERED INTO AS DESCRIBED
IN THE PRECEDING PARAGRAPH.
"MERGER" MEANS THE MERGER OF FACILICOM WITH AND INTO THE COMPANY PURSUANT
TO THE AGREEMENT AND PLAN OF MERGER DATED AUGUST 17, 1999 BETWEEN THE COMPANY
AND FACILICOM.
"ORIGINAL INDENTURE" MEANS THE INDENTURE, DATED AS OF JANUARY 28, 1998,
AMONG FACILICOM AND THE FACILICOM TRUSTEE, AS SUPPLEMENTED BY THE FIRST
SUPPLEMENTAL INDENTURE THERETO, PURSUANT TO WHICH FACILICOM ISSUED THE FACILICOM
NOTES.
"ORIGINAL ISSUE DATE" MEANS JANUARY 28, 1998, THE DATE FACILICOM ISSUED THE
FACILICOM NOTES.
"Permitted Business" means any business involving voice, data and other
telecommunications services OR EQUIPMENT.
"Telecommunications Assets" means, with respect to any person, equipment
used in the telecommunications business or ownership rights with respect to
IRUs, MAOUs or minimum investment units (or similar ownership interests) in
fiber optic cable and international or domestic telecommunications switches or
other transmission facilities (or Common Stock of a Person that becomes a
Restricted Subsidiary, the [Assets] ASSETS of which consist primarily of any
such Telecommunications Assets), in each case purchased or acquired through
Incurring [a Capitalized Lease Obligation] INDEBTEDNESS, PROVIDED THAT SUCH
INDEBTEDNESS DOES NOT EXCEED THE FAIR MARKET VALUE OF SUCH ASSETS, by the
Company or a Restricted Subsidiary after the ORIGINAL ISSUE [Closing] Date.
"TOTAL EQUITY MARKET CAPITALIZATION" OF ANY PERSON MEANS, AS OF ANY DATE OF
DETERMINATION, THE PRODUCT OF (I) THE AGGREGATE NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK OF SUCH PERSON ON SUCH DATE ON A FULLY-DILUTED BASIS AND (II) THE
AVERAGE CLOSING PRICE OF SUCH COMMON STOCK OVER THE FIVE CONSECUTIVE TRADING
DAYS IMMEDIATELY PRECEDING SUCH DATE. IF NO CLOSING PRICE EXISTS WITH RESPECT TO
SHARES OF ANY SUCH CLASS, THE VALUE OF SUCH SHARES SHALL BE DETERMINED BY THE
BOARD OF DIRECTORS IN GOOD FAITH AND EVIDENCED BY A RESOLUTION OF THE BOARD OF
DIRECTORS FILED WITH THE TRUSTEE.
"WORLD ACCESS CHARITABLE TRUST" MEANS THAT CERTAIN WORLD ACCESS CHARITABLE
TRUST DATED AUGUST 19, 1999, BY AND BETWEEN WORLD ACCESS INVESTMENT CORP., A
DELAWARE CORPORATION AND CLAY C. LONG, ESQ., AS TRUSTEE, IN FAVOR OF WORLD
ACCESS FOUNDATION, INC., A GEORGIA NONPROFIT CORPORATION.
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FORM OF REVERSE OF NOTE
The Notes are subject to redemption upon not less than 30 nor more than 60
days' prior notice, in whole or in part, at any time or from time to time on or
after January 15, 2003, at the election of the Company, at Redemption Prices
(expressed in percentages of principal amount thereof), plus accrued and unpaid
interest [and Liquidated Damages, if any,] thereon to the Redemption Date
(subject to the right of Holders of record on the relevant Record Date to
receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), if redeemed during the 12-month period commencing on January
15, of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2003........................................................ [105.25%] 106.625%
2004........................................................ [103.50] 104.417%
2005........................................................ [101.75] 102.208%
2006 (and thereafter)....................................... 100.00%
</TABLE>
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THE PROPOSED AMENDMENTS
GENERAL
On October 12, 1999, we entered into an agreement to exchange and consent
with FaciliCom and the holders of a majority in interest of the FaciliCom notes
in which we and FaciliCom agreed, among other things, to use our reasonable best
efforts to prepare, and have declared effective by the SEC, a registration
statement under which the exchange notes and exchange shares would be registered
in connection with the exchange offer. In turn, the holders of a majority in
interest of the FaciliCom notes agreed to tender their FaciliCom notes in the
exchange offer and consent to the proposed amendments to the terms of the
FaciliCom indenture described below. Under its terms, the applicable provisions
of the FaciliCom indenture can be amended by a supplemental indenture if
FaciliCom and the holders of a majority in interest of the outstanding FaciliCom
notes consent to such amendments.
Adoption of the proposed amendments to the FaciliCom indenture is required
to consummate the merger with FaciliCom. Holders of a majority in interest of
the outstanding FaciliCom notes have agreed, in the agreement to exchange and
consent, to consent to the proposed amendments described below. If such holders
exchange their FaciliCom notes in the exchange offer, immediately prior to the
merger, FaciliCom will enter into the second supplemental indenture which, among
other things, will omit the provisions permitting the holders of FaciliCom notes
to require us, as the surviving corporation in the merger with FaciliCom, to
repurchase the FaciliCom notes as a result of the merger.
IF YOU TENDER YOUR FACILICOM NOTES IN THE EXCHANGE OFFER, YOU ARE ALSO
CONSENTING TO THE PROPOSED AMENDMENTS TO THE FACILICOM INDENTURE DESCRIBED
BELOW. IF THE HOLDERS OF A MAJORITY IN PRINCIPAL AMOUNT OF THE OUTSTANDING
FACILICOM NOTES CONSENT TO THE PROPOSED AMENDMENTS, THE FACILICOM INDENTURE WILL
BE AMENDED BY A SECOND SUPPLEMENTAL INDENTURE INCLUDING THE PROPOSED AMENDMENTS.
THE TERMS OF THE AMENDED FACILICOM INDENTURE WILL APPLY TO ALL OF THE FACILICOM
NOTES.
The second supplemental indenture will amend the FaciliCom indenture by
deleting in their entirety the covenants set forth below from the FaciliCom
indenture, the effect of which will be to:
(1) remove restrictions on FaciliCom's ability to:
- consolidate and/or merge;
- incur additional debt;
- make payments to affiliates;
- make dividend payments;
- sell capital stock of its subsidiaries;
- enter into transactions with shareholders;
- create liens on its property;
- sell assets;
- transfer its existing business; and
- enter into sale-leaseback transactions; and
(2) eliminate FaciliCom's obligations to:
- hold money for payment of the FaciliCom notes in trust;
- pay taxes;
- maintain its properties;
- maintain insurance coverage; and
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- provide the holders of FaciliCom notes with financial statements.
THE SECOND SUPPLEMENTAL INDENTURE
The second supplemental indenture will delete from the FaciliCom indenture
the following covenants in their entirety:
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with, or merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or substantially
all of its property and assets (as an entirety or substantially as an
entirety in one transaction or a series of related transactions) to, any
Person or permit any Person to merge with or into the Company and the
Company shall not permit any of its Restricted Subsidiaries to enter into
any such transaction or series of transactions if such transaction or
series of transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the
Company and its Restricted Subsidiaries, taken as a whole, to any other
Person or Persons, unless:
(1) either (A) the Company shall be the continuing Person or (B)
the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or that acquired or leased such
property and assets of the Company (i) shall be a corporation organized
and validly existing under the laws of the United States of America or
any jurisdiction thereof and (ii) shall expressly assume, by an
indenture supplemental hereto, duly executed and delivered to the
Trustee, all of the obligations of the Company with respect to all the
Notes and under this Indenture;
(2) immediately after giving effect to such transaction on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction on a pro
forma basis, the Company, or any Person becoming the successor obligor
of the Notes, shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction;
(4) immediately after giving effect to such transaction on a pro
forma basis, the Company, or any Person becoming the successor obligor
of the Notes, as the case may be, could Incur at least $1.00 of
Indebtedness under paragraph (a) of Section 1011; and
(5) the Company delivers to the Trustee an Officer's Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (3) and (4) above) and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with;
provided, however, that clauses (3) and (4) above shall not apply if, in
the good faith determination of the Board of Directors of the Company,
whose determination shall be evidenced by a Board Resolution, the principal
purpose of such transaction is to change the state of incorporation of the
Company; and provided further that any such transaction shall not have as
one of its purposes the evasion of the foregoing limitations.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of (or premium or
Liquidated Damages, if any) or interest on any of the Notes, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal of (or premium or Liquidated Damages, if
any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall promptly
notify the Trustee of its action or failure so to act.
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Whenever the Company shall have one or more Paying Agents for the
Notes, it shall, on or before each due date of the principal of (or premium
or Liquidated Damages, if any) or interest on any Notes, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium and
Liquidated Damages, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the
Company shall promptly notify the Trustee of such action or any failure so
to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section
1003, that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal of
(and premium and Liquidated Damages, if any) or interest on Notes in
trust for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium and Liquidated Damages, if any) or interest on the Notes;
and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same terms as those upon which such sums were held by
the Company or such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (or premium or
Liquidated Damages, if any) or interest on any Note and remaining unclaimed
for two years after such principal, premium, interest or Liquidated Damages
has become due and payable shall be paid to the Company on Company Request,
or (if then held by the Company) shall be discharged from such trust; and
the Holder shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in
a newspaper published in the English language, customarily published on
each Business Day and of general circulation in the Borough of Manhattan,
The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then
remaining shall be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; provided, however, that the Company shall not
be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its
Subsidiaries as a whole and that the loss thereof is not disadvantageous in
any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the
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Company or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary and (b) all lawful claims for labor, materials
and supplies, which, if unpaid, might by law become a lien (other than a
Permitted Lien) upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested
in good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and
shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct
of its business or the business of any Subsidiary and not disadvantageous
in any material respect to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its Subsidiaries
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officer's Certificate from the principal
executive officer, principal financial officer or principal accounting
officer to the effect that a review has been conducted of the activities of
the Company and the Company's performance under this Indenture, and that
the Company has fulfilled its obligations thereunder or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default and the nature and status thereof. For purposes of this Section
1008(a), such compliance shall be determined without regard to any period
of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $1,000,000) shall deliver
to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officer's Certificate specifying such event,
notice or other action within five Business Days of its occurrence.
(c) When any Registration Default (as defined in the Registration
Rights Agreement) occurs, the Company shall immediately deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officer's Certificate specifying the nature of such
Registration Default. In addition, the Company shall deliver to the Trustee
on each Interest Payment Date during the continuance of a Registration
Default and on the Interest Payment Date following the cure of a
Registration Default, an Officer's Certificate specifying the amount of
Liquidated Damages which have occurred and which are then owing under the
Registration Rights Agreement.
SECTION 1009. Provision of Financial Statements and Reports.
(a) After the Company has completed the Exchange Offer, the Company
shall file on a timely basis with the Commission, to the extent such
filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, the annual reports,
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quarterly reports and other documents that the Company would be required to
file if it were subject to Section 13 or 15 of the Exchange Act. All such
annual reports shall include the geographic segment financial information
contemplated by Item 101(d) of Regulation S-K under the Securities Act, and
all such quarterly reports shall provide the same type of interim financial
information that, as of the date of this Indenture, is the Company's
practice to provide.
(b) The Company shall also be required (i) to file with the Trustee,
and provide to each Holder, without cost to such Holder, copies of such
reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which
the Company would be required to file such reports and documents if the
Company were so required and (ii) if filing such reports and documents with
the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder promptly upon request.
SECTION 1010. Repurchase of Notes upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require the Company to repurchase such Holder's Notes in whole
or in part (the "Change of Control Offer"), at a purchase price (the
"Purchase Price") in cash in an amount equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase (subject to the right of Holders of record to
receive interest on the relevant Interest Payment Date) (the "Change of
Control Payment") in accordance with the procedures set forth in paragraphs
(c) and (d) of this Section.
(b) [Reserved]
(c) Within 30 days following any Change of Control, the Company shall
give to each Holder and the Trustee in the manner provided in Section 106 a
notice stating:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this Section 1010 and that all
Notes validly tendered will be accepted for payment;
(ii) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro
forma historical income, cash flow and capitalization after giving
effect to such Change of Control);
(iii) the Purchase Price and date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change of Control Payment Date");
(iv) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(v) that, unless the Company defaults in the payment of the Change
of Control Payment, any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest and Liquidated Damages,
if any, on and after the Change of Control Payment Date;
(vi) that Holders electing to have any Note or portion thereof
purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of such Note completed, to
the Paying Agent at the address specified in the notice prior to the
close of business on the Business Day immediately preceding the Change
of Control Payment Date;
(vii) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
third Business Day immediately preceding the Change of Control Payment
Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Notes delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased; and
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<PAGE> 106
(viii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; provided that each Note purchased and
each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof.
(d) [Reserved].
(e) On the Change of Control Payment Date, the Company shall:
(i) accept for payment Notes or portions thereof tendered pursuant
to the Change of Control Offer;
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Notes
or portions thereof so accepted together with an Officer's Certificate
specifying the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail, to the Holders so
accepted, payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note
equal in principal amount to any unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued
shall be in a principal amount of $1,000 or integral multiples thereof.
The Company shall publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment
Date. For purposes of this Section 1010, the Trustee shall act as Paying
Agent.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes a Change of Control Offer
in the manner, at the times and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control
occurs and the Company is required to repurchase the Notes under this
Section 1010.
SECTION 1011. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company may Incur Indebtedness if immediately thereafter the ratio of (i)
the aggregate principal amount (or accreted value, as the case may be) of
Indebtedness of the Company and its Restricted Subsidiaries on a
consolidated basis outstanding as of the Transaction Date to (ii) the Pro
Forma Consolidated Cash Flow for the preceding two full fiscal quarters
multiplied by two, determined on a pro forma basis as if any such
Indebtedness had been Incurred and the proceeds thereof had been applied at
the beginning of such two fiscal quarters, would be greater than zero and
less than 5 to 1.
(b) The foregoing limitations of paragraph (a) of this covenant will
not apply to any of the following Indebtedness ("Permitted Indebtedness"),
each of which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the Notes;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date;
(iii) Indebtedness of the Company or any Restricted Subsidiary
under one or more Credit Facilities, in an aggregate principal amount at
any one time outstanding not to exceed the greater of (x) $35.0 million
and (y) 80% of Eligible Accounts Receivable at any one time outstanding,
subject to any permanent reductions required by any other terms of this
Indenture;
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(iv) Indebtedness of the Company or any Restricted Subsidiary
Incurred to finance the cost (including the cost of design, development,
construction, acquisition, installation or integration) of
Telecommunications Assets;
(v) Indebtedness of a Restricted Subsidiary owed to and held by the
Company or another Restricted Subsidiary, except that (A) any transfer
of such Indebtedness by the Company or a Restricted Subsidiary (other
than to the Company or another Restricted Subsidiary) or (B) the sale,
transfer or other disposition by the Company or any Restricted
Subsidiary of Capital Stock of a Restricted Subsidiary which is owed
Indebtedness of another Restricted Subsidiary shall, in each case, be an
Incurrence of Indebtedness by such Restricted Subsidiary, subject to the
other provisions of this Indenture;
(vi) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right to the payment
and performance to the obligations of the Company under this Indenture
and the Notes, except that the limitations of paragraph (a) of this
Section 1011 shall apply to such Indebtedness at such time as (A) any
transfer of such Indebtedness by a Restricted Subsidiary (other than to
another Restricted Subsidiary) and (B) the sale, transfer or other
disposition by the Company or any Restricted Subsidiary of Capital Stock
of a Restricted Subsidiary which is owed such Indebtedness, subject to
other provisions of this Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary issued
in exchange for, or the net proceeds of which are used to refinance
(whether by amendment, renewal, extension or refunding), then
outstanding Indebtedness of the Company or a Restricted Subsidiary,
other than Indebtedness Incurred under clauses (iii), (v), (vi), (viii),
(ix), (xi) and (xii) of this paragraph, and any refinancings thereof in
an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, and reasonable fees and expenses); provided
that such new Indebtedness shall only be permitted under this clause
(vii) if: (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made pari passu with, or subordinate in right
of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the
Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes and (C) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, does not mature
prior to the Stated Maturity of the Indebtedness to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least
equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded; and provided further that in no event may Indebtedness of
the Company be refinanced by means of any Indebtedness of any Restricted
Subsidiary pursuant to this clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any one
time outstanding, 2.00 times the Net Cash Proceeds from the issuance and
sale, other than to a Subsidiary, of Common Stock (other than Redeemable
Stock) of the Company (less the amount of such proceeds used to make
Restricted Payments as provided in clause (iii) or (iv) of the second
paragraph of Section 1012) and (y) the Company or Acquired Indebtedness
of a Restricted Subsidiary not to exceed, at one time outstanding, the
fair market value of any Telecommunications Assets acquired by the
Company in exchange for Common Stock of the Company issued after the
Issue Date; provided, however, that in determining the fair market value
of any such Telecommunications Assets so acquired, if the estimated fair
market value of such Telecommunications Assets exceeds (A) $2 million
(as estimated in good faith by the Board of Directors), then the fair
market value of such Telecommunications Assets will be determined by a
majority of the Board of Directors of the Company, which determination
will be evidenced by a resolution thereof, and
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(B) $10 million (as estimated in good faith by the Board of Directors),
then the Company shall deliver the Trustee a written appraisal as to the
fair market value of such Telecommunications Assets prepared by a
nationally recognized investment banking or public accounting firm (or,
if no such investment banking or public accounting firm is qualified to
prepare such an appraisal, by a nationally recognized appraisal firm);
and provided further that such Indebtedness does not mature prior to the
Stated Maturity of the Notes and the Average Life of such Indebtedness
is longer than that of the Notes;
(ix) Indebtedness of the Company or any Restricted Subsidiary (A)
in respect of performance, surety or appeal bonds or letters of credit
supporting trade payables, in each case provided in the ordinary course
of business, (B) under Currency Agreements and Interest Rate Agreements
covering Indebtedness of the Company; provided that such agreements do
not increase the Indebtedness of the obligor outstanding at any time
other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary
in connection with such disposition;
(x) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly (A) used to repurchase Notes tendered in a
Change of Control Offer or (B) deposited to defease all of the Notes
pursuant to Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by a
Guarantee of the Notes permitted by and made in accordance with Section
1018; and
(xii) Indebtedness of the Company or any Restricted Subsidiary in
addition to that permitted to be incurred pursuant to clauses (i)
through (xi) above in an aggregate principal amount not in excess of $10
million (or, to the extent not denominated in United States dollars, the
United States Dollar Equivalent thereof) at any one time outstanding.
(l) For purposes of determining any particular amount of indebtedness
under this Section 1011, 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 1018. For purposes of determining compliance with
this Section 1011, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the
above clauses, the Company, in its sole discretion may, at the time of such
Incurrence, (i) classify such item of Indebtedness under and comply with
either of paragraph (a) or (b) of this covenant (or any of such
definitions), as applicable, (ii) classify and divide such item of
Indebtedness into more than one of such paragraphs (or definitions), as
applicable, and (iii) elect to comply with such paragraphs (or
definitions), as applicable in any order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, (i) (A) declare or pay any dividend or make any
distribution in respect of the Company's Capital Stock to the holders
thereof (other than dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) of the Company or in options,
warrants or other rights to acquire such shares of Capital Stock) or (B)
declare or pay any dividend or make any distribution in respect of the
Capital Stock of any Restricted Subsidiary to any Person other than
dividends and
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distributions payable to the Company or any Restricted Subsidiary or to all
holders of Capital Stock of such Restricted Subsidiary on a pro rata basis;
(ii) purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of the Company (including options, warrants or other rights
to acquire such shares of Capital Stock) held by any Person or any shares
of Capital Stock of any Restricted Subsidiary (including options, warrants
and other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a wholly owned Restricted Subsidiary)
or any holder (or any Affiliate thereof) of 5% or more of the Company's
Capital Stock; (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes; or (iv) make any Investment,
other than a Permitted Investment, in any Person (such payments or any
other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Company could not Incur at least $1.00 of Indebtedness
under paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments declared or
made from and after the Closing Date would exceed the sum of:
(1) Cumulative Consolidated Cash Flow minus 200% of Cumulative
Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the issue or
sale to a Person, which is not a Subsidiary of the Company, of
Capital Stock of the Company (other than Redeemable Stock) or of debt
securities of the Company which have been converted into or exchanged
for such Capital Stock (except to the extent such Net Cash Proceeds
are used to Incur new Indebtedness outstanding pursuant to clause
(viii) of paragraph (b) of Section 1011); and
(3) to the extent any Permitted Investment that was made after
the Closing Date is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (i) the cash return of capital with respect
to such Permitted Investment (less the cost of disposition, if any)
and (ii) the initial amount of such Permitted Investment.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the Notes including a premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, with the net proceeds of,
or in exchange for, Indebtedness Incurred under clause (viii) of paragraph
(b) of Section 1011; (iii) the repurchase, redemption or other acquisition
of Capital Stock of the Company in exchange for, or out of the Net Cash
Proceeds of a substantially concurrent (A) capital contribution to the
Company or (B) offering of, shares of Capital Stock (other than Redeemable
Stock) of the Company (except to the extent such proceeds are used to incur
new Indebtedness outstanding pursuant to clause (viii) of paragraph (b) of
Section 1011); (iv) the acquisition of Indebtedness of the Company which is
subordinated in right of payment to the Notes in exchange for, or out of
the proceeds of, a substantially concurrent (A) capital contribution to the
Company or (B) offering of, shares of the Capital Stock of the Company
(other than Redeemable Stock) (except to the extent such proceeds are used
to incur new Indebtedness outstanding pursuant to clause (viii) of
paragraph (b) of Section 1011); (v) payments or distributions to dissenting
stockholders in accordance with applicable law, pursuant to or in
connection with a consolidation, merger or transfer of assets that complies
with Article Eight; and (vi) other Restricted Payments not to exceed $2
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million; provided that, except in the case of clause (i), no Default or
Event of Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately
preceding paragraph (other than the Restricted Payment referred to in
clause (ii) thereof) and the Net Cash Proceeds from any capital
contributions to the Company or issuance of Capital Stock referred to in
clauses (iii) and (iv) of the immediately preceding paragraph, shall be
included in calculating whether the conditions of clause (C) of the first
paragraph of this Section 1012 have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital
Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, then the Net Cash Proceeds of such issuance shall
be included in clause (C) of the first paragraph of this Section 1012 only
to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company shall not,
and shall not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to do
any one of the following:
(i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned
by the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(iii) make loans or advances to the Company or any other Restricted
Subsidiary; or
(iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in this Indenture or any other
agreements or instruments in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed
or replaced;
(ii) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if the encumbrance or
restriction applies only in the event of a default with respect to a
financial covenant contained in such Indebtedness or agreement and such
encumbrance or restriction is not materially, more disadvantageous to
the Holders than is customary in comparable financing (as determined by
the Company) and the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or assets
of such Person acquired by the Company or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
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(v) in the case of clause (iv) of the first paragraph of this
Section 1013, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject
to, a lease, purchase mortgage obligation, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract
from the value of property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or any Restricted
Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary. Nothing contained in this Section
1013 shall prevent the Company or any Restricted Subsidiary from (1)
creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in Section 1016 or (2) restricting the sale or other
disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any
of its Restricted Subsidiaries.
SECTION 1014.Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to issue, transfer, convey, sell, lease or
otherwise dispose of any shares of Capital Stock (including options,
warrants or other rights to purchase shares of such Capital Stock) of such
or any other Restricted Subsidiary (other than to the Company or a wholly
owned Restricted Subsidiary or in respect of any director's qualifying
shares or sales of shares of Capital Stock to foreign nationals mandated by
applicable law) to any Person unless (A) the Net Cash Proceeds from such
issuance, transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 1017, (B) immediately after giving
effect to such issuance, transfer, conveyance, sale, lease or other
disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and (C) any Investment in such Person remaining after
giving effect to such issuance, transfer, conveyance, sale, lease or other
disposition would have been permitted to be made under Section 1012 if made
on the date of such issuance, transfer, conveyance, sale, lease or other
disposition (valued as provided in the definition of "Investment" contained
in Section 101).
SECTION 1015. Limitation on Transactions with Stockholders and
Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or
any Affiliate of such holder) of 5% or more of any class of Capital Stock
of the Company or any Restricted Subsidiary or with any Affiliate of the
Company or any Restricted Subsidiary, unless the following conditions have
been met:
(i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with a Person
that is not such a holder or an Affiliate;
(ii) if such transaction or series of transactions involves
aggregate consideration in excess of $2 million, then such transaction
or series of transactions is approved by a majority of the Board of
Directors of the Company and is evidenced by a resolution therein; and
(iii) if such transaction or series of transactions involves
aggregate consideration in excess of $10 million, then the Company or
such Restricted Subsidiary shall deliver to the Trustee a written
opinion as to the fairness to the Company or such Restricted Subsidiary
of such transaction from a financial point of view from a nationally
recognized investment banking firm
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(or, if an investment banking firm is generally not qualified to give
such an opinion, by a nationally recognized appraisal firm or accounting
firm).
The foregoing limitation does not limit, and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and
customary regular fees to directors of the Company who are not employees of
the Company; (iii) any Restricted Payments not prohibited by Section 1012;
(iv) loans and advances to officers or employees of the Company and its
Subsidiaries not exceeding at any one time outstanding $1.5 million in the
aggregate, made in the ordinary course of business; and (v) arrangements
with TMG, Armstrong and/or its subsidiaries existing on the date of this
Indenture and listed on Schedule A attached thereto as such arrangements
may be extended or renewed; provided that the terms of any arrangement
altered by any such extension or renewal may not be altered in a manner
adverse to the Company or the Holders of the Notes.
SECTION 1016. Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any
Lien (other than Permitted Liens) on any of its assets or properties of any
character (including, without limitation, licenses and trademarks), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary,
whether owned at the date of this Indenture or thereafter acquired, or any
income, profits or proceeds therefrom, or assign or otherwise convey any
right to receive income thereof, without making effective provision for all
of the Notes and all other amounts ranking pari passu with the Notes to be
directly secured equally and ratably with the obligation or liability
secured by such Lien or, if such obligation or liability is subordinated to
the Notes and other amounts ranking pari passu with the Notes, without
making provision for the Notes and such other amounts to be directly
secured prior to the obligation or liability secured by such Lien.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Sale unless (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such
sale or other disposition at least equal to the fair market value of the
assets sold or disposed of as determined by the good faith judgment of the
Board of Directors evidenced by a Board Resolution and (ii) at least 80% of
the consideration received for such sale or other disposition consists of
cash or cash equivalents or the assumption of unsubordinated Indebtedness.
The Company shall, or shall cause the relevant Restricted Subsidiary
to, within 270 days after the date of receipt of the Net Cash Proceeds from
an Asset Sale, (i) (A) apply an amount equal to such Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries, or (B) invest
an equal amount, or the amount not so applied pursuant to clause (A), in
property or assets of a nature or type or that are used in a business (or
in a company having property and assets of a nature or type, or engaged in
a business) similar or related to the nature or type of the property and
assets of, or the business of, the Company and its Restricted Subsidiaries
existing on the date of such investment (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced
by a Board Resolution) and (ii) apply (no later than the end of the 270-day
period referred to above) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) as provided in the following paragraphs of
this Section 1017. The amount of such Net Cash Proceeds required to be
applied (or to be committed to be applied) during such 270-day period
referred to above in the preceding sentence and not applied as so required
by the end of such period shall constitute "Excess Proceeds".
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $10 million, the Company must, not later
than the 30th Business Day thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate
principal amount of Notes
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equal to the Excess Proceeds on such date, at a purchase price equal to
100% of the principal amount of the Notes, plus, in each case, accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase
(the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder stating: (i) that the Excess Proceeds
Offer is being made pursuant to this Section 1017 and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Excess Proceeds Payment Date"); (iii) that any Note not
tendered will continue to accrue interest pursuant to its terms; (iv) that,
unless the Company defaults in the payment of the Excess Proceeds Payment
any Note accepted for payment pursuant to the Excess Proceeds Offer shall
cease to accrue interest and Liquidated Damages, if any, on and after the
Excess Proceeds Payment Date; (v) that Holders electing to have a Note
purchased pursuant to the Excess Proceeds Offer will be required to
surrender the Note, together with the form entitled "Option of the Holder
to Elect Purchase" on the reverse side of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of business
on the Business Day immediately preceding the Excess Proceeds Payment Date;
(vi) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and (vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; provided that each Note purchased and
each new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i) accept for
payment on a pro rata basis Notes or portions thereof tendered pursuant to
the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Notes or portions thereof so accepted together with an Officer's
Certificate specifying the Notes or portions thereof accepted for payment
by the Company. The Paying Agent shall promptly mail to the Holders of
Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall upon Company Order promptly authenticate and mail to such
Holders a new Note equal in principal amount to any unpurchased portion of
the Note surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof. To the extent that the aggregate principal amount of Notes
tendered is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Excess Proceeds Payment Date. For purposes of this
Section 1017, the Trustee shall act as the Paying Agent.
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that such Excess Proceeds
are received by the Company under this Section 1017 and the Company is
required to repurchase Notes as described above.
SECTION 1018.Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company, other than Indebtedness under
Credit Facilities incurred under clause (iii) of paragraph (b) in Section
1011, unless (i) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a
Guarantee of the Notes on terms substantially similar to the Guarantee of
such Indebtedness, except that if such Indebtedness is by its
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express terms subordinated in right of payment to the Notes, any such
assumption, Guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to
such Restricted Subsidiary's assumption, Guarantee or other liability with
respect to the Notes substantially to the same extent as such Indebtedness
is subordinated to the Notes and (ii) such Restricted Subsidiary waives,
and shall not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Guarantee.
Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the
release or discharge of the guarantee which resulted in the creation of
such Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
SECTION 1019.Business of the Company; Restriction on Transfers of
Existing Business.
The Company shall not, and shall not permit any Restricted Subsidiary
to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary
shall not be permitted to, directly or indirectly, transfer to any
Unrestricted Subsidiary (i) any of the licenses, material agreements or
instruments, permits or authorizations used in the Permitted Business of
the Company and any Restricted Subsidiary on the Closing Date or (ii) any
material portion of the "property and equipment" (as such term is used in
the Company's consolidated financial statements) of the Company or any
Restricted Subsidiary used in the licensed service areas of the Company and
any Restricted Subsidiary as they exist on the Closing Date.
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries.
The Company shall not make, and shall not permit any of its Restricted
Subsidiaries to make, any Investments in Unrestricted Subsidiaries if, at
the time thereof, the aggregate amount of such Investments together with
any other Restricted Payments made after the Closing Date would exceed the
amount of Restricted Payments then permitted to be made pursuant to Section
1012. Any Investments in Unrestricted Subsidiaries permitted to be made
pursuant to this covenant (i) shall be treated as the making of a
Restricted Payment in calculating the amount of Restricted Payments made by
the Company or a Subsidiary and (ii) may be made in cash or property (if
made in property, the Fair Market Value thereof as determined by the Board
of Directors of the Company (whose determination shall be conclusive and
evidenced by a Board Resolution) shall be deemed to be the amount of such
Investment for the purpose of clause (i) of this Section 1020).
SECTION 1021. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to
any property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may enter into
Sale-Leaseback Transactions; provided, however, that (a) the Attributable
Value of such Sale-Leaseback Transaction shall be deemed to be Indebtedness
of the Company and (b) after giving pro forma effect to any such Sale-
Leaseback Transaction and the foregoing clause (a), the Company would be
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 1011.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the federal income tax consequences of the
exchange offer and consent solicitation to holders of original FaciliCom notes.
Long Aldridge & Norman, LLP, tax counsel to World Access in connection with the
exchange offer and consent solicitation, has reviewed this discussion and is of
the opinion that, except as to matters upon which they have expressly declined
to express an opinion, as disclosed herein, to the extent this discussion
summarizes matters of law or legal conclusions, it is accurate in all material
respects under the federal income tax laws as now in effect. This discussion is
general in nature and does not purport to be a complete analysis of all aspects
of federal income taxation that may be relevant to you in light of your
particular circumstances. For example, special rules may apply to you if you are
one of the following types of holders: (i) an insurance company; (ii) a
tax-exempt organization; (iii) an employee stock ownership plan; (iv) a bank;
(v) broker, dealer or financial institution; (vi) a holder that holds original
FaciliCom notes as part of a position in a "straddle" or as part of a "hedging"
or "conversion" transaction for federal income tax purposes; (vii) a holder that
has a "functional currency" other than the United States dollar; (viii) a holder
subject to alternative minimum tax; or (ix) a taxpayer that is not a citizen or
resident of the United States, or that is a foreign corporation, foreign
partnership or foreign estate or trust as to the United States.
In addition, the discussion does not consider the effect of any foreign,
state, local, or other tax laws, or any tax consequences (for example, estate or
gift tax) other than federal income tax consequences, that may be applicable to
you. Further, this summary assumes that you hold the FaciliCom notes as "capital
assets" (generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary
is based on the Code and final, temporary and proposed Treasury regulations
promulgated thereunder, administrative pronouncements and rulings, and judicial
decisions as of the date hereof, all of which are subject to change or differing
interpretations at any time with possible retroactive effect and any such change
could affect the continuing validity of this summary.
World Access has not requested a ruling from the IRS with respect to the
federal income tax consequences of the exchange offer or the consent
solicitation. It is not a condition to either the exchange offer or the consent
solicitation that World Access or FaciliCom receive such a ruling or an opinion
of tax counsel concerning such tax consequences.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO YOU OF THE EXCHANGE OFFER AND
CONSENT SOLICITATION.
TAX CONSIDERATIONS IF YOU EXCHANGE
Receipt of Exchange Consideration. In general, if you tender your original
FaciliCom notes in the exchange offer, the exchange will likely be treated for
federal income tax purposes as either (i) part of our merger with FaciliCom
under Section 368 of the Code, or (ii) a "recapitalization" within the meaning
of Section 368(a)(1)(E) of the Code. If so, then in either case the treatment of
the exchange will be governed by Section 354 of the Code. Under Section 354, you
should not recognize any gain or loss as a result of your receipt of the
exchange notes. Because Long Aldridge & Norman LLP is unable to render an
opinion that the FaciliCom notes and exchange notes are both "securities" within
the meaning of Section 354 of the Code as discussed below, Long Aldridge &
Norman LLP is in turn unable to render an opinion that the exchange will be
treated for federal income tax purposes as either (i) part of our merger with
FaciliCom under Section 368 of the Code, or (ii) a "recapitalization" within the
meaning of Section 368(a)(1)(E) of the Code.
The law is unclear as to how the exchange shares and the cash payment
(collectively referred to in this summary only as the "exchange premium") that
is received by you with respect to your FaciliCom notes exchanged in the
exchange offer should be characterized by the IRS for federal income tax
purposes. World Access believes that such exchange premium should be treated as
additional consideration received
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by you in the exchange as a premium paid to retire your FaciliCom notes. In that
case, you should not recognize any gain or loss as a result of your receipt of
the exchange shares. However, treatment of the exchange premium as additional
consideration in the exchange will result in the recognition of gain (but not
loss) by you to the extent of the lesser of: (1) the cash payment received and
(2) the gain, if any, realized by you on the exchange of those FaciliCom notes
(i.e., the excess of the "amount realized" on the exchange, which equals the sum
of the "issue price" of the exchange notes, as determined under either Section
1273 or Section 1274 of the Code as discussed below, the fair market value of
the exchange shares and the cash payment over your tax basis in the FaciliCom
notes tendered). Any gain recognized will most likely be capital gain under
Section 356 of the Code, except to the extent of any accrued market discount on
the FaciliCom notes.
Assuming that the exchange premium is treated as additional consideration
received by you in the exchange as a premium paid to retire your FaciliCom
notes, your basis in the exchange shares and the exchange notes immediately
after the exchange offer will in the aggregate be the same as the basis of your
original FaciliCom notes tendered in the exchange offer, increased by the amount
of gain, if any, you recognized in the exchange offer and decreased by the
amount of the cash payment received (but only if such cash payment is treated as
additional consideration in exchange for your FaciliCom notes as discussed
above). This aggregate basis will be allocated between the exchange notes and
the exchange shares in proportion to the fair market values of such exchange
notes and exchange shares. The holding period of the exchange notes and the
exchange shares you received in the exchange offer will include the period
during which you held your FaciliCom notes tendered in the exchange offer.
It is possible that the IRS could instead take the view that the exchange
premium is (i) a separate payment or fee in order to obtain your consent to the
proposed amendments under the consent solicitation, or (ii) a separate payment
of additional interest on the FaciliCom notes. In either case, this would result
in ordinary income to you in an amount equal to the fair market value of the
exchange shares plus the cash payment received. Your basis for the exchange
shares received as part of the exchange premium would be the fair market value
of such exchange shares upon receipt. Your basis in the exchange notes
immediately after the exchange offer would be the same as the basis of your
original FaciliCom notes tendered in the exchange offer. The holding period for
the exchange shares would begin upon consummation of the exchange offer, while
the holding period for the exchange notes you received in the exchange offer
will include the period during which you held your FaciliCom notes tendered in
the exchange offer.
The first statement discussed above, that the exchange will likely qualify
as an exchange of debt between parties to our merger with FaciliCom, is based on
the likelihood that under the so-called "step transaction doctrine," the IRS
will integrate (i.e., treat as one transaction for federal income tax purposes)
the exchange offer and the consent solicitation with our merger with FaciliCom
under Section 368 of the Code. This is because consummation of the exchange
offer and consent solicitation is conditioned on the closing of the merger, and
vice versa. In this context, and where we understand that none of you are
shareholders of FaciliCom, the IRS published ruling position reflects that the
exchange can qualify as a separate Section 354 exchange occurring pursuant to
our plan of reorganization with FaciliCom under Section 368 of the Code.
This result is also based on the assumption, among others, that the
FaciliCom notes and exchange notes are both "securities" within the meaning of
Section 354 of the Code. Whether a debt instrument constitutes a "security"
depends on the terms, conditions and other facts and circumstances relating to
the instrument. Prominent factors that the IRS and the courts have relied upon
in making this determination include: (a) the term of maturity of the debt; (b)
the collateral securing the debt; (c) the degree of subordination of the debt;
(d) the ratio of debt to equity of the issuer; (e) the riskiness of the business
of the issuer; and (f) the negotiability of the instrument. Generally, notes
with terms to maturity of ten years or more are treated as "securities" under
Section 354. Securities with terms to maturity of five years or less are
generally not treated as "securities" under Section 354. Nevertheless, the IRS
and the courts have taken the position that while the term to maturity is an
important factor, the controlling consideration is an overall evaluation of the
nature of the debt, degree of participation and continuing interest in the
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business, the extent of proprietary interest compared with the similarity of the
note to a cash payment, the purposes of the advances, and certain other factors.
Based on all of the factors discussed above, World Access believes that
both the original FaciliCom notes and the exchange notes should be treated as
"securities" under Section 354 and currently expects to report the exchange
offer as a Section 354 exchange for federal income tax purposes on its
consolidated federal income tax return. However, due to the inherently factual
nature of the determination of whether a debt instrument is a security for tax
purposes, Long Aldridge & Norman LLP is unable to render an opinion that the
FaciliCom notes and exchange notes are both "securities" within the meaning of
Section 354 of the Code. Accordingly, there can be no assurance that the IRS or
a court would not determine that the original FaciliCom notes or the exchange
notes do not constitute securities.
If either (i) the original FaciliCom notes or the exchange notes are
determined not to be "securities" under Section 354, or (ii) the exchange does
not qualify as an exchange described in Section 354 of the Code, then if you
participate in the exchange offer you would recognize capital gain or loss under
Section 1001 of the Code equal to the difference between the "amount realized"
on the exchange (i.e., the sum of the "issue price" of the exchange notes, as
determined under either Section 1273 or Section 1274 of the Code as discussed
below, the fair market of the exchange shares and the cash payment if, as
discussed below, it is determined that the exchange shares and the cash payment
are treated as additional consideration in exchange for your FaciliCom notes)
and your tax basis of the FaciliCom notes tendered. Any gain may be subject to
ordinary income treatment if you acquired the original FaciliCom notes with
"market discount" for federal income tax purposes.
Due to the inherently factual nature of this determination, coupled with
the dearth of authority as to how your receipt of the exchange premium should be
characterized for federal income tax purposes, Long Aldridge & Norman LLP is
unable to render an opinion on this matter. For federal income tax purposes on
its consolidated federal income tax return, World Access currently intends to
treat the exchange premium as additional consideration received by you in the
exchange as a premium paid to retire your FaciliCom notes in the exchange offer.
However, no ruling has been requested from the IRS nor has any opinion of tax
counsel been issued regarding the tax consequences of the receipt of the
exchange premium. Thus, no assurance can be given that the position currently
intended to be taken by World Access described above will be accepted by the
IRS.
Accrued Interest. Any portion of the exchange consideration received by
you which is attributable to accrued interest on your FaciliCom notes will be
taxable as ordinary income in accordance with your method of accounting for
federal income tax purposes.
Original Issue Discount. Under Section 1273(b)(3) of the Code and the
Treasury regulations thereunder, if either the FaciliCom notes or the exchange
notes are treated as publicly traded (i.e., is considered "traded on an
established securities market" under the applicable Treasury regulations), then
the exchange notes may be issued with original issue discount ("OID") equal to
the difference between their "issue price" and their stated principal amount.
You would include any OID in income as it accrues on the basis of a constant
yield to the maturity date, and thus would be required to include amounts in
income prior to the date such income is actually paid in cash. Although World
Access understands that the FaciliCom notes are eligible for trading in the
PORTAL market, they are not listed on any securities market. Further, it is
unclear whether there has ever been sufficient trading volume and frequency of
trades of the FaciliCom notes in the PORTAL market in order for such notes to be
considered to be traded on an established securities market. Accordingly, it is
unclear whether the FaciliCom notes are publicly traded.
As for the exchange notes, although they will also be eligible for trading
in the PORTAL market, they too will not be listed on any securities exchange.
Again, it is unclear whether there will be sufficient trading volume and
frequency of trades of the exchange notes in the PORTAL market in order for the
exchange notes to be considered traded on an established securities market. Due
to the factual nature of both the trading volume and the frequency of trading
with respect to the FaciliCom Notes, and the inability to predict the trading
volume or frequency of trading for the exchange notes which have not yet
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been issued, Long Aldridge & Norman LLP is unable to render any opinion on
whether either the FaciliCom notes are, or the exchange notes will be, "traded
on an established securities market" under the applicable Treasury Regulations.
If the exchange notes are not treated as publicly traded, then under
Section 1274 of the Code and the Treasury regulations thereunder, where neither
the exchange notes or the FaciliCom notes are publicly traded, the issue price
of the exchange notes will be determined (regardless of their actual fair market
value) by reference to their stated principal amount because the exchange notes
will have "adequate stated interest" under Section 1274. Accordingly, if Section
1274 governs, there should be no OID on the exchange notes because there will be
no difference between their issue price and their stated principal amount. The
determination of whether Section 1273(b)(3) or Section 1274 applies cannot be
made until the exchange offer is consummated.
TAX CONSIDERATIONS IF YOU DO NOT EXCHANGE
If you do not exchange your FaciliCom notes in the exchange offer, you
should not recognize gain or loss for federal income tax purposes unless the
second supplemental indenture with respect to the FaciliCom notes becomes
effective and is deemed to constitute a "significant modification" of the
FaciliCom notes under Section 1001 of the Code. Although the changes in the
terms of the FaciliCom notes to be effected by the second supplemental indenture
will likely constitute a significant modification under the applicable Treasury
regulations, and will result in a deemed exchange of an original FaciliCom note
for a " new" FaciliCom note for federal income tax purposes, if you do not
tender your FaciliCom notes into the exchange offer, you should not recognize
gain or loss on such deemed exchange since the deemed exchange should also
qualify as a "recapitalization" within the meaning of Section 368(a)(1)(E) of
the Code (assuming that the FaciliCom notes constitute "securities" under
Section 354 of the Code as discussed above). As discussed above, Long Aldridge &
Norman LLP is unable to render an opinion that the FaciliCom notes are
"securities" under Section 354 of the Code. Further, unless the FaciliCom notes
are treated as publicly traded (as discussed above), the deemed reissuance of
FaciliCom notes in such a deemed exchange should not result in the creation of
any OID. This is because like the exchange notes, the reissued FaciliCom notes
bear adequate stated interest under Section 1274 of the Code and as such, their
issue price equals their stated principal amount. If, however, the reissued
FaciliCom notes are treated as publicly traded, then OID will be created upon
such deemed exchange to the extent that their issue price is less than their
stated principal amount.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each holder of FaciliCom notes,
exchange notes and exchange shares the amount of interest paid (including any
OID reportable by such holder) and the dividends paid to such holder,
respectively, and any amount withheld under the backup withholding provisions.
Under the federal income tax backup withholding provisions of the Code and
applicable Treasury regulations, you will be subject to backup withholding at
the rate of 31% with respect to interest and may be subject to backup
withholding at the rate of 31% with respect to the exchange premium received by
you unless you: (a) are a corporation or come within certain other exempt
categories and, when required, demonstrate this fact; or (b) provide a correct
taxpayer identification number to the exchange agent, certify as to no loss of
exemption from backup withholding, and otherwise comply with the applicable
requirements of the backup withholding rules. Any amount withheld under these
rules will be credited against your federal income tax liability. To prevent
backup withholding with respect to the payment of interest, you must complete
and sign a substitute Form W-9, which is included as part of the consent and
letter of transmittal, and return it to the exchange agent. If the exchange
agent is not provided with the correct taxpayer identification number, you may
also be subject to penalties imposed by the IRS. If withholding results in an
overpayment of taxes, a refund may be obtained by you from the IRS provided that
you furnish the required information to the IRS.
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WORLD ACCESS
We are a leading provider of international long distance services with
agreements in place to route voice, data and internet traffic throughout the
world. In addition, we are a leading provider of proprietary network equipment
to many of the world's largest telecommunications companies. We market and sell
our services and products to a broad range of customers, including all of the
regional Bell operating companies; other local exchange carriers such as British
Telecom, GTE and ALLTEL; inter-exchange carriers such as MCI WorldCom, AT&T,
Sprint and Cable & Wireless; wireless service providers such as Cellular One,
Comcast Cellular and Price Communications; and other telecommunications service
providers, including competitive access providers, cable television companies
and private network operators. Our revenues and earnings before interest,
expense, income taxes, depreciation and amortization (EBITDA) for the six months
ended June 30, 1999 were $321.3 million and $34.9 million, respectively.
Our telecommunications group provides wholesale and retail international
long distance services through a combination of owned and leased international
network facilities, various international termination relationships and resale
arrangements with other international long distance service providers. Our
digital telecommunications network includes transatlantic cable facilities and
international gateway switches located in Los Angeles, Dallas, Chicago, Newark
and London, England. For the six months ended June 30, 1999, our
Telecommunications Group had revenues and EBITDA of $198.9 million and $9.8
million, respectively.
Our equipment group develops, manufactures and markets network products
that switch and transport voice, data and internet traffic. To support and
complement our product sales, we also provide our customers with a broad range
of network design, engineering, testing, installation and other value-added
services. For the six months ended June 30, 1999, our equipment group had
revenues and earnings before interest, expense, income taxes, depreciation and
amortization of $122.4 million and $25.1 million, respectively.
THE MERGER
On August 17, 1999, we announced that we entered into a merger agreement
with FaciliCom, providing that FaciliCom will merge with and into World Access.
Upon consummation of the merger, the separate existence of FaciliCom will cease
and World Access will continue as the surviving corporation. Pursuant to the
terms of the merger agreement, the shareholders of FaciliCom will receive
approximately $436 million in consideration, primarily in the form of
Convertible Preferred Stock, Series C. The Series C Preferred Stock bears no
dividend and is convertible into shares of World Access common stock at a
conversion rate of $20.38 per common share, subject to potential adjustment
under certain circumstances. If the closing trading price of World Access common
stock exceeds $20.38 per share for 60 consecutive trading days, the Series C
Preferred Stock will automatically convert into World Access common stock.
Adoption of the proposed amendments to the FaciliCom indenture is required
to consummate the merger. Accordingly, under the terms of the merger agreement,
the consummation of the merger is conditioned upon the adoption of the proposed
amendments. In addition, the closing of the merger is subject to the approval of
World Access stockholders and certain regulatory agencies. Certain stockholders
of World Access have entered into a voting agreement whereby they have committed
to vote in favor of the merger. The merger is expected to close in the fourth
quarter of 1999 and will be accounted for as a purchase transaction.
We are conducting the exchange offer and consent solicitation in connection
with the merger in order to facilitate the adoption of the proposed amendments.
If the proposed amendments are adopted, we expect that FaciliCom and the trustee
under the indenture for the FaciliCom notes will execute a second supplemental
indenture containing the proposed amendments on the closing date of the merger
that will be effective on that date. We anticipate that the closing of the
exchange offer will occur immediately after the closing of the merger.
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BACKGROUND OF THE MERGER
On or about July 16, 1999, Brown Brothers Harriman & Co. was contacted
regarding the possibility of an investment by Brown Brothers Harriman in
FaciliCom. Brown Brothers Harriman, the general partner of The 1818 Fund, which
holds 50,000 shares of World Access Series A preferred stock, was not inclined
to invest in a competitor of World Access, but suggested that FaciliCom and
World Access contact each other directly regarding a potential strategic
alliance. During the week of July 19, 1999, Clifford S. Rees, Executive Vice
President of International Business Development for the World Access
Telecommunications Group, called Walter J. Burmeister, President and Chief
Executive Officer of FaciliCom, to arrange a meeting between members of
management of World Access and FaciliCom.
On the morning of July 26, 1999, John D. Phillips and W. Tod Chmar,
Executive Vice President of World Access, met with Mr. Burmeister and Jeffrey J.
Guzy, Executive Vice President of Sales, Marketing and Product Development of
FaciliCom, at the principal executive offices of FaciliCom in Washington, D.C.
The parties determined that they shared similar views on the outlook for the
international telecommunications industry and the market strategies to be
followed in order to capitalize on the favorable trends expected to occur in the
industry. They also determined that the operating networks and customer bases of
World Access and FaciliCom were complimentary and that the possibility of a
strategic transaction should be explored. Mr. Burmeister indicated that
management of Armstrong Holdings, the indirect controlling stockholder of
FaciliCom, should be contacted and participate in any discussions to be held. At
the request of Mr. Phillips, a meeting between Messrs. Phillips, Chmar and
Burmeister and the senior management of Armstrong Holdings was immediately
scheduled for that afternoon.
On the afternoon of July 26, 1999, Messrs. Phillips, Chmar and Burmeister
met with Kirby J. Campbell, Chief Executive Officer of Armstrong Holdings, and
Bryan Cipoletti, Vice President of Finance of Armstrong Holdings, at the
principal executive offices of Armstrong Holdings in Butler, Pennsylvania. The
parties discussed the potential advantages of combining the significant
international wholesale, retail and data services revenue base and extensive
carrier-grade European network of FaciliCom with the MCI WorldCom wholesale
carrier service revenues, Equipment Group and financial strength of World
Access. The parties also discussed the advantages of the Equipment Group of
World Access providing funding for the forecasted growth of the combined
companies' services business, the strategy of adding significant retail services
and the expansion of the combined companies' network and future acquisitions in
Europe.
On July 28, 1999, Messrs. Campbell, Cipoletti, Burmeister, Christopher S.
King, Chief Financial Officer of FaciliCom, and representatives of Lehman
Brothers, Inc., financial advisor to FaciliCom, met with Messrs. Phillips and
Chmar and Mark A. Gergel, Executive Vice President and Chief Financial Officer
of World Access, A. Lindsay Wallace, President of the World Access Equipment
Group, and Michael F. Mies, Vice President of Finance and Treasurer of World
Access, at the principal executive offices of World Access in Atlanta, Georgia.
On July 30, 1999, Messrs. Phillips, Chmar and Gergel met with the same
representatives of FaciliCom and Armstrong Holdings in Butler, Pennsylvania and
discussed the relative valuations of World Access and FaciliCom and the
alternative structures of convertible preferred stock to be used as
consideration in a potential merger transaction.
The parties continued to discuss the terms of a possible strategic
transaction during the week of August 2, 1999, and on August 6, 1999 reached a
preliminary understanding on certain principal terms of the merger.
During August 10 through 12, 1999, Messrs. Chmar, Gergel and Mies met with
Messrs. Cipoletti, Burmeister and King, members of FaciliCom's and World Access'
operating management, representatives of Brown Brothers Harriman, including
Lawrence C. Tucker, also a director of World Access, representatives of
Donaldson, Lufkin & Jenrette, financial advisor to World Access, and
representatives of Lehman Brothers at the principal executive offices of
FaciliCom in Washington, D.C. The purpose of these meetings was for each party
to conduct business due diligence and develop a combined business model. In
addition to business due diligence, counsel for World Access reviewed publicly
available
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documents filed by FaciliCom with the Commission and conducted legal due
diligence on materials provided to it at FaciliCom's Washington, D.C. offices.
Throughout the week of August 9, 1999, senior management of World Access
had several telephone conferences with each of the members of the World Access
board of directors in order to update the board individually on the discussions
with FaciliCom. On August 13, 1999, the board had a telephonic conference call
during which legal counsel reviewed the terms of a draft of the merger
agreement, which had been provided to the board prior to the call, and advised
the board of its fiduciary duties in the context of the proposed merger.
Donaldson, Lufkin & Jenrette reviewed the preliminary financial terms of the
proposed merger and its analysis thereof. During the call, the members of the
board of directors had extensive discussions regarding the legal and financial
terms of the proposed merger. The board of directors instructed management of
World Access to proceed with its discussions with FaciliCom and FaciliCom
stockholders to finalize the terms of the proposed merger agreement.
On August 16, 1999, the board of directors of World Access met by
telephonic conference call to discuss the terms of the merger, and Donaldson,
Lufkin & Jenrette gave its oral opinion as to the fairness of the consideration
to be paid by World Access pursuant to the merger agreement. Legal counsel
advised the board with respect to, and responded to questions regarding, the
development of negotiations with FaciliCom and certain of the FaciliCom
shareholders. During this conference, the World Access board of directors
unanimously approved the merger agreement and the transactions contemplated by
the merger agreement and unanimously agreed to recommend its adoption to the
stockholders of World Access. On August 17, 1999, Donaldson, Lufkin & Jenrette
forwarded its written opinion regarding the fairness of the consideration to be
paid by World Access pursuant to the merger agreement to the members of the
board of directors of World Access.
WORLD ACCESS' REASONS FOR THE MERGER
The board of directors of World Access believes that the merger is fair to
and in the best interests of World Access and its stockholders. After
consideration of relevant business, financial, legal and market factors, the
board of directors unanimously approved the merger agreement and the
transactions contemplated by the merger agreement and voted to recommend that
the stockholders of World Access vote for the approval and adoption of the
merger agreement and the transactions contemplated by the merger agreement.
In deciding to approve the merger agreement and to recommend approval and
adoption of the merger agreement by the stockholders of World Access, the World
Access board of directors considered a number of factors, including particularly
the factors listed below. In view of the number and wide variety of factors
considered in connection with its evaluation of the merger, the board of
directors did not consider it practicable to, nor did it attempt to, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. The board of directors viewed its position and recommendation
as being based on the totality of the information and factors presented to and
considered by it. In addition, individual directors may have given different
weight to different information and factors.
The Financial Terms of the Merger. The board of directors of World Access
considered information concerning the business, earnings, operations, financial
condition and prospects of World Access and FaciliCom, both individually and on
a combined basis. The board of directors also considered the financial analyses
and other information with respect to World Access and FaciliCom presented to it
by World Access' financial advisor, as well as the directors' own knowledge of
World Access and FaciliCom and their respective businesses.
FaciliCom's Extensive Facilities-Based International Telecommunications
Network. The board of directors of World Access considered FaciliCom's strong
European presence and the potential for entry into additional deregulating
European countries. The board of directors also considered the technical
capabilities, cost effectiveness and available capacity of FaciliCom's
carrier-grade network in 14 countries and the utilization of this network to
facilitate World Access' global expansion strategy.
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Industry Trend Toward Consolidation. The board of directors of World
Access considered the status of the international telecommunications services
industry and the likely trend toward consolidation of service providers. The
board of directors also considered the importance of market position in the
global telecommunications services industry. The board of directors considered
the potential significant cost savings to be achieved as a result of the merger
in order to provide global retail telecommunications services at competitive
rates.
FaciliCom's Established Wholesale Customer Base. The board of directors of
World Access considered the compatibility of FaciliCom's established base of
wholesale customers with World Access' existing wholesale customer base. With
only approximately 20% wholesale customer overlap between World Access and
FaciliCom, the board of directors considered the significant expansion
possibility to be achieved with the addition of approximately 220 wholesale
carrier customers of FaciliCom.
Significant Increase in Offered Services. The board of directors of World
Access considered the additional services offered by FaciliCom, which would be
made available to current and future customers of World Access. Specifically,
the board of directors considered the potential growth opportunities for new
internet and data services.
CLOSING; EFFECTIVE TIME OF THE MERGER
The closing of the merger will take place on the second business day
following the satisfaction or waiver of the conditions to be fulfilled prior to
the closing set forth in the merger agreement, unless another date is agreed to
in writing by World Access, FaciliCom and the FaciliCom stockholders. On the
closing date, World Access and FaciliCom will file a Certificate of Merger with
the Secretary of State of the State of Delaware. We anticipate that, assuming
all conditions are met, the merger will occur prior to December 31, 1999.
MANAGEMENT OF WORLD ACCESS AFTER THE MERGER
Executive Officers. Following the consummation of the merger, John D.
Phillips, Chairman of the Board, President and Chief Executive Officer of World
Access will continue as Chairman and Chief Executive Officer of World Access.
Walter J. Burmeister, President and Chief Executive Officer of FaciliCom, will
be the President of World Access after the merger. It is anticipated that the
other current executive officers of World Access will continue as executive
officers of World Access with their current duties and responsibilities. The
parties have not yet determined which specific offices will be held by the other
current executive officers of FaciliCom. Mr. Burmeister does not have an
employment contract with FaciliCom. For FaciliCom's fiscal year ended September
30, 1999, FaciliCom paid Mr. Burmeister $212,000 in cash compensation. Mr.
Burmeister's compensation arrangements with World Access have not yet been
determined.
Board of Directors. After the merger, the board of directors of World
Access will consist of twelve members. Six of these twelve are the current
directors of World Access who will continue as directors, and four of these
twelve will be designated by the holders of World Access Series C preferred
stock. The current directors of World Access are John D. Phillips, Stephen J.
Clearman, Mark A. Gergel, John P. Imlay, Carl E. Sanders and Lawrence C. Tucker.
The initial designees of the holders of World Access Series C preferred stock to
the board of directors are Dru A. Sedwick, Kirby J. Campbell, Bryan Cipoletti
and Walter J. Burmeister. Of the six continuing directors, The 1818 Fund, as
sole holder of World Access Series A preferred stock, is entitled to designate
one person for recommendation for election by the World Access board of
directors to the stockholders of World Access. Lawrence C. Tucker was so
designated by The 1818 Fund. In connection with the closing of the private
placement of the $75.0 million of World Access common stock to fund the cash
portion of the consideration payable in the merger and expenses related to the
merger, Massimo Prelz Oltramonti, a Managing Director of Gilbert Global Equity
Partners, and John P. Rigas, Managing Partner of Zilkha Capital Partners, have
agreed to join our board of directors.
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Information concerning the six current directors of World Access who will
continue as directors of the World Access after the merger can be found in World
Access' Proxy Statement for its 1999 Annual Meeting held on June 15, 1999. See
"Incorporation of Certain Documents by Reference."
The initial four persons designated by the holders of World Access Series C
preferred stock to be members of the board of directors of World Access after
the merger are as follows:
Walter J. Burmeister (age 60) is one of FaciliCom's co-founders and has
been its Chief Executive Officer, President and one of its directors since it
was founded in 1995. Prior to co-founding FaciliCom, Mr. Burmeister founded
Telecommunications Management Group, a telecommunications consulting firm, and
he has served as its Chairman from 1992 to the present. Before founding this
firm, Mr. Burmeister was Vice President and Chief Financial Officer of Bell
Atlantic International from 1989 to 1992. In these positions, Mr. Burmeister was
responsible for overseeing business development in Central and South America,
the Middle East and Africa, as well as managing that company's financial
affairs. During his 31 years with Bell Atlantic, Mr. Burmeister was Vice
President of Bell of Pennsylvania's and Diamond State Telephone's sales
organization and headed the C&P Telephone Operations Staff. Mr. Burmeister has
served as a director of Skysat Communications Network since 1992.
Kirby J. Campbell (age 52) has served as Treasurer, Vice President and as a
director of FaciliCom since its inception. Since June 1997, Mr. Campbell has
been the Chief Executive Officer of Armstrong Holdings, and since 1993 he has
been Executive Vice President of Armstrong Holdings. Mr. Campbell also holds
various executive and board positions with Armstrong Holdings' affiliated
companies.
Dru A. Sedwick (age 35) has served as Secretary, Vice President and as a
director of FaciliCom since FaciliCom's inception. Since June 1997, Mr. Sedwick
has been President of Armstrong Holdings, and since 1993 he has been Senior Vice
President of Armstrong Holdings. Mr. Sedwick also holds various executive and
board positions with Armstrong Holdings' affiliated companies.
Bryan Cipoletti (age 39) has been one of FaciliCom's directors since
September 1997. Since 1993, Mr. Cipoletti has been Vice President of Finance of
Armstrong Holdings. Mr. Cipoletti also holds various executive and board
positions with Armstrong Holdings' affiliated companies.
The two people who have agreed to join the World Access board of directors
in connection with the closing of the merger and our private placement of $75.0
million of World Access common stock are as follows:
Massimo Prelz Oltramonti (age 44) is a Managing Director of Gilbert Global
Equity Partners, L.L.C., a private equity firm with a diversified global
investment strategy. He previously served as Managing Director of Advent
International Corporation, the general partner of a series of global private
equity funds. In this capacity, he co-managed the media and telecom investment
activity of Advent International in Europe and was directly responsible for its
investments in Scandinavian Broadcasting Systems SA, Esat Telecom Group plc,
PrimaCom AG, Esaote S.p.A and Jazztel SA. Prior to joining Advent International
in 1991, Mr. Prelz was a partner at Alta Berkeley Associates, a venture capital
group in London. He currently serves as Vice-Chairman of PrimaCom AG and is a
director of Esat Telecom Group plc, Jazztel SA and Iaxis N.V.
John P. Rigas (age 36) is a Managing Partner of Zilkha Capital Partners
L.P., a private equity firm involved in a wide variety of venture capital and
technology investments both in the U.S. and internationally. Mr. Rigas has been
with Zilkha Capital Partners and its predecessor firms for twelve years. He
currently serves as the Chairman of Advanced Interactive Systems Inc. and as a
director of New Colt Holding, Inc. and Omniglow, Inc.
CONSIDERATION TO BE RECEIVED IN THE MERGER
In the merger, the outstanding FaciliCom common stock will be converted
into the right to receive, and certain outstanding options to purchase FaciliCom
common stock will be exchanged for, in the aggregate, (i) an amount of cash
and/or World Access common stock equal in value to $56.0 million,
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(ii) approximately 369,400 shares, or $369.4 million in aggregate liquidation
preference, of World Access Series C preferred stock and (iii) approximately
520,000 vested options that each may be exercised for one share of World Access
common stock at an average exercise price of $3.06 per share.
In the event that we are unable to obtain net proceeds from the private
placement of World Access common stock of $56.0 million on or prior to the
closing of the merger, the FaciliCom stockholders and certain of the FaciliCom
optionholders will be entitled to receive, in the aggregate, such number of
shares of World Access common stock as is equal to the cash shortfall divided by
the market price of World Access common stock on the trading day immediately
preceding the closing date plus such number of additional shares of World Access
common stock as will result, upon the resale by such persons of all such shares,
in the aggregate, in net cash proceeds to such persons equal to the cash
shortfall. We have agreed to file a registration statement with the SEC in
connection with the resale of any World Access common stock received by the
stockholders of FaciliCom. We have received commitments from a group of
institutional and sophisticated investors to purchase $75.0 million of World
Access common stock in a private transaction that is conditioned upon, among
other things, and will close simultaneously with, the merger with FaciliCom. We
will use the majority of the proceeds from this private placement to fund the
cash portion of the FaciliCom merger, including related fees and expenses. The
World Access common stock to be issued will be priced at the average trading
value of the World Access common stock during a five day period prior to the
closing of the merger, with the purchase price to be no lower than $13 per share
and no higher than $17 per share. Brown Brothers Harriman & Co. acted as an
advisor to us on this transaction. Descriptions of the World Access Series C
preferred stock to be received by the stockholders of FaciliCom and the
treatment of FaciliCom options in the merger are set forth below.
Description of World Access Series C Preferred Stock.
Designation. Upon the filing of a Certificate of Designation with the
Secretary of State of the State of Delaware, approximately 369,400 shares of
World Access authorized preferred stock will be designated as "Convertible
Preferred Stock, Series C."
Ranking. The Series C preferred stock will rank, as to dividends, on
parity with the World Access common stock and junior to World Access Series A
preferred stock and Series B preferred stock. The Series C preferred stock will
rank, as to liquidation preference, senior to World Access common stock, on
parity with World Access Series B preferred stock and junior to World Access
Series A preferred stock.
Voting Rights. In addition to any voting rights provided by law, except
with respect to the election of directors, the holders of shares of World Access
Series C preferred stock will be entitled to vote on all matters voted on by the
holders of World Access common stock voting together as a single class with the
holders of World Access common stock, Series A preferred stock, Series B
preferred stock and other shares entitled to vote on those matters. Each holder
of shares of Series C preferred stock will be entitled to cast the number of
votes per share as is equal to the number of votes that such holder would be
entitled to cast had such holder converted its shares of Series C preferred
stock into World Access common stock on the record date for determining the
stockholders eligible to vote on any such matters.
In addition, unless the consent or approval of a greater number of shares
is then required by law, the affirmative vote of the holders of at least 66 2/3%
of the outstanding shares of World Access Series C preferred stock, voting
separately as a single series, will be required to: (i) authorize, increase the
authorized number of shares of or issue any shares of any class or classes of
stock ranking senior to the Series C preferred stock; (ii) authorize, adopt or
approve an amendment to the certificate of incorporation of World Access that
would increase or decrease the par value of the shares of Series C preferred
stock, or alter or change the powers, preferences or special rights of the
shares of Series C preferred stock, or would alter or change the powers,
preferences or special rights of stock ranking senior to the Series C preferred
stock; (iii) amend or alter the certificate of incorporation of World Access so
as to affect the shares of Series C preferred stock adversely and materially;
(iv) authorize or issue any security convertible into, exchangeable for or
evidencing the right to purchase or otherwise receive any shares of any class or
classes of stock ranking senior to the Series C preferred stock; and (v) subject
to certain exceptions set forth in
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the certificate of designation for the Series C preferred stock, effect the
voluntary liquidation, dissolution, winding up, recapitalization or
reorganization of World Access, or the consolidation or merger of World Access
with or into any other entity (except a wholly-owned subsidiary of World
Access), or the sale or other distribution to another entity of all or
substantially all of the assets of World Access.
Board of Directors Representation. The holders of the outstanding shares
of World Access Series C preferred stock will have the right, voting as a
separate series, to nominate and elect four directors to the board of directors
of World Access, and will not be entitled to vote with respect to the election
of any other directors; provided that on the record date for determining the
stockholders eligible to vote on such matters, at least 15% of the originally
issued shares of Series C preferred stock is outstanding. Notwithstanding the
foregoing, if the World Access common stock issuable upon conversion of the
Series C preferred stock equals less than 20% of the outstanding shares of
capital stock of World Access entitled to vote for the election of directors,
then, so long as the outstanding shares of Series C preferred stock constitute
at least 15% of the originally issued shares of Series C preferred stock, the
holders of Series C preferred stock will have the right to elect, voting as a
separate series, such number of directors which, as a percentage of the total
number of members of the board of directors of World Access, is at least equal
to the percentage of all outstanding shares of capital stock entitled to vote
for the election of directors held by such holders of Series C preferred stock
on an as converted basis.
Conversion Price. The shares of World Access Series C preferred stock will
be convertible into shares of World Access common stock at a conversion rate
equal to one share of World Access common stock per $20.38 of liquidation
preference, subject to adjustment in the event of below market issuances of
World Access common stock, stock dividends, subdivisions, combinations,
reclassifications and other distributions with respect to World Access common
stock and in certain other instances specified in the certificate of designation
for the Series C preferred stock.
Mandatory Conversion. If for 60 consecutive trading days the market price,
as defined in the certificate of designation for World Access Series C preferred
stock, of World Access common stock on each such trading day exceeds the
conversion price in effect on each such trading day, then the outstanding shares
of Series C preferred stock will be automatically converted into such number of
shares of World Access common stock as is equal to the number of shares of
Series C preferred stock subject to conversion multiplied by the quotient of the
liquidation preference of the Series C preferred stock divided by the conversion
price in effect on the last trading day of such 60-day period.
In addition, any outstanding shares of Series C preferred stock that have
not been converted into World Access common stock within three years following
the issue date of the Series C preferred stock will automatically be converted
into such number of shares of World Access common stock as is equal to the
number of shares of Series C preferred stock subject to conversion multiplied by
the quotient of the liquidation preference divided by the current market price,
as defined in the certificate of designation for World Access Series C preferred
stock. Notwithstanding the foregoing, the three year conversion price may not be
less than $11.50; if the three year conversion price is less than the market
price on the issue date of the Series C preferred stock and the Nasdaq Composite
Index on the close of business of the three year conversion date is 85% or less
than the Nasdaq Composite Index on the close of business on the issue date of
the Series C preferred stock, then the three year conversion price will be
increased by a percentage equal to that portion in excess of 15%; and the three
year conversion price may not be greater than the conversion price.
Treatment of FaciliCom Stock Options.
FaciliCom 1998 Stock Option Plan. FaciliCom has granted options to
approximately 70 individuals under its 1998 Stock Option Plan, representing
rights to acquire approximately 12,242 shares of non-voting FaciliCom common
stock. Pursuant to the provisions of the FaciliCom 1998 Stock Option Plan, in
the event of a change or exchange of the non-voting FaciliCom common stock, each
share of non-voting FaciliCom common stock subject to each outstanding option
shall be substituted with the number and kind of stock or securities into which
the non-voting FaciliCom common stock is changed or exchanged,
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with an appropriate adjustment to the per share option exercise price. In
addition, pursuant to the provisions of the FaciliCom 1998 Stock Option Plan,
each outstanding option granted under that plan shall become fully exercisable
upon a change in control of FaciliCom. For that purpose, the merger will
constitute a change in control of FaciliCom.
In connection with the merger, the options to acquire 12,242 shares of
non-voting FaciliCom common stock are expected to be exchanged for an aggregate
of approximately $10.7 million in cash and non-qualified options to acquire
approximately 520,000 shares of World Access common stock at an average exercise
price of $3.06 per share. The cash consideration and the fair value of the new
options are part of the total consideration to be paid by World Access in the
merger.
FaciliCom 1999 Stock Option Plan. In October 1999, FaciliCom granted stock
options under a new FaciliCom 1999 Stock Option Plan to its employees who are
expected to continue with World Access after the merger. These options were
granted in contemplation of and contingent upon the merger. Upon consummation of
the merger, these options will convert into non-qualified options to purchase
approximately 1,900,000 shares of World Access common stock at an exercise price
of $15.00 per share. These options generally will become exercisable in 25%
increments on each of the first four anniversaries from the date of grant. The
exercisability will not be accelerated due to the merger.
The exercise of all these options would result in approximately $28.5
million of capital infusion into World Access and may result in significant
income tax benefits for World Access. These options will be granted as
incentives for the FaciliCom employees to continue in their positions following
the merger and will not result in a reduction of the number of shares of World
Access Series C preferred stock to be issued in the merger. The value of the
approximately 1.9 million shares of World Access common stock which may be
issued upon exercise of the options is in addition to the total consideration to
be paid by World Access in the merger.
REGULATORY APPROVALS
On September 29, 1999, World Access, the Jud L. Sedwick Grandchildren's
Trust (the ultimate parent entity of FaciliCom) and Walter J. Burmeister (the
ultimate parent entity of BFV Associates, Inc.) each filed a Pre-Merger
Notification and Report Form with the Justice Department and the Federal Trade
Commission pursuant to the Hart-Scott-Rodino Act. Under the Hart-Scott-Rodino
Act, the merger could not have been consummated until at least 30 days after
such filing unless earlier termination of the waiting period was granted. The
Federal Trade Commission granted early termination of the Hart-Scott-Rodino Act
waiting period, effective October 19, 1999. No further action under the
Hart-Scott-Rodino Act is required so long as the merger is consummated prior to
October 18, 2000. The early termination of the Hart-Scott-Rodino Act waiting
period does not preclude the Justice Department, the Federal Trade Commission or
other parties from seeking actions challenging the merger based on federal
antitrust statutes. We do not anticipate any such challenge.
The transaction also requires notification in certain European countries.
Under the Finnish Competition Act, the merger must be notified and cannot
be consummated until the merger has been approved or certain waiting
periods/investigation periods have expired. FaciliCom filed for approval under
the Finnish Competition Act on October 25, 1999. The initial waiting period
lasts for 30 days from the date that the notification is considered to be
complete. If the Finnish competition authority has not issued its decision prior
to the end of the waiting period, the merger may be consummated. During the
initial waiting period, the Finnish competition authority may decide to open a
further investigation of the transaction. If a further investigation is
instituted, the transaction may not be consummated until a further three month
period has expired, which may be extended to five months in certain cases, or
the transaction has been cleared. Furthermore, the Finnish competition authority
may decide to refer the merger to the Finnish competition council. If the case
is referred to the Finnish competition council, the merger may not be
consummated until the Finnish competition council has issued its decision or a
three month period has expired. The Finnish competition council has the
authority to
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block the merger. We cannot assure you that a challenge to the merger on
competition law grounds will not be made or that, if such a challenge is made,
it would not be successful in Finland.
The merger must also be notified under the Swedish Competition Act and, if
the merger is notified prior to consummation, it cannot be completed until it
has been approved or a 30 day waiting period has expired. FaciliCom filed for
approval under the Swedish Competition Act on October 22, 1999. The 30 day
waiting period may be extended if it is decided that the notification was
incomplete or inaccurate. During the waiting period, the Swedish competition
authority may decide to open a further investigation of the merger, in which
case the Swedish competition authority has six months to render a final
decision. Swedish law does not require that notification be completed prior to
consummation of the merger. However, if the filing is delayed and the Swedish
competition authority decides that the merger creates or strengthens a dominant
position that would reduce competition in Sweden, it can declare the merger void
with respect to Sweden or impose conditions. We cannot assure you that a
challenge to the merger on competition law grounds will not be made or that, if
such a challenge is made, it would not be successful in Sweden.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the World Access board of directors
with respect to the merger, holders of World Access voting stock should be aware
that certain members of World Access' management and board of directors,
including certain of the new directors and executive officers to be appointed by
World Access in connection with the merger, have interests in the merger that
are in addition to the interests of stockholders of World Access in general.
Stock Options Held by John D. Phillips. In connection with the execution
of the merger agreement, Armstrong International Telecommunications, intending
to ensure that John D. Phillips devotes his full time and attention to the
management and operations of World Access, required Mr. Phillips to enter into a
Letter Agreement, dated August 17, 1999, under which Mr. Phillips agreed not to
sell or transfer any of his shares of World Access for a specified period of
time. In consideration for Mr. Phillips' entering into the letter agreement, the
Board of Directors of World Access has agreed to accelerate the exercisability
of currently outstanding options held by Mr. Phillips under the World Access
1998 Stock Option Plan for 1,000,000 shares of World Access common stock at an
exercise price of $12.75 per share. The options were originally scheduled to
vest ratably over a four-year period. Upon consummation of the merger, all of
these options will be immediately exercisable.
Release of Escrowed Shares of World Access Common Stock. In connection
with the acquisition of Cherry U.S. and Cherry U.K. by World Access and related
transactions in December 1998, World Access entered into a Share Exchange
Agreement and Plan of Reorganization, dated as of May 12, 1998, by and among
World Access, WAXS, Inc., Cherry U.K. and Renaissance Partners II pursuant to
which Renaissance Partners II, a Georgia general partnership and the sole
shareholder of Cherry U.K., exchanged all of the issued and outstanding ordinary
shares of Cherry U.K. for 1,875,000 shares of World Access common stock, of
which 1,250,000 shares were placed in escrow and constitute part of the escrowed
shares subject to release or forfeiture based on whether Cherry U.S. and Cherry
U.K. meet certain specified financial performance criteria. These criteria have
not yet been satisfied. Pursuant to the Operating Agreement, dated December 11,
1998, for Resurgens Partners, LLC, of which Renaissance Partners II is the
manager, Renaissance Partners II made a capital contribution to Resurgens
Partners in the form of its interest in 937,500 shares of World Access common
stock, of which 625,000 shares were part of the escrowed shares. Notwithstanding
the performance criteria set forth in the share exchange agreement, the share
exchange agreement provides that all of the escrowed shares shall be released
and shall no longer be subject to forfeiture upon a change of control of World
Access. For the purposes of the share exchange agreement, the merger constitutes
a change of control of World Access.
Mr. Phillips has sole voting and dispositive power over the shares of World
Access common stock owned of record by Renaissance Partners II and Resurgens
Partners. Upon consummation of the merger, Mr. Phillips, and his affiliates, and
Carl E. Sanders and John P. Imlay, Jr., each a director of World
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Access and each of whom will be a director of World Access after the merger,
will be entitled to receive the economic benefit of approximately 416,667,
40,000 and 26,667, respectively, of the released escrowed shares, and Mr.
Phillips will have the sole voting and dispositive power over all of the
escrowed shares.
Release of Contingent Shares of World Access Common Stock. In connection
with the acquisition of Cherry U.S. by World Access in December 1998, pursuant
to an Agreement and Plan of Merger and Reorganization, dated May 12, 1998, by
and among World Access, WAXS, Inc., WA Merger Corp. and Cherry U.S., WorldCom
Network Services received 1,310,430 shares of World Access common stock and is
expected to receive an additional 541,902 to 822,986 shares later in 1999 when
all creditor claims against Cherry U.S. are finalized. In addition, 6,250,000
shares of World Access common stock were placed in escrow and constitute part of
the escrowed shares which are subject to release or forfeiture based on whether
Cherry U.K. and Cherry U.S. meet certain specified financial criteria.
Approximately 4,200,000 of these escrowed shares are owned of record by World
Com Network Services. These performance criteria have not yet been satisfied.
Notwithstanding these performance criteria, the Cherry merger agreement provides
that all of these escrowed shares shall be released and shall no longer be
subject to forfeiture upon a change of control of World Access. For purposes of
the Cherry merger agreement, the merger constitutes a change of control of World
Access, and World Com Network Services will be entitled to receive approximately
4,200,000 of these escrowed shares. Lawrence C. Tucker, a director of World
Access and a World Access designee for director of World Access after the
merger, is a member of the board of directors of MCI WorldCom.
While we cannot determine at this time whether the relevant financial
performance criteria for release of the escrowed shares would have been in fact
satisfied, the World Access board of directors, in approving the merger
agreement, considered the release of the escrowed shares in the context of the
overall merger transaction and believed that the relevant performance criteria
would have been satisfied and that the escrowed shares would have been released
in February 2000 and 2001, irrespective of the merger.
FaciliCom Director Designees. The holders of World Access Series C
preferred stock are entitled to elect up to four of the twelve members of the
board of directors of World Access after the merger, subject to maintaining
specified levels of stock ownership. The initial designee directors of the
holders of the Series C preferred stock are Dru A. Sedwick, Kirby J. Campbell,
Bryan Cipoletti and Walter J. Burmeister. Each of Messrs. Sedwick, Campbell and
Cipoletti are executive officers of Armstrong Holdings and hold other executive
and board positions, including on FaciliCom's board of directors, with Armstrong
Holdings affiliated companies and will continue to do so after the consummation
of the merger. Mr. Burmeister is the President and Chief Executive Officer, as
well as a board member, of FaciliCom and will serve as President of World Access
after the merger.
Mr. Burmeister is the beneficial owner of 24,067 shares of FaciliCom common
stock, representing 10.6% of the outstanding FaciliCom common stock, and will be
entitled to receive approximately $5.6 million in cash or, in the event of a
cash shortfall, World Access common stock and approximately 38,300 shares of
World Access Series C preferred stock pursuant to the merger. Mr. Burmeister
also holds FaciliCom stock options with respect to shares of FaciliCom common
stock and, in connection with the merger, these options are expected to be
exchanged for $587,000 in cash and non-qualified options to acquire 195,474
shares of World Access common stock. In the event of a cash shortfall, Mr.
Burmeister would receive additional non-qualified options to acquire World
Access common stock in exchange for his FaciliCom stock options.
Mr. Cipoletti holds FaciliCom stock options with respect to 200 shares of
FaciliCom common stock. In connection with the merger, these options are
expected to be exchanged for cash or, in the event of a cash shortfall, World
Access common stock.
Management Information Services Agreement Between FaciliCom and Armstrong
Holdings. FaciliCom has an agreement with Armstrong Holdings through which
Armstrong Holdings provides billing and management information support services,
including call collection, processing, rating and reporting for FaciliCom and
its subsidiaries. Armstrong Holdings also provides FaciliCom with access to
experienced management information professionals and computer programmers on an
as-needed basis. This service
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expires on September 30, 2002. The parties anticipate that Armstrong Holdings
will continue to render similar services to World Access after the merger. The
terms of the billing and management information support services that Armstrong
Holdings will provide to World Access after the merger have not been determined.
The costs for such services are currently as follows:
- professional services are billed at a rate of $65.00 per hour;
- call detail record processing including data center management,
operations and hardware services are billed at a rate per minute of use
dependent upon call volumes;
- AS/400 disk storage services are billed at a rate of $25.00 per gigabyte;
- software applications and direct hardware FaciliCom purchases are billed
at actual cost; and
- telecommunications facilities are billed based on the actual facilities
it uses.
Armstrong Holdings has the right to increase the cost of its services upon
30 days' written notice if there is a change in the underlying cost of providing
these services. During the nine months ended June 30, 1999 and the fiscal years
ended September 30, 1998, 1997 and 1996, FaciliCom paid $2.2 million, $1.5
million, $431,000 and $0, respectively, to Armstrong Holdings for the management
information services Armstrong Holdings provided FaciliCom under this agreement
and an earlier agreement. Armstrong Holdings provides similar services to other
telecommunications companies with which it is affiliated. FaciliCom believes
that the terms of this agreement with Armstrong Holdings are competitive with
similar agreements offered by other providers of management information
services.
Financial Accounting Services Agreement Between FaciliCom and Armstrong
Holdings. FaciliCom also has an agreement with Judco Management Services, Inc.,
an affiliate of Armstrong Holdings, for Judco to provide certain financial
accounting services to it, such as payroll, accounts payable, human resources
support services and income tax return preparation and compliance services. The
costs for these services are currently as follows:
- human resources and payroll processing is billed at $6.75 per check;
- accounts payable invoice and check processing is billed at $3.50 per
invoice; and
- income tax return preparation is billed at $80.00 per hour.
Judco has the right to increase the cost of its services upon 30 days'
written notice if there is a change in the underlying cost of providing these
services. Judco provides similar services to other telecommunications companies
with which it is affiliated at comparable prices. FaciliCom believes that the
benefits to it of this agreement with Judco are competitive with similar
agreements offered by providers of comparable financial and accounting services.
This service agreement is expected to continue in effect at the closing. The
agreement expires on September 30, 2000, and shall be automatically renewed for
successive terms of two years unless either party provides written notice of its
intent to terminate the agreement at least 180 days prior to the end of the
original term of any then current term. The terms of the financial accounting
services that Judco will provide to World Access after the merger have not been
determined.
FaciliCom's payments under this agreement for the nine months ended June
30, 1999 and for fiscal 1998, fiscal 1997 and fiscal 1996 were $43,818, $30,000,
$8,000 and $7,000, respectively.
Armstrong Holdings Guarantee of FaciliCom Credit Facility and Letters of
Credit. Armstrong Holdings serves as guarantor for any borrowings up to $35.0
million under FaciliCom's credit facility with Key Corporate Capital, Inc. In
addition, an affiliated company of Armstrong Holdings has issued letters of
credit on behalf of FaciliCom totaling approximately $6.9 million as of
September 30, 1999. The termination of this guarantee and these letters of
credit on terms and conditions reasonably satisfactory to FaciliCom are
conditions to the obligations of FaciliCom and the FaciliCom stockholders to
complete the merger.
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FaciliCom Management Relationship with Telecommunications Management
Group. Mr. Burmeister is a co-founder, stockholder and director of
Telecommunications Management Group, an international telecommunications
consulting company. During 1997, FaciliCom used the consulting services of
Telecommunications Management Group principally for exploring business
development opportunities in Latin America. Since FaciliCom's inception, Mr.
Burmeister has devoted less than 5% of his working time to performing services
for this entity. Since becoming an employee of FaciliCom, Mr. Burmeister has not
provided to FaciliCom any of the services provided by Telecommunications
Management Group. FaciliCom paid Telecommunications Management Group fees of $0;
$60,000; $85,097 and $58,274 in the nine months ended June 30, 1999 and the
fiscal years ended September 30, 1998, 1997 and 1996, respectively. FaciliCom
believes that the fees it has paid to Telecommunications Management Group for
its services are competitive with those charged for comparable services by other
companies in the industry.
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RELATED AGREEMENTS
VOTING AGREEMENT
FaciliCom, Armstrong International Telecommunications, BFV Associates,
Inc., Epic Interests, Inc., WorldCom Network Services, The 1818 Fund and John D.
Phillips have entered into a voting agreement, dated August 17, 1999 pursuant to
which each of the World Access shareholders has agreed to vote all of its or his
shares of World Access voting stock, whether owned beneficially or of record, as
well as any other shares such World Access shareholder acquires beneficial
ownership of after the date of the voting agreement, in favor of the merger and
the adoption and approval of the merger agreement and the transactions
contemplated by the merger agreement. Pursuant to the voting agreement, the
World Access shareholders have also agreed to vote against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation or agreement of World Access
under the merger agreement, and any action or agreement that would materially
impede, interfere with, delay or postpone or that would reasonably be expected
to discourage the merger. The voting agreement, and all rights and obligations
thereunder, terminate upon the first to occur of the consummation of the merger,
the termination of the merger agreement, or February 28, 2000. As of the date of
this prospectus, these World Access shareholders own, beneficially or of record,
shares of World Access voting stock representing approximately 24.1% of the
voting stock of the World Access voting together as a single class.
LETTER AGREEMENT
John D. Phillips and Armstrong International Telecommunications have
entered into a letter agreement, pursuant to which Mr. Phillips has agreed not
to sell or transfer, directly or indirectly, any shares of World Access common
stock held by him, including his personal interest in such shares held by
Renaissance Partners II and Resurgens Partners and any shares received upon
exercise of World Access stock options or warrants, without the prior written
consent of Armstrong International Telecommunications for so long as Armstrong
International Telecommunications or any of its affiliates remains a stockholder
of the World Access. The provisions of the letter agreement terminate upon Mr.
Phillips' death or disability, any decision to remove, or to not reelect, Mr.
Phillips as the Chief Executive Officer of World Access in which at least 50% of
the directors elected by the holders of the Series C preferred stock (or, upon
conversion into or other acquisition of World Access common stock, by 50% of the
directors nominated, designated or elected by the FaciliCom shareholders, or
their affiliates) vote in favor of such removal or fail to vote in favor of such
reelection, the 5th anniversary of the closing in the event that Mr. Phillips is
no longer Chief Executive Officer of World Access for any reason, and upon a
change of control of World Access.
REGISTRATION RIGHTS AGREEMENT
World Access has agreed to enter into a registration rights agreement with
certain FaciliCom stockholders pursuant to which World Access will grant certain
rights to such persons to cause World Access to register their shares of World
Access common stock, including World Access common stock issued or issuable upon
conversion of the Series C preferred stock and securities issued or issuable
with respect to such shares of World Access common stock by way of dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
Demand Registration Rights. At any time after the date of the registration
rights agreement, one or more holders of an aggregate of at least 25% of the
total number of shares of World Access common stock issued or issuable upon
conversion of the Series C preferred stock may demand that World Access register
its or their registrable securities under the Securities Act. Other holders of
registrable securities and holders of World Access securities with the right to
participate in a World Access registration statement will have the right to
include their shares in such a demand registration; provided, however, that if
the facilitating broker/dealer or, in an underwritten offering, the lead
managing underwriter advises that
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<PAGE> 132
marketing factors require a limitation on the number of shares to be sold, the
number of shares to be included in the sale or underwriting and registration
will be allocated pro rata among the initiating holders and the holders seeking
registration on the basis of the estimated proceeds from the sale of the
securities covered by such registration. World Access will not be required to
effect more than four Demand Registrations in the aggregate or more than one
demand registration within any 12-month period occurring immediately subsequent
to the effectiveness of a demand registration. Notwithstanding the foregoing, a
demand registration will not be deemed to have been effected unless, among other
things, (x) a registration statement with respect thereto has become effective
and remains effective in compliance with the Securities Act until the earlier of
(1) such time as all of such registrable securities covered by the registration
statement have been disposed of and (2) 180 days after the effective date of
such registration with respect to any registration statement filed pursuant to
Rule 415 under the Securities Act or (y) if, when effective, it includes fewer
than 75% of the number of shares of registrable securities of the initiating
holders which were the subject matter of the demand.
Piggyback Registration Rights. Subject to certain exceptions set forth in
the registration rights agreement, if at any time World Access proposes to
register any shares of World Access common stock or any securities convertible
into World Access common stock under the Securities Act by registration on any
form other than Forms S-4 or S-8, each holder of registrable securities will
have the right to include in such registration statement such number of
registrable securities as it requests. If the managing underwriter of any
underwritten offering informs World Access that the number of registrable
securities requested to be included in such registration would materially affect
such offering, then World Access will include in such offering, to the extent of
the number and type that World Access is advised can be sold in such offering,
and subject to the rights described in section 2.1(f) of the registration rights
agreement, dated as of April 21, 1999, between World Access and The 1818 Fund,
first, all securities proposed to be sold by World Access for its own account,
second, such registrable securities requested to be included in such
registration and securities of other persons who have the right to require that
their securities be included in such registration, pro rata on the basis of the
estimated proceeds from the sale thereof, and third, all other securities
proposed to be registered.
Expenses. World Access will pay all registration expenses, except for
underwriting commissions or discounts, in connection with the first and second
demand registrations. Each holder of registrable securities whose registrable
securities are included in the third and fourth demand registrations will pay
its proportionate share of the registration expenses (including underwriting
commissions or discounts) on the basis of such holder's share of the gross
proceeds from the sale of its registrable securities. World Access will pay all
registration expenses in connection with any piggyback registration.
Expiration of Registration Rights. Registrable securities will cease to be
registrable securities and, therefore, no longer have registration rights
pursuant to the registration rights agreement when (i) a registration statement
with respect to the sale of such securities has become effective under the
Securities Act and such securities have been disposed of in accordance with the
registration statement, (ii) they have been sold as permitted by Rule 144 under
the Securities Act and the purchaser thereof does not receive "restricted
securities" as defined in Rule 144, (iii) they have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer have
been delivered by World Access and subsequent public distribution of them will
not, in the opinion of counsel for the holders, require registration under the
Securities Act or (iv) they have ceased to be outstanding.
PRIVATE PLACEMENT AGREEMENTS
In connection with the private placement of $75.0 million of World Access
common stock to fund the cash portion of the FaciliCom merger (including related
fees and expenses), we entered into separate agreements with a group of
institutional and sophisticated investors on October 13, 1999. The closing of
the purchase and sale of the shares of World Access common stock pursuant to the
private placement will occur on the date, and is subject to the closing, of the
FaciliCom merger. Additional conditions to each such investor's obligation to
proceed to the private placement closing include (i) the termination or
expiration of the waiting period (and any extension thereof) under the
Hart-Scott-Rodino Act related to
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<PAGE> 133
the transactions contemplated by such investor's private placement agreement, if
applicable, and (ii) the non-occurrence of a Material Adverse Effect (as defined
in the private placement agreement) with respect to World Access. The number of
shares of World Access common stock to be acquired by each investor is
determined by dividing (x) the total consideration paid by each such investor by
(y) the average of the daily closing price of World Access common stock as
reported on Nasdaq for the five consecutive trading days ending at the close of
trading on the trading day before the private placement closing, provided that
the denominator may not be less than $13.00 or more than $17.00. Under each
private placement agreement, we have agreed to file with the SEC, no later than
thirty (30) days following the private placement closing, a registration
statement on Form S-3 in connection with the resale of the shares of World
Access common stock acquired thereunder. Each private placement agreement may be
terminated by either the investor or World Access at any time prior to the
private placement closing (a) upon termination of the merger agreement or (b) if
the private placement has not occurred on or before December 31, 1999.
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<PAGE> 134
RELATED TRANSACTIONS
RELEASE OF ESCROWED SHARES
Prior to October 1997, Cherry U.S. and Cherry U.K. were under the
operational and financial direction and control of James R. Elliot, Chairman of
the Board and Chief Executive Officer of Cherry U.S., an 80.1% owner of the
outstanding shares of the common stock of Cherry U.S., and the owner of all the
issued and outstanding capital stock of Cherry U.K.. In the second half of 1997,
Mr. Elliot sought financial assistance from WorldCom Network Services, already a
significant creditor of Cherry U.S. and the owner of the remaining outstanding
shares of Cherry U.S. stock. In October 1997, Cherry U.S., WorldCom Network
Services, Cherry U.K., Mr. Elliot and John D. Phillips entered into a series of
agreements pursuant to which Cherry U.S. retained Mr. Phillips to engineer a
turnaround and reorganization of the financially ailing Cherry U.S. These
agreements also culminated in, among other things, Mr. Phillips obtaining the
right to acquire at least 50% of the total outstanding amount of each of the
Cherry U.K. stock and the Cherry U.S. stock held by Mr. Elliot. In December
1997, Mr. Elliot resigned as director, officer and employee of Cherry U.S. and
exercised his right to have all of his Cherry U.K. stock sold to Mr. Phillips.
As part of the acquisition of Cherry U.S. and Cherry U.K., World Access
entered into the Cherry merger agreement and the share exchange agreement. The
Cherry merger agreement provided that the creditors of Cherry U.S., in
satisfaction of their claims against Cherry U.S., would receive an aggregate of
9,375,000 shares of World Access common stock, of which 6,250,000 shares were to
be held in escrow as part of the escrowed shares and are subject to forfeiture
in the event the combined business of Cherry U.S. and Cherry U.K. failed to meet
certain financial performance criteria. As a creditor of Cherry U.S., WorldCom
Network Services became eligible to receive up to a total of 6,638,096 shares of
World Access common stock. Of that amount, 1,310,430 shares have been issued to
WorldCom Network Services. Upon resolution of the total amount of claims against
Cherry U.S. for which shares of World Access common stock are to be issued,
WorldCom Network Services will receive a minimum of 541,902 and a maximum of
822,986 additional shares. Assuming the full amount of the escrowed shares are
issued to Cherry U.S. creditors, WorldCom Network Services could receive a
minimum of 3,911,172 and a maximum of 4,504,680 shares, depending on the
resolution of the total claims against Cherry U.S. for which shares are to be
issued. At the present time, WorldCom Network Services votes or has the power to
direct the voting of an aggregate of 6,074,372 shares of World Access common
stock.
The share exchange agreement provided that Renaissance Partners II, a
Georgia limited partnership formed by, among others, Mr. Phillips to be the sole
shareholder of Cherry U.K., and the manager of Resurgens Partners, was to
receive an aggregate of 1,875,000 shares of World Access common stock, 625,000
of which were issued upon consummation of the Cherry acquisition and 1,250,000
of which are held in escrow as part of the escrowed shares and are subject to
forfeiture in the event the combined business of Cherry U.S. and Cherry U.K.
fail to meet certain financial performance criteria.
While we cannot determine at this time whether the relevant financial
performance criteria for the release of the escrowed shares would have been in
fact satisfied, the World Access board of directors, in approving the merger
agreement, considered the release of the escrowed shares as a result of the
merger and in the context of the overall merger transaction and believed that
the relevant performance criteria would have been satisfied and that the
escrowed shares would have been released in February 2000 and 2001, irrespective
of the merger.
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<PAGE> 135
PRINCIPAL STOCKHOLDERS
Our only issued and outstanding classes of voting securities are World
Access common stock, Series A preferred stock and Series B preferred stock. As
of the date of this prospectus, there were 45,236,057 shares of World Access
common stock issued and outstanding, 50,000 shares of Series A preferred stock
issued and outstanding (convertible into 4,347,826 shares of World Access common
stock) and 23,174 shares of Series B preferred stock issued and outstanding
(convertible into 1,448,375 shares of World Access common stock).
The following table sets forth information regarding the beneficial
ownership of World Access common stock, Series A preferred stock and Series B
preferred stock as of November 3, 1999 for (i) each person known by World Access
to beneficially own more than 5% of the World Access common stock, Series A
preferred stock or Series B preferred stock, (ii) each director and each nominee
for director individually, (iii) each executive officer who would be a "Named
Executive Officer" of World Access under Rule 402 of Regulation S-K and (iv) all
directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
SHARES UNDER
EXERCISABLE TOTAL SHARES
SHARES OPTIONS AND BENEFICIALLY PERCENTAGE
NAME OWNED(1) WARRANTS(2) OWNED(1) OWNED
---- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
WORLD ACCESS COMMON STOCK
- -------------------------------
WorldCom Network Services, Inc.(3)
500 Clinton Center Drive
Clinton, MS 39056......................... 6,074,372 -- 6,074,372 13.4%
The 1818 Fund III, L.P.(4)
59 Wall Street
New York, NY 10005........................ 4,347,826 1,739,130 6,086,956 11.9
John D. Phillips+++(6)...................... 1,875,000 1,184,340 3,059,340 6.6
Stephen J. Clearman+++...................... 52,210 167,000 219,210 *
Mark A. Gergel+++(7)........................ 26,683 237,500 264,183 *
John P. Imlay, Jr.+......................... 19,900 179,000 198,900 *
Carl E. Sanders+............................ 10,000 179,000 189,000 *
Lawrence C. Tucker+(4)...................... 4,347,826 1,839,130 6,186,956 12.0
A. Lindsay Wallace++(7)..................... 309 122,380 122,689 *
Walter J. Burmeister#....................... -- -- -- *
Kirby J. Campbell#.......................... -- -- -- *
Bryan Cipoletti#............................ -- -- -- *
Massimo Prelz Oltramonti#................... -- -- -- *
John P. Rigas#.............................. -- -- -- *
Dru A. Sedwick#............................. -- -- -- *
All directors and executive officers as a
group (9 persons)(8)...................... 6,331,928 3,908,350 10,240,278 19.1
SERIES A PREFERRED STOCK
- --------------------------
The 1818 Fund III, L.P.(4).................. 50,000 20,000 70,000 100.0
SERIES B PREFERRED STOCK
- --------------------------
Gregory A. Somers
2301 Ohio Drive, Suite 285
Plano, TX 75093........................... 13,760 -- 13,760 59.4
Teleplus Telecommunications, Inc.
111 Main Street
Webb, IA.................................. 3,032 -- 3,032 13.1
R. Scott Birdwell
3626 N. Hall Street, Suite 908
Dallas, TX 75219.......................... 2,276 -- 2,276 9.8
Kelli J. Somers
2301 Ohio Drive, Suite 285
Plano, TX 75093........................... 2,270 -- 2,270 9.7
</TABLE>
- ---------------
* Less than one percent
+ Director
++ Named Executive Officer
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<PAGE> 136
# Nominee for Director
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act. Unless otherwise noted, World Access believes that all
persons named in the table have sole voting and investment power with
respect to all shares of World Access common stock beneficially owned by
them.
(2) Includes shares which may be acquired by the exercise of stock options and
warrants granted by World Access and exercisable on or before January 2,
2000.
(3) In connection with World Access' acquisition of Cherry U.S., World Access
issued shares of World Access common stock to the creditors of Cherry U.S.,
including WorldCom Network Services, a wholly owned subsidiary of MCI
WorldCom, in satisfaction of their claims against Cherry U.S. WorldCom
Network Services is eligible to receive up to a total of 6,638,096 shares of
World Access common stock. Of this amount, 1,310,430 shares have been issued
to WorldCom Network Services. Upon resolution of the total amount of claims
against Cherry U.S. for which World Access' shares are to be issued,
WorldCom Network Services will receive a minimum of 541,902 and a maximum of
822,986 shares. This distribution is expected to occur by the end of 1999.
Additional shares of World Access common stock were placed into escrow in
connection with the acquisition and were to be released to Cherry U.S.
creditors in February 2000 and February 2001, subject to the attainment of
certain earnings levels by Cherry U.S. and Cherry U.K. during 1999 and 2000,
respectively. Assuming the full amount of shares held in escrow are issued
to Cherry U.S. creditors, WorldCom Network Services could receive a minimum
of 3,911,172 and a maximum of 4,504,680 shares, depending on the resolution
of the total claims against Cherry U.S. for which shares are to be issued.
At the present time, WorldCom Network Services votes or has the power to
direct the voting of an aggregate of 6,074,372 shares of World Access common
stock. The merger will constitute a "change of control" of World Access
under the Cherry merger agreement and as a result, upon consummation of the
merger, all shares currently held in escrow will be released to Cherry U.S.
creditors.
(4) Represents 4,347,826 shares of World Access common stock issuable upon the
conversion of 50,000 shares of Series A preferred stock owned of record by
The 1818 Fund, a private equity partnership, and 1,739,130 shares of World
Access common stock reserved for issuance upon the conversion of 20,000
shares of World Access Series A preferred stock, which is subject to an
option held by The 1818 Fund. The general partner of The 1818 Fund is Brown
Brothers Harriman. Mr. Tucker, a partner at Brown Brothers Harriman, is
deemed to be the beneficial owner of these shares due to his role as
co-manager of The 1818 Fund.
(5) Represents shares of World Access common stock issuable upon the conversion
of shares of World Access Series B preferred stock.
(6) Represents 937,500 shares owned of record by Renaissance Partners II and
937,500 shares owned of record by Resurgens Partners. Renaissance Partners
II is the manager of Resurgens Partners and, as such, has sole voting and
dispositive power over the shares of the World Access common stock owned of
record by Resurgens Partners. Mr. Phillips beneficially owns a majority of
the general partnership interests of Renaissance and, as such, has sole
voting and dispositive power over the shares of the World Access common
stock owned of record by Renaissance Partners II and sole indirect voting
and dispositive power over the shares of the World Access common stock owned
of record by Resurgens Partners. Of the aggregate 1,875,000 shares of World
Access common stock owned of record by Renaissance Partners II and Resurgens
Partners, an aggregate of 1,250,000 shares (625,000 owned of record by each
of Renaissance Partners II and Resurgens Partners) were placed into escrow
in connection with the acquisition of Cherry U.K. and were to be released to
Renaissance Partners II and Resurgens Partners in February 2000 and February
2001, subject to the attainment of certain earnings levels by Cherry U.S.
and Cherry U.K. during 1999 and 2000, respectively. The merger will
constitute a change of control of World Access under the share exchange
agreement and as a result, upon consummation of the merger, all shares
currently held in escrow will be released to Renaissance Partners II and
Resurgens Partners.
(7) Includes the following shares of World Access common stock acquired through
voluntary employee contributions to World Access' 401(k) Plan and
contributed to the 401(k) Plan by World Access under a matching contribution
program offered to all 401(k) Plan participants: Mr. Gergel -- 3,933 shares;
and Mr. Wallace -- 309 shares.
(8) Includes W. Tod Chmar and Dennis E. Bay, two Named Executive Officers of
World Access that currently have no beneficial ownership of World Access
common stock and no stock options or warrants exercisable on or before
January 2, 2000.
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<PAGE> 137
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements of World Access give
effect to several transactions we completed in 1998 and our pending merger with
FaciliCom, the private placement of World Access common stock and the exchange
of FaciliCom notes for exchange notes. The Unaudited Pro Forma Combined Balance
Sheet gives effect to our pending merger with FaciliCom, private placement and
exchange offer noted previously as if they had been completed as of June 30,
1999. The Unaudited Pro Forma Combined Statements of Operations give effect to
the following transactions as if each had been completed as of January 1, 1998:
- our acquisition of a majority interest in NACT Telecommunications, Inc.
on February 27, 1998 and subsequent merger with NACT on October 28, 1998;
- our merger with Telco Systems, Inc. on November 30, 1998;
- our merger with Cherry Communications Incorporated, d/b/a Resurgens
Communications Group, and Cherry Communications U.K. Limited on December
15, 1998 (these companies are collectively referred to as Resurgens in
the pro forma financial statements); and
- our pending merger with FaciliCom, private placement and exchange offer.
We have prepared the pro forma financial statements to demonstrate how
these combined businesses might have looked if the mergers and related
transactions had been completed as of the dates or at the beginning of the
periods presented. The pro forma financial statements, while helpful in
illustrating characteristics of the combined company under one set of
assumptions, do not attempt to predict or suggest future results. The pro forma
financial statements are preliminary and subject to change based on a final
review of the fair values of FaciliCom's net assets as of the actual merger
date. Upon final review of the fair value of FaciliCom's assets and liabilities,
it is likely that certain tangible and intangible assets such as international
licenses and foreign carrier operating agreements may be recognized which
generally have lives ranging from 5-10 years. Although we do not expect these
final adjustments to be significant, they would increase the amortization
expense reflected in the unaudited pro forma financial statements as these
intangible assets would be amortized over a shorter life than goodwill.
Each of the merger transactions above has been accounted for using the
purchase method of accounting. In connection with our acquisitions of NACT and
Telco, we recorded charges of $44.6 million and $50.3 million, respectively,
representing the portion of the purchase price allocated to in-process research
and development. Since these charges were directly related to the acquisitions
and will not recur, the Unaudited Pro Forma Combined Statement of Operations for
the year ended December 31, 1998 has been prepared excluding these one-time
non-recurring charges.
Upon the completion of our merger with FaciliCom, we expect to record a
one-time restructuring charge for the estimated costs of (i) consolidating
certain of our United States gateway switching centers and related technical
support functions into existing FaciliCom operations; (ii) consolidating our
United Kingdom operations into existing FaciliCom operations; (iii)
consolidating the administrative functions of our Telecommunications Group into
FaciliCom's operations; and (iv) eliminating other redundant operations and
assets as a result of combining our Telecommunications Group's and FaciliCom's
operations. The restructuring charge is expected to include the write-down of
our switching and transmission equipment taken out of service, the write-off of
certain leasehold improvements, a provision for lease commitments remaining on
certain facilities and equipment taken out of service and employee termination
benefits. Although we have not yet finalized the restructuring program, it is
expected to be approved in its final form and adopted immediately following the
FaciliCom merger, communicated to our employees at that time and completed
within three months. We have not yet determined the actual
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<PAGE> 138
restructuring charge to be recorded but estimate that it will be in excess of
$20.0 million. This one-time charge has been excluded from the pro forma
financial statements.
As a result of the FaciliCom merger and the restructuring program discussed
above, we expect the combined company to realize significant operational and
financial synergies. These synergies are expected to include cost reductions
resulting from traffic routing changes made to take advantage of each company's
least cost routes, elimination of redundant leased line costs, elimination of
redundant switching centers and consolidation of certain administrative
functions. We currently estimate that these annualized cost savings, which have
been excluded from the pro forma financial statements, will range from $20.0
million to $35.0 million.
The pro forma financial statements are presented for comparative purposes
only and are not intended to be indicative of the actual results had these
transactions occurred as of the dates indicated above nor do they purport to
indicate results which may be attained in the future. The pro forma financial
statements should be read in conjunction with the historical consolidated
financial statements of World Access, NACT, Telco, Resurgens and FaciliCom,
which are included herein or incorporated herein by reference.
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<PAGE> 139
WORLD ACCESS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORLD PRO FORMA PRO FORMA
ACCESS(1) FACILICOM(3) ADJUSTMENTS WORLD ACCESS
--------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents.................. $ 98,996 $ 18,696 $ 5,750(6) $ 123,442
Accounts receivable................... 97,342 98,542 -- 195,884
Marketable securities -- restricted... -- 31,755 -- 31,755
Inventories........................... 45,216 -- -- 45,216
Other current assets.................. 54,929 6,067 -- 60,996
-------- -------- -------- ----------
Total Current Assets.......... 296,483 155,060 5,750 457,293
Property and equipment.................. 62,325 185,768 -- 248,093
Goodwill and other intangibles.......... 309,540 13,862 (13,199)(8) 874,149
460,216(5)
103,730(7)
Marketable securities -- restricted..... -- 29,525 -- 29,525
Other assets............................ 24,798 550 -- 25,348
-------- -------- -------- ----------
Total Assets.................. $693,146 $384,765 $556,497 $1,634,408
======== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt....................... $ 12,285 $ 21,837 $ -- $ 34,122
Accounts payable...................... 58,393 126,423 -- 184,816
Other accrued liabilities............. 45,744 38,476 -- 84,220
-------- -------- -------- ----------
Total Current Liabilities..... 116,422 186,736 -- 303,158
Long-term debt.......................... 140,728 304,166 (15,000)(5) 429,894
Noncurrent liabilities.................. 10,204 -- -- 10,204
-------- -------- -------- ----------
Total Liabilities............. 267,354 490,902 (15,000) 743,256
-------- -------- -------- ----------
Stockholders' Equity
Preferred stock....................... 1 -- 4(5) 5
Common stock.......................... 448 2 (2)(4) 512
11(5)
53(6)
Capital in excess of par value........ 544,481 37,658 (37,658)(4) 1,009,773
287,365(5)
103,730(7)
74,197(6)
Stock-based compensation.............. -- 5,546 (5,546)(4) --
Foreign currency translation
adjustment......................... -- (5,819) 5,819(4) --
Accumulated deficit................... (119,138) (143,524) 143,524(4) (119,138)
-------- -------- -------- ----------
Total Stockholders' Equity.... 425,792 (106,137) 571,497 891,152
-------- -------- -------- ----------
Total Liabilities and
Stockholders' Equity........ $693,146 $384,765 $556,497 $1,634,408
======== ======== ======== ==========
</TABLE>
136
<PAGE> 140
WORLD ACCESS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WORLD PRO FORMA PRO FORMA
ACCESS(1) FACILICOM(3) ADJUSTMENTS WORLD ACCESS
--------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Carrier service revenues................... $198,891 $173,257 $ (4,340)(10) $367,808
Equipment sales............................ 122,360 -- -- 122,360
-------- -------- -------- --------
Total Sales.............................. 321,251 173,257 (4,340) 490,168
Cost of carrier services................... 185,232 169,243 (3,690)(10) 350,785
Cost of equipment sold..................... 68,690 -- -- 68,690
Amortization of acquired technology........ 2,400 -- -- 2,400
-------- -------- -------- --------
Total Cost of Sales...................... 256,322 169,243 (3,690) 421,875
-------- -------- -------- --------
Gross Profit............................. 64,929 4,014 (650) 68,293
Research and development................... 8,773 -- -- 8,773
Selling, general and administrative........ 27,486 24,719 -- 52,205
Amortization of goodwill................... 6,369 634 13,470(15) 20,473
Provision for doubtful accounts............ 1,453 2,817 -- 4,270
-------- -------- -------- --------
Operating Income (Loss).................. 20,848 (24,156) (14,120) (17,428)
Foreign exchange loss...................... -- (1,290) -- (1,290)
Interest and other income.................. 1,506 2,762 -- 4,268
Interest expense........................... (4,604) (16,907) (4,540)(9) (26,051)
-------- -------- -------- --------
Income (Loss) From Continuing Operations
Before Income Taxes................... 17,750 (39,591) (18,660) (40,501)
Income taxes (benefits).................... 9,357 (5,576) (2,000)(17) 1,781
-------- -------- -------- --------
Income (Loss) From Continuing
Operations............................ 8,393 (34,015) (16,660) (42,282)
Preferred stock dividends.................. 413 -- -- 413
-------- -------- -------- --------
Income (Loss) From Continuing Operations
Available to Common Stockholders...... $ 7,980 $(34,015) $(16,660) $(42,695)
======== ======== ======== ========
Income (Loss) From Continuing Operations
Per Common Share:
Basic.................................... $ 0.22 $ (0.85)(18)
======== ========
Diluted.................................. $ 0.22 $ (0.85)(18)
======== ========
Weighted Average Shares Outstanding:
Basic.................................... 36,232 50,102(18)
======== ========
Diluted.................................. 38,446 50,102(18)
======== ========
</TABLE>
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WORLD ACCESS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
WORLD PRO FORMA WORLD
ACCESS(1) NACT(2) TELCO(2) RESURGENS(2) FACILICOM(3) ADJUSTMENTS ACCESS
--------- ------- -------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Carrier service
revenues................. $ 13,143 $1,160 $126,324 $ -- $184,246 $ (2,520)(10) $ 322,353
Equipment sales.......... 138,990 1,175 -- 96,367 -- -- 236,532
--------- ------- -------- -------- -------- -------- ---------
Total Sales............ 152,133 2,335 126,324 96,367 184,246 (2,520) 558,885
Cost of carrier sales.... 12,522 1,050 145,043 -- 184,989 (2,140)(10) 340,234
(1,230)(12)
Cost of equipment sold... 73,842 925 -- 64,416 -- (400)(11) 138,783
Write-down of
inventories............ 9,292 -- -- -- -- -- 9,292
Amortization of acquired
technology............. 446 -- -- -- -- 4,360(13) 4,806
--------- ------- -------- -------- -------- -------- ---------
Total Cost of Sales.... 96,102 1,975 145,043 64,416 184,989 590 493,115
--------- ------- -------- -------- -------- -------- ---------
Gross Profit
(Deficit)............ 56,031 360 (18,719) 31,951 (743) (3,110) 65,770
Research and
development............ 6,842 504 -- 15,265 -- -- 22,611
Selling, general and
administrative......... 19,984 1,265 38,569 22,295 37,562 780(14) 120,455
Amortization of
goodwill............... 4,255 39 -- 800 961 34,530(15) 40,585
In-process research and
development............ 100,300 -- -- 15,585 -- (94,900)(16) 20,985
Goodwill impairment...... 6,200 -- -- -- -- -- 6,200
Provision for doubtful
accounts............... 11,332 104 2,294 589 4,620 -- 18,939
Restructuring and other
charges................ 17,240 -- -- -- -- -- 17,240
--------- ------- -------- -------- -------- -------- ---------
Operating Income
(Loss)............... (110,122) (1,552) (59,582) (22,583) (43,886) 56,480 (181,245)
Foreign exchange loss.... -- -- -- -- (391) -- (391)
Interest and other
income................. 3,419 -- -- 2,194 8,943 -- 14,556
Interest and other
expense................ (6,832) -- (9,457) (127) (22,612) (19,880)(9) (58,908)
--------- ------- -------- -------- -------- -------- ---------
Loss Before Income
Taxes and Minority
Interests............ (113,535) (1,552) (69,039) (20,516) (57,946) 36,600 (225,988)
Income taxes
(benefits)............. (1,387) (620) -- 300 (11,351) (8,440)(17) (21,498)
--------- ------- -------- -------- -------- -------- ---------
Loss Before Minority
Interests............ (112,148) (932) (69,039) (20,816) (46,595) 45,040 (204,490)
Minority interests in
earnings of
subsidiary............. (2,497) -- -- -- -- 2,497 --
--------- ------- -------- -------- -------- -------- ---------
Loss From Continuing
Operations........... $(114,645) $ (932) $(69,039) $(20,816) $(46,595) $ 47,537 $(204,490)
========= ======= ======== ======== ======== ======== =========
Loss From Continuing
Operations
Per Common Share:
Basic.................. $ (5.19) $ (4.22)(18)
========= =========
Diluted................ $ (5.19) $ (4.22)(18)
========= =========
Weighted Average Shares
Outstanding:
Basic.................. 22,073 48,460(18)
========= =========
Diluted................ 22,073 48,460(18)
========= =========
</TABLE>
138
<PAGE> 142
WORLD ACCESS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. These columns represent the historical results of operations and
financial position of World Access. With respect to the information
included in the Unaudited Pro Forma Results of Operations for the year
ended December 31, 1998, the World Access information includes the
results for the following businesses from their respective dates of
acquisition: Advanced TechCom, Inc. -- January 1998; NACT -- February
1998; Telco -- November 1998; and Resurgens -- December 1998.
2. These columns represent the historical results of NACT for the period
January 1, 1998 to February 27, 1998; Telco for the period January 1,
1998 to November 29, 1998; and Resurgens for the period January 1,
1998 to December 14, 1998.
3. These columns represent the historical results of operations and
financial position of FaciliCom. With respect to the information
included in the Unaudited Pro Forma Combined Statements of Operations
for the year ended December 31, 1998 and the six months ended June 30,
1999, the FaciliCom information is for the twelve months ended
September 30, 1998 and the six months ended March 31, 1999,
respectively. Depreciation and amortization related to network
operations has been reclassified to costs of carrier sales to conform
with the World Access presentation.
4. Elimination of the historical FaciliCom stockholders' equity accounts.
5. The FaciliCom merger will be accounted for under the purchase method
of accounting. World Access has not determined the final allocation of
the purchase price, and accordingly, the amount ultimately determined
may differ from the amounts shown below.
Under the terms of the merger agreement and based on the valuation of
the Series C Preferred Stock and World Access common stock at that
time, the purchase price was determined as follows (in thousands):
<TABLE>
<S> <C>
Purchase price:
Issuance of preferred stock(i)............................ $266,000
Cash...................................................... 56,000
Issuance of common stock(ii).............................. 15,000
Fair value of World Access options issued in exchange for
FaciliCom options(iii)................................. 6,380
Estimated fees and expenses............................... 12,500
--------
Total purchase price.............................. 355,880
--------
Allocation to fair values:
Historical stockholders' deficit.......................... 106,137
Adjust assets and liabilities:
Eliminate historical goodwill and debt issue costs........ 13,199
Discount on World Access 13.25% Senior Notes(iv).......... (15,000)
--------
Estimated goodwill................................ $460,216
========
</TABLE>
- ---------------
(i) Represents the fair value of the approximately 369,400 shares of
Series C Preferred Stock to be issued as part of the FaciliCom merger
consideration. The fair value was computed using the Black-Scholes
Option Pricing Model assuming a volatility factor of 45%, a risk free
rate of 6% and a 10% discount for the lack of liquidity in a private
security. The Series C Preferred Stock bears no dividend and is
convertible into shares of World Access common stock at a conversion
rate of $20.38 per share of World Access common stock, subject to
adjustment in the event of below market issuances of World Access
common stock, stock dividends, subdivisions, combinations,
reclassifications and other distributions with respect to World
Access common stock. If the closing trading price of World Access
common stock exceeds $20.38 per share for 60 consecutive trading
days, the Series C Preferred Stock will automatically convert into
World Access common stock at a conversion rate of $20.38 per share of
World Access common stock.
139
<PAGE> 143
WORLD ACCESS, INC
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Initially, the holders of the Series C Preferred Stock will be
entitled to elect four new directors to the World Access Board of
Directors. Except for the election of directors, the holders of the
Series C Preferred Stock will vote on an as-converted basis with the
holders of World Access common stock.
(ii) In connection with the merger of World Access and FaciliCom, holders
of a majority of the aggregate principal amount of FaciliCom's
10 1/2% Series B Senior Notes due 2008 (the FaciliCom Notes) have
agreed to tender their notes and accept in exchange for each $1,000
in principal amount (i) $1,000 principal amount of World Access
13.25% Senior Notes due 2008 (the World Access Notes) having an
aggregate principal amount of $300.0 million (ii) $10 in cash, and
(iii) World Access common stock having a market value of $50, as
measured at the time of the exchange. These pro forma statements
assume that all holders of FaciliCom Notes will exchange their notes
for World Access Notes, and that therefore (i) $300.0 million
aggregate principal amount of the World Access Notes will be issued
(ii) an aggregate amount of $3.0 million cash will be paid to holders
of the FaciliCom Notes (which represents the fee paid by World Access
to obtain the consent from the FaciliCom noteholders waiving their
right to put their notes at 101% of par in connection with the
FaciliCom merger) and (iii) World Access common stock equal in value
to an aggregate amount of $15.0 million will be issued to the holders
of the FaciliCom Notes. For purposes of these pro forma financial
statements, 1,062,000 shares of World Access common stock were
assumed issued based upon the closing trading price on Nasdaq on June
30, 1999 for the World Access common stock, which was $14.13 per
share.
(iii) Represents the fair value of approximately 520,000 options to
acquire World Access common stock to be issued in exchange for
certain options outstanding to acquire FaciliCom common stock. The
fair value has been determined using the Black-Scholes Option
Pricing Model with the following assumptions: dividend yield 0%,
volatility 70%, risk free interest rate of 5.8% and an expected life
of 5 years. The World Access options are expected to be issued at an
average exercise price of $3.06 per share and will be fully vested
upon the consummation of the FaciliCom merger.
(iv) Represents the discount to face value to be recorded to adjust the
World Access Notes to their estimated fair value. The estimated fair
value was based on the quoted market price of debt with similar
characteristics. The terms of the World Access Notes were structured
to provide fair value equal to 95% of the principal amount.
6. In connection with the FaciliCom merger, World Access has received
commitments from a group of institutional and sophisticated investors
to purchase $75.0 million of World Access common stock in a private
transaction that is conditioned upon and will close simultaneously
with the FaciliCom merger. World Access will use the majority of the
proceeds from this private placement to fund the $56.0 million cash
portion of the merger consideration, as well as fees and expenses to
be incurred in connection with the merger. The World Access common
stock to be issued will be priced at the average trading value of
World Access common stock during a five day period prior to the
closing of the FaciliCom merger, with the purchase price to be no
lower than $13.00 per share and no higher than $17.00 per share. For
purposes of these pro forma financial statements, 5,308,000 shares
were assumed issued based upon the closing trading price on Nasdaq on
June 30, 1999 for the World Access common stock, which was $14.13 per
share.
7. In December 1998, World Access acquired Resurgens and issued
approximately 7,500,000 restricted shares of World Access common stock
which were placed in escrow for future release contingent upon their
future EBITDA performance. The release of these shares is accelerated
in
140
<PAGE> 144
WORLD ACCESS, INC
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
connection with the FaciliCom merger as the FaciliCom merger qualifies
as a "Change in Control" as defined in the Resurgens merger
agreements. The release of the 7,500,000 shares has been accounted for
as an increase in goodwill and stockholders' equity. These shares were
valued based on the average market price on Nasdaq of World Access
common stock for the three days prior and the three days subsequent to
the date economic terms of the FaciliCom merger were announced (August
17, 1999), or $13.83 per share.
8. Elimination of existing goodwill from prior FaciliCom acquisitions and
debt issue costs associated with the FaciliCom Notes.
9. Represents the adjustment to interest expense related to the exchange
of FaciliCom Notes (10 1/2% coupon) for World Access Notes (13.25%
coupon) and the amortization of the $15.0 million debt discount
related to the World Access Notes over a period of eight years. The
FaciliCom Notes were issued on January 28, 1998 and were outstanding
for approximately eight months in fiscal 1998. The pro forma
adjustment to interest expense was computed as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -----------------
<S> <C> <C>
Interest expense on World Access Notes................ $ 19,875 $ 39,750
Debt issue cost amortization on World Access
Notes.......................................... 940 1,875
Historical FaciliCom Note interest expense....... (15,750) (21,000)
Historical FaciliCom debt issue cost
amortization................................... (525) (745)
-------- --------
$ 4,540 $ 19,880
======== ========
</TABLE>
10. Elimination of inter-company carrier service revenues and related
costs.
11. Adjustment to depreciation expense related to the write-down of certain
redundant equipment at Telco.
12. Adjustment to depreciation and amortization expense for the adjustment
to fair value of switching equipment and license agreements at
Resurgens.
13. Amortization of acquired technology relating to the NACT and Telco
acquisitions over 8 years.
14. Amortization of trademarks of Telco over 8 years.
15. Amortization of goodwill over an estimated life of 20 years. The pro
forma adjustment to goodwill for the six months ended June 30, 1999 was
computed as follows (in thousands):
<TABLE>
<CAPTION>
HISTORICAL
PRO FORMA GOODWILL PRO FORMA
GOODWILL AMORTIZATION AMORTIZATION ADJUSTMENTS
-------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
FaciliCom (see Note 5).................... $460,216 $11,510 $(634) $10,876
Escrowed shares (see Note 7)......... 103,730 2,594 -- 2,594
------- ----- -------
$14,104 $(634) $13,470
======= ===== =======
</TABLE>
141
<PAGE> 145
WORLD ACCESS, INC
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma adjustment to goodwill for the year ended December 31,
1998 was computed as follows (in thousands):
<TABLE>
<CAPTION>
HISTORICAL
PRO FORMA GOODWILL PRO FORMA
GOODWILL AMORTIZATION AMORTIZATION ADJUSTMENT
-------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
FaciliCom (see Note 5).................... $460,216 $ 23,010 $ (961) $22,049
Escrowed shares (see Note 7)......... 103,730 5,186 -- 5,186
NACT................................. 92,668 4,630 (2,107) 2,523
Telco................................ 39,418 1,970 (964) 1,006
Resurgens............................ 78,625 3,930 (164) 3,766
-------- ------- -------
$ 38,726 $(4,196) $34,530
======== ======= =======
</TABLE>
16. Elimination of the one-time, non-recurring in-process research and
development charges recorded in connection with the NACT and Telco
mergers.
17. Adjustment for the additional tax benefit derived from certain pro
forma adjustments. World Access has not recorded any tax benefit on a
pro forma basis that may be derived from FaciliCom's net operating
losses.
18. Represents pro forma weighted average shares and basic and diluted
earnings from continuing operations per share. The weighted average
shares are computed assuming the issuance of (i) approximately
1,430,000, 2,790,000, 7,042,000 and 3,687,500 shares of World Access
common stock for the acquisition of a majority interest in NACT, NACT
merger, Telco merger and Resurgens merger, respectively; (ii) an
aggregate of approximately 5,308,000 shares issued for $75.0 million in
connection with the private placement of World Access common stock;
(iii) an aggregate of 1,062,000 shares issued to the holders of the
FaciliCom Notes; and (iv) 7,500,000 shares released from escrow related
to the acceleration of the Resurgens earn-out (see Note 7) as of the
beginning of the periods presented. Due to the pro forma loss from
continuing operations for the six months ended June 30, 1999 and the
year ended December 31, 1998, potential common stock shares related to
stock options, stock warrants, convertible notes and convertible
preferred stock have been excluded from the diluted loss per share as
the inclusion of these potential common stock shares would be
anti-dilutive.
19. In October 1999, FaciliCom granted stock options (contingent upon the
consummation of the merger) to its employees who are expected to
continue with the surviving corporation after the merger with World
Access. These options, which were granted under a new FaciliCom 1999
Stock Option Plan, will have a four year vesting period. Upon
consummation of the merger, these options will convert into
non-qualified options to purchase approximately 1.9 million shares of
World Access common stock at an exercise price of $15.00 per share.
Given that the conversion of the options is contingent upon the merger,
any resulting compensation expense to be recorded over the vesting
period will be determined at the time of the merger based on the
intrinsic value of the options. As a result, no effect for these
options has been included in the pro forma financial statements.
20. In connection with the execution of the FaciliCom merger agreement,
John D. Phillips was required to enter into a letter agreement, dated
August 17, 1999, under which he agreed not to sell or transfer any of
his shares of World Access for a specified period of time. In
consideration
142
<PAGE> 146
WORLD ACCESS, INC
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
for Mr. Phillips' entering into the letter agreement, the Board of
Directors of World Access has agreed to accelerate the exercisability
of currently outstanding options held by Mr. Phillips under the World
Access 1998 Stock Option Plan for 1.0 million shares of World Access
common stock at an exercise price of $12.75 per share. The options were
originally scheduled to vest ratably over a four-year period. Upon
consummation of the merger, all of these options will be immediately
exercisable. Since acceleration of the options is contingent upon
consummation of the merger, and given its one time nature, its effects
have not been included in the pro forma financial statements.
143
<PAGE> 147
FACILICOM'S MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
FaciliCom is a rapidly growing multinational carrier focused on providing
international wholesale telecommunications services to other carriers worldwide.
As a facilities-based carrier, FaciliCom seeks primarily to provide service over
its facilities and international transmission capacity owned or leased on a
fixed-cost basis (commonly referred to as "on-net"). FaciliCom believes that it
is better able to control the quality and the termination costs of on-net
traffic and that increasing the proportion of on-net traffic significantly
improves its gross margins. For the nine months ended June 30, 1999, 41.7% of
FaciliCom's wholesale international traffic was terminated on-net and 58.3% was
terminated by other long distance carriers pursuant to resale and operating
agreements between FaciliCom and such carriers (commonly referred to as
"off-net"). FaciliCom's expanding facility-based network will enable it to
increase the percentage of on-net traffic.
FaciliCom provides its services over a carrier-grade international network
consisting of international gateway switches, transmission capacity owned or
leased on a fixed-cost basis and various multinational termination agreements
and resale arrangements with other long distance providers. FaciliCom began
generating revenues in July 1995 through its acquisition of FCI-Sweden, formerly
Nordiska Tele8 AB. Since that time, FaciliCom has installed or acquired 16
additional international gateway switches in the United States (New York, New
Jersey, Los Angeles and Miami) and Europe (United Kingdom, The Netherlands,
Germany, Finland, Denmark, France, Norway, Switzerland, Italy, Austria, Spain
and Belgium).
FaciliCom's strategy is to invest in network facilities as it expands its
customer base, allowing it to enhance service quality and increase gross margins
on particular routes. However, this approach also causes FaciliCom's gross
margins to fluctuate with changes in network utilization due to FaciliCom's
fixed-cost investment in its network.
Currently, FaciliCom's revenues are generated through the sale of
international long distance services on a wholesale basis to telecommunications
carriers and through the sale of domestic and international long distance
services on a retail basis in Sweden, Denmark, Norway and Finland. FaciliCom
records revenues from the sale of telecommunications services at the time of
customer usage. FaciliCom earns revenues based on the number of minutes it bills
to and collects from its customers. FaciliCom's agreements with its wholesale
customers are short-term in duration and are subject to significant traffic
variability. The rates charged to customers are subject to change from time to
time, generally requiring seven days' notice to the customer.
FaciliCom believes its services are competitively priced in each country in
which it offers its services. Prices for wholesale and retail telecommunications
services in many of FaciliCom's markets have declined in recent years as a
result of deregulation and increased competition. FaciliCom believes that
worldwide deregulation and increased competition are likely to continue to
reduce its wholesale and retail revenues per billed minute of use. FaciliCom
believes, however, that any decrease in wholesale and retail revenues per minute
will be at least partially offset by an increase in billed minutes by its
wholesale and retail customers, and by a decreased cost per billed minute.
FaciliCom has made since its inception, and expects to continue to make,
investments to expand its network. FaciliCom expects increased capital
expenditures in the future to affect its operating results due to increased
depreciation charges and interest expense in connection with borrowings to fund
such expenditures.
144
<PAGE> 148
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
unaudited financial data and related percentage of revenues (dollars in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30, YEARS ENDED SEPTEMBER 30,
------------------------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $279,695 100.0% $117,146 100.0% $184,246 100.0% $ 70,187 100.0% $11,891 100.0%
Cost of revenues....... 257,253 92.0 114,473 97.7 178,952 97.1 65,718 93.6 12,742 107.2
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Gross Margin........... 22,442 8.0 2,673 2.3 5,294 2.9 4,469 6.4 (851) (7.2)
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Operating expenses:
Selling, general and
administrative
(including related
party)............. 40,354 14.5 21,834 18.6 32,797 17.8 13,072 18.6 7,575 63.7
Stock-based
compensation
expense............ 364 0.1 5,706 4.9 6,017 3.3 -- -- -- --
Related party
expenses........... -- -- -- -- 1,550 0.8 439 0.6 7 0.1
Depreciation and
amortization....... 16,895 6.0 5,314 4.5 8,816 4.8 2,318 3.3 1,143 9.6
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total operating
expenses....... 57,613 20.6 32,854 28.1 49,180 26.7 15,829 22.6 8,725 73.4
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Operating loss......... (35,171) (12.6) (30,181) (25.8) (43,886) (23.8) (11,360) (16.2) (9,576) (80.6)
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Other income (expense):
Interest expense
(including related
party)............. (25,690) (9.2) (14,539) (12.4) (22,612) (12.3) (1,336) (1.9) (312) (2.6)
Interest income...... 3,646 1.3 5,594 4.8 8,152 4.4 -- -- -- --
Gain on settlement
agreement.......... -- -- 791 0.7 791 0.5 -- -- -- --
Foreign exchange
(loss) gain........ (1,346) (0.5) (655) (0.6) (391) (0.2) (1,335) (1.9) 226 1.9
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Total other income
(expense)........ (23,390) (8.4) (8,809) (7.5) (14,060) (7.6) (2,671) (3.8) (86) (0.7)
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Loss before income
taxes................ (58,561) (21.0) (38,990) (33.3) (57,946) (31.4) (14,031) (20.0) (9,662) (81.3)
Income tax benefit..... 6,682 2.4 6,475 5.5 11,351 6.1 -- -- -- --
-------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Net loss............... $(51,879) (18.6)% $(32,515) (27.8)% $(46,595) (25.3)% $(14,031) (20.0)% $(9,662) (81.3)%
======== ===== ======== ===== ======== ===== ======== ===== ======= =====
</TABLE>
FOR THE NINE MONTHS ENDED JUNE 30, 1999 AS COMPARED TO THE NINE MONTHS ENDED
JUNE 30, 1998
Revenues increased by $162.5 million to $279.7 million for the nine months
ended June 30, 1999, from $117.1 million for the nine months ended June 30,
1998. The growth in revenues resulted primarily from an increase in billed
customer minutes of use generated from an increase in wholesale customers in the
U.S. and Europe. Many of the new wholesale customers relate to newly deployed
and activated switch facilities in Europe. Offsetting the growth in billed
customer minutes of use during this period was a decrease in the price per
billed minute to $0.194 for the nine months ended June 30, 1999, from $0.233 for
the nine months ended June 30, 1998. The unit revenue decrease is the combined
result of increases in the percentage of on-net traffic and increased
competition. For the nine months ended June 30, 1999, U.S. revenues totaled
$121.6 million or 43.5% of FaciliCom's consolidated revenues and European
revenues totaled $158.1 million, or 56.5% of consolidated revenues. Billed
minutes of use increased by 935.3 million, to 1,438.7 million minutes of use for
the nine months ended June 30, 1999, from 503.3 million minutes of use for the
nine months ended June 30, 1998.
Wholesale customers increased by 106, or 93.0%, to 220 wholesale customers
at June 30, 1999 from 114 wholesale customers at June 30, 1998. As of June 30,
1999, FaciliCom had approximately 52,000 retail customers in Sweden, Denmark,
Finland and Norway.
145
<PAGE> 149
Cost of revenues increased by $142.8 million to $257.3 million for the nine
months ended June 30, 1999, from $114.5 million for the nine months ended June
30, 1998. As a percentage of revenues, cost of revenues decreased to 92.0% for
the nine months ended June 30, 1999, from 97.7% for the nine months ended June
30, 1998, primarily as a result of increased minutes of use on FaciliCom's
network, improved efficiencies of network fiber facilities due to higher traffic
volumes and reductions in rates charged by FaciliCom's carrier suppliers.
FaciliCom expects cost of revenues as a percentage of revenues to decrease as a
result of improved efficiencies of network fiber facilities due to higher
traffic volumes as well as from an anticipated increase in the percentage of
on-net traffic.
Gross margin increased by $19.8 million to $22.4 million for the nine
months ended June 30, 1999, from $2.7 million for the nine months ended June 30,
1998. As a percentage of revenues, gross margin increased to 8.0% for the nine
months ended June 30, 1999, from 2.3% for the nine months ended June 30, 1998.
Selling, general and administrative expenses increased by $13.2 million to
$40.7 million for the nine months ended June 30, 1999, from $27.5 million for
the nine months ended June 30, 1998, primarily as a result of FaciliCom's
increased sales and an increase in customer service, billing, collections and
accounting staff required to support revenues growth. Offsetting these increased
expenses was a reduction in stock-based compensation related to FaciliCom's
stock options. As a percentage of revenues, selling, general and administrative
expenses decreased to 14.6% for the nine months ended June 30, 1999, from 23.5%
for the nine months ended June 30, 1998. Bad debt expense was $4.6 million, or
1.6% of revenues for the nine months ended June 30, 1999, compared with $1.8
million, or 1.5% of revenues for the nine months ended June 30, 1998. Although
selling, general and administrative expenses are expected to increase on an
absolute basis in order to support expansion of its operations, FaciliCom
expects that selling, general and administrative expenses as a percentage of
revenues will continue to decrease over time.
Depreciation and amortization increased by $11.6 million to $16.9 million
for the nine months ended June 30, 1999, from $5.3 million for the nine months
ended June 30, 1998, primarily due to increased capital expenditures incurred in
connection with the deployment and expansion of FaciliCom's network.
Interest expense increased by $11.2 million to $25.7 million for the nine
months ended June 30, 1999, from $14.5 million for the nine months ended June
30, 1998, primarily due to interest obligations on the FaciliCom notes which
were issued on January 28, 1998.
Interest income decreased by $1.9 million to $3.6 million for the nine
months ended June 30, 1999, from $5.6 million for the nine months ended June 30,
1998 as the proceeds from the FaciliCom notes offering have been used to service
interest payments and fund capital expenditures.
Foreign exchange loss increased by $0.7 million to $1.3 million for the
nine months ended June 30, 1999, from $655,000 for the nine months ended June
30, 1998.
Income tax benefit of $6.7 million and $6.5 million was recorded for the
nine months ended June 30, 1999 and 1998, respectively, related principally to
the estimated tax benefits utilized by Armstrong Holdings.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998, AS COMPARED TO THE FISCAL YEAR
ENDED SEPTEMBER 30, 1997
Revenues increased by $114.1 million to $184.2 million for the fiscal year
ended September 30, 1998, from $70.2 million for the fiscal year ended September
30, 1997. The growth in revenue resulted primarily from an increase in billed
customer minutes of use resulting from an increase in wholesale customers in the
U.S. and Europe and an increase in retail customers in Sweden, Denmark and
Finland, as well as usage increases from existing wholesale customers.
Offsetting the growth in revenue during this period was a decrease in the price
per billed minute to $0.225 for the fiscal year ended September 30, 1998, from
$0.278 for the fiscal year ended September 30, 1997, as a result of increased
on-net traffic and competition. For the fiscal year ended September 30, 1998,
U.S. revenues totaled $116.4 million or 63.2%
146
<PAGE> 150
of FaciliCom's consolidated revenues and European revenues totaled $67.8
million, or 36.8% of consolidated revenues. Billed minutes of use increased by
568.1 million, to 820.3 million minutes of use for the fiscal year ended
September 30, 1998, from 252.3 million minutes of use for the fiscal year ended
September 30, 1997.
Wholesale customers increased by 86, or 162.3%, to 139 wholesale customers
at September 30, 1998, from 53 at September 30, 1997. As of September 30, 1998
retail customers in Sweden, Denmark and Finland total approximately 43,300.
Cost of revenues increased by $113.3 million, to $179.0 million for the
fiscal year ended September 30, 1998, from $65.7 million for the fiscal year
ended September 30, 1997. As a percentage of revenues, cost of revenues
increased to 97.1% for the fiscal year ended September 30, 1998, from 93.6% for
the fiscal year ended September 30, 1997, primarily as a result of increased
fixed costs associated with expanding inter-switch fiber capacity within the
U.S. and Europe. FaciliCom expects cost of revenues as a percentage of revenues
to decrease as a result of improved efficiencies of network fiber facilities due
to higher traffic volumes as well as from an anticipated increase in the
percentage of on-net traffic.
Gross margin increased by $825,000 to $5.3 million for the fiscal year
ended September 30, 1998, from $4.5 million for the fiscal year ended September
30, 1997. As a percentage of revenues, gross margin decreased to 2.9% for the
fiscal year ended September 30, 1998, from 6.4% for the fiscal year ended
September 30, 1997.
Selling, general and administrative expenses increased by $26.9 million to
$40.4 million for the fiscal year ended September 30, 1998, from $13.5 million
for the fiscal year ended September 30, 1997, primarily as a result of
FaciliCom's increased sales, an increase in customer service, billing,
collections and accounting staff required to support revenue growth, and
approximately $6.0 million of expenses related to stock-based compensation
arrangements. As a percentage of revenues, selling, general and administrative
expenses increased to 21.9% for the fiscal year ended September 30, 1998, from
19.3% for the fiscal year ended September 30, 1997. Bad debt expense was $3.8
million, or 2.0% of revenues for the fiscal year ended September 30, 1998,
compared with $1.3 million, or 1.8% of revenues for the fiscal year ended
September 30, 1997, as a result of increased revenue and new customers.
Depreciation and amortization increased by $6.5 million to $8.8 million for
the fiscal year ended September 30, 1998, from $2.3 million for the fiscal year
ended September 30, 1997, primarily due to increased capital expenditures
incurred in connection with the deployment and expansion of FaciliCom's network.
Interest expense increased by $21.3 million to $22.6 million for the fiscal
year ended September 30, 1998, from $1.3 million for the fiscal year ended
September 30, 1997, primarily due to the offering of the FaciliCom notes.
Interest income for the fiscal year ended September 30, 1998, was $8.2
million and related principally to interest on proceeds from the FaciliCom notes
offering, which were invested in marketable securities and cash and cash
equivalents.
Foreign exchange loss decreased by $944,000 to $391,000 for the fiscal year
ended September 30, 1998, from $1.3 million for the fiscal year ended September
30, 1997.
Income tax benefit of $11.4 million was recorded for the fiscal year ended
September 30, 1998 related mainly to a tax benefit of $12.1 million utilized by
Armstrong Holdings, a $393,000 tax charge related to the change in tax status as
a result of a reorganization of FaciliCom on December 22, 1997 and approximately
$302,000 tax charge for taxes in Finland.
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997, AS COMPARED TO THE FISCAL YEAR
ENDED SEPTEMBER 30, 1996
Revenues increased by $58.3 million to $70.2 million in the fiscal year
ended September 30, 1997, from $11.9 million in the fiscal year ended September
30, 1996. The growth in revenue resulted primarily
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from an increase in billed customer minutes of use resulting from an increased
number of wholesale customers in the U.S., the U.K. and Scandinavia and an
increased number of retail customers in Sweden, as well as usage increases from
existing wholesale customers. Offsetting the growth in revenue during this
period was a decrease in the price per billed minute of 3.5%, to $0.278 for the
fiscal year ended September 30, 1997 from $0.288 for the fiscal year ended
September 30, 1996, as a result of increased competition. In the fiscal year
ended September 30, 1997, U.S. revenues totaled $53.7 million, or 76.5% of
FaciliCom's consolidated revenues, Swedish revenues totaled $15.5 million, or
22.1% of consolidated revenues, and U.K. revenues totaled $1.0 million, or 1.4%
of consolidated revenues.
Wholesale customers increased by 36, or 211.8%, to 53 wholesale customers
at September 30, 1997, from 17 at September 30, 1996. Retail customers in Sweden
increased by 10,750, to 12,365 retail customers at September 30, 1997, from
1,615 at September 30, 1996. Billed minutes of use increased by 211.0 million,
to 252.3 million minutes of use in the fiscal year ended September 30, 1997,
from 41.3 million minutes of use in the fiscal year ended September 30, 1996.
Cost of revenues increased by $53.0 million, to $65.7 million in the fiscal
year ended September 30, 1997, from $12.7 million in the fiscal year ended
September 30, 1996. As a percentage of revenues, cost of revenues declined to
93.6% in the fiscal year ended September 30, 1997, from 107.2% in the fiscal
year ended September 30, 1996, primarily as a result of increased minutes of use
on FaciliCom's network, improved efficiencies of network facilities due to
higher traffic volumes and reductions in rates charged by FaciliCom's carrier
suppliers.
Gross margin increased to $4.5 million in the fiscal year ended September
30, 1997, from ($851,000) in the fiscal year ended September 30, 1996. As a
percentage of revenues, gross margin increased to 6.4% in the fiscal year ended
September 30, 1997, from (7.2%) in the fiscal year ended September 30, 1996.
Selling, general and administrative expenses increased by $5.9 million to
$13.5 million in the fiscal year ended September 30, 1997, from $7.6 million in
the fiscal year ended September 30, 1996, primarily as a result of FaciliCom's
increased sales, and an increase in customer service, billing, collections and
accounting staff required to support revenue growth. Staff levels grew by 30, or
47.6%, to 93 employees at September 30, 1997, from 63 employees at September 30,
1996. As a percentage of revenues, selling, general and administrative expenses
decreased to 19.3% in the fiscal year ended September 30, 1997, from 63.8% in
the fiscal year ended September 30, 1996, as a result of improved efficiencies.
Bad debt expense was $1.3 million for the fiscal year ended September 30, 1997,
or 1.8% of revenues.
Depreciation and amortization expenses increased by $1.2 million to $2.3
million in the fiscal year ended September 30, 1997, from $1.1 million in the
fiscal year ended September 30, 1996, primarily due to increased capital
expenditures incurred in connection with the deployment and expansion of
FaciliCom's network.
Interest expense, net increased by $1.0 million to $1.3 million in the
fiscal year ended September 30, 1997, from $312,000 in the fiscal year ended
September 30, 1996, primarily due to increased levels of vendor financing and
loans from Armstrong International Telecommunications.
Foreign exchange gain (loss) decreased by $1.5 million to ($1.3) million in
the fiscal year ended September 30, 1997, from $226,000 in the fiscal year ended
September 30, 1996.
Income taxes were $0 for both years, as all net operating losses from
foreign subsidiaries were fully reserved.
LIQUIDITY AND CAPITAL RESOURCES
FaciliCom has incurred significant operating losses and negative cash flows
as a result of the development and operation of its network, including the
acquisition and maintenance of switches and undersea fiber optic capacity.
FaciliCom has financed its growth primarily through equity, a credit facility
provided by Armstrong, credit facilities with two equipment vendors, capital
lease financing, the proceeds from the $300 million offering of the FaciliCom
notes and proceeds from a line of credit.
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Net cash provided by (used in) operating activities was ($30.3) million for
the nine months ended June 30, 1999 due principally to a net loss of $51.9
million offset in part by depreciation and amortization expense of $16.9
million.
Net cash provided by (used in) investing activities was ($18.2) million for
the nine months ended June 30, 1999. Net cash used in investing activities in
this period resulted from an increase in capital expenditures to expand
FaciliCom's network offset in part by the sale of marketable securities.
Net cash provided by (used in) financing activities was ($742,000) for the
nine months ended June 30, 1999. Net cash used in financing activities for the
nine months ended June 30, 1999 resulted from payments on existing long-term
debt and capital leases offset in part by proceeds from FaciliCom's line of
credit bank facility.
In May 1999, FaciliCom obtained a one-year, $35 million credit facility
with Key Corporate Capital, Inc. FaciliCom uses the proceeds of this credit
facility for working capital and for general corporate purposes. At June 30,
1999, FaciliCom had $10.0 million in borrowings under this credit facility.
Non-cash financing activities for the nine months ended June 30, 1999
resulted from the financing of fiber circuits provided by Qwest Communications
Corporation.
FaciliCom's business strategy contemplates aggregate capital expenditures
of approximately $100 million during fiscal year 1999. Such capital expenditures
are expected to be used primarily for international gateway switches, points of
presence, transmission equipment, undersea and international fiber circuits
(including indefeasible right of use and minimum assignable ownership units for
new and existing routes and other support systems.
In May 1998, FaciliCom entered into a Memorandum of Understanding with
Qwest. The agreement provides Qwest with international direct dial termination
service to various destinations and provides FaciliCom an indefeasible right of
use for domestic and international fiber optic capacity. The indefeasible right
of use is for twenty-five years, for which FaciliCom has agreed to pay $24
million within three years of delivery of the fiber optic capacity. Delivery of
the three capacity segments occurred during the twelve months ended September
30, 1999.
In addition, FaciliCom has entered into an agreement that provides it with
an indefeasible right of use for international fiber optic capacity for the
Pacific Rim. Delivery of the capacity under the agreement is expected prior to
April 2000. The indefeasible right of use is for 15 years, for which FaciliCom
has agreed to pay $20.0 million through September 30, 2002, of which $2.5
million has already been paid as a deposit and an additional $2.5 million is
expected to be paid on April 30, 2000.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measuring those instruments at fair value, with the potential effect on
operations dependent upon certain conditions being met. The statement (as
amended by SFAS No. 137) is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. FaciliCom has yet to determine any impact the
implementation of the standard will have on its financial position or results of
operations.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define the applicable year, resulting in
date-sensitive software having the potential, among other things, to recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities, which could have
material adverse operational and financial consequences. Currently, FaciliCom
believes that a disruption in the operation of its networks, billing system and
financial and accounting systems
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and/or an inability to access interconnections with other telecommunications
carriers, are the major risks associated with the inability of systems and
software to process Year 2000 data correctly. If the systems of other companies
on whose services FaciliCom depends, including Armstrong Holdings, or with whom
its systems interface are not Year 2000 compliant, there could be a material
adverse effect on FaciliCom's business, financial position and results of
operations.
State of Readiness
FaciliCom, in conjunction with Armstrong Holdings, formed a task team in
February 1998. The task team's program comprised three phases: (1) assessment of
Year 2000 compliance of FaciliCom's equipment, software and systems, (2) a
detailed inventory of these items and (3) building and implementing a workplan
and contingency plan, which includes assessing the cost in dollars and the
necessary manpower, upgrading or replacing the item, and scheduling the date of
compliance. As of September 30, 1999, FaciliCom had completed all phases of the
program. Included in the task team's assessment was a review of the year 2000
compliance efforts of FaciliCom's key suppliers. Below is a more detailed
breakdown of their efforts.
Internal Issues
Network elements -- FaciliCom's main concern is the switching equipment and
peripherals, and other vendor components that are time and date sensitive.
FaciliCom has upgraded all of its networks with the compliant software, except
for one switch in Finland, which it plans to replace with a new year 2000
compliant switch by October 31, 1999. In addition, FaciliCom has completed the
software upgrade for its passport equipment which allows it to compress its
traffic thereby allowing more traffic to be carried over a single fiber optic
cable. FaciliCom's transmission equipment is currently year 2000 "friendly",
which means the manufacturer has represented that the software releases will not
experience any service-affecting issues upon rollover into the new millennium.
Although FaciliCom expects that it will be able to resolve year 2000 problems
with workarounds, it cannot assure you that such workarounds will be successful.
Billing System and Accounting System -- FaciliCom's billing system was
developed by Armstrong Holdings' programmers and operates on an IBM AS400.
FaciliCom believes that the billing system and the IBM AS400 are year 2000
compliant. However, the production of accurate and timely customer invoices
depends upon the generation of accurate and timely underlying data by
FaciliCom's switches. Though the switch manufacturer has represented that
FaciliCom's switches are year 2000 compliant, there can be no assurance that
such billing problems will not occur. FaciliCom is in the process of converting
its accounting system. The manufacturer has represented that this system is year
2000 compliant and its implementation is expected to be completed by December
31, 1999.
Information Systems -- FaciliCom's upgrade of its information systems is in
progress. FaciliCom believes that all of its hardware equipment, including the
equipment it relies upon at Armstrong Holdings, is year 2000 compliant. All of
FaciliCom's software products are year 2000 compliant. Substantially all
software applications have been modified or upgraded for year 2000 compliance.
Additionally, all of FaciliCom's workstations and laptops have been upgraded for
year 2000 compliance.
Third Party Issues
Vendor Issues -- In general, FaciliCom's product vendors have made
available either year 2000 compliant versions of their products or new compliant
products as replacements for discontinued offerings. In most cases, statements
made by FaciliCom herein as to the degree of compliance of the products in
question are based on vendor-provided information, which remains subject to
FaciliCom's testing and verification activities. Testing and verification will
be ongoing through December 31, 1999. FaciliCom is in the process of requesting
information from utilities and similar service providers.
Customer Issues -- FaciliCom's customers are interested in the progress of
FaciliCom's year 2000 efforts, and FaciliCom anticipates increased demand for
information, including detailed testing data and company-specific responses.
When requested by customers, FaciliCom provides year 2000 compliance
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information. At this time, FaciliCom has not performed an analysis of its
potential liability to customers in the event of year 2000 related problems.
Interconnecting Carriers -- FaciliCom's network operations interconnect
with domestic and international networks of other carriers. If one of these
interconnecting carriers should fail or suffer adverse consequences due to a
year 2000 problem, FaciliCom's customers could experience impairment of
services. In addition, since many of these interconnecting carriers are also
FaciliCom's customers, a year 2000 problem by one of these customers could
result in a loss of revenues due to its inability to send traffic to its
network. FaciliCom is in the process of sending correspondence to its major
interconnecting carriers to determine the status of their year 2000 compliance
review.
Costs
Although it cannot precisely estimate total costs to implement the plan,
FaciliCom has not incurred costs to date in excess of those normally associated
with business planning and implementation. FaciliCom anticipates that future
costs will not be material, in as much as it began to acquire products after the
year 2000 issue was identified and manufacturers had begun to remediate the
problem. However, FaciliCom cannot assure you that material costs will not be
incurred. FaciliCom cannot estimate the future cost related to the inoperability
of third party products. These costs will be expensed as incurred, unless new
systems are purchased that should be capitalized in accordance with generally
accepted accounting principles.
Risks
The failure to correct a material year 2000 problem could cause an
interruption or failure of certain of FaciliCom's normal business functions or
operations, which could have a material adverse effect on its business,
financial position and results of operations. Due to the uncertainty inherent in
other year 2000 issues that are ultimately beyond FaciliCom's control,
including, for example, the year 2000 readiness of its suppliers, customers and
interconnecting carriers, FaciliCom is unable to determine at this time the
likelihood of a material impact on its business, financial position and results
of operation, due to such year 2000 issues. However, based upon risk assessment
work conducted thus far, FaciliCom believes that the most reasonably likely
worst case scenario of the failure by it, its suppliers or other
telecommunications carriers with which FaciliCom interconnects to resolve year
2000 issues would be an inability by it
- to provide telecommunications services to its customers,
- to route and deliver telephone calls originating from or terminating with
other telecommunications carriers, and
- to timely and accurately bill its customers.
In addition to lost earnings, these failures could also result in loss of
customers due to service interruptions and billing errors, substantial claims by
customers and increased expenses associated with year 2000 litigation,
stabilization of operations and executing mitigation and contingency plans.
While FaciliCom believes that it is taking appropriate measures to mitigate
these risks, it cannot assure you that such measures will be successful.
Contingency Plan
FaciliCom has completed its contingency plan.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Although FaciliCom's reporting currency is the U.S. dollar, FaciliCom
expects to derive an increasing percentage of its revenues from international
operations. Accordingly, changes in currency exchange rates may have a
significant effect on FaciliCom's results of operations. For example, the
accounting rate under operating agreements is often defined in monetary units
other than U.S. dollars, such as "special drawing
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rights" or "SDRs." To the extent that the U.S. dollar declines relative to units
such as special drawing rights, the dollar equivalent accounting rate would
increase. In addition, as FaciliCom expands into foreign markets, its exposure
to foreign currency rate fluctuations is expected to increase. Although
FaciliCom does not currently engage in exchange rate hedging strategies, it may
choose to limit such exposure by purchasing forward foreign exchange contracts
or other similar hedging strategies. FaciliCom's board of directors periodically
reviews and approves the overall interest rate and foreign exchange risk
management policy and transaction authority limits. Specific hedging contracts,
if any, will be subject to approval by certain specified officers of FaciliCom
acting within its board of directors' overall policies and limits. FaciliCom
intends to limit its hedging activities to the extent of its foreign currency
exposure. FaciliCom cannot assure you that any currency hedging strategy would
be successful in avoiding currency exchange-related losses.
Also, FaciliCom is exposed to interest rate risk. FaciliCom maintains both
fixed rate and variable rate long-term debt. FaciliCom manages its interest rate
risk in order to balance its exposure between fixed and variable rates while
attempting to minimize its interest costs.
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BUSINESS OF FACILICOM
OVERVIEW
FaciliCom is a rapidly growing multinational, facilities-based
telecommunications carrier. FaciliCom provides international long distance
services to other carriers worldwide and offers international and domestic long
distance voice, internet access, data and other value-added services to business
and residential customers in select European markets. FaciliCom provides these
services over its carrier-grade international network which consists of 17
gateway switches and 18 additional points of presence in the U.S. and in 13
European countries, as well as a satellite earth station in Malmo, Sweden.
FaciliCom's network is connected primarily by fiber optic cable capacity which
it owns, together with additional fiber capacity that it leases, including
capacity that it leases from Hermes, CIRCE and Qwest. In addition to its
facilities, FaciliCom has 12 interconnection agreements, ten of which are with
the dominant national carriers in FaciliCom's markets, and 21 operating
agreements, 16 of which are with the dominant national carriers in these
markets. FaciliCom believes that its facilities-based network is one of the most
extensive independent telecommunications networks serving the international long
distance market in the U.S. and Europe. This network and FaciliCom's
interconnection and operating agreements enable it to offer competitively
priced, high-quality voice and data services to over 220 wholesale carriers and
approximately 52,000 retail customers.
FaciliCom believes that its multinational, facilities-based approach and
established licensed carrier status in the U.S. and in 13 European countries
provide it with significant competitive advantages. These advantages include:
- reduced termination and network costs resulting in higher gross margins;
- increased flexibility to introduce new products and services such as
internet access, data and other value-added services;
- improved transmission quality; and
- the ability to offer high-quality local sales and customer service.
Since January 1998, FaciliCom has focused on entering key deregulating
markets, accumulating a critical mass of wholesale telecommunications traffic to
support investments in carrier-grade telecommunications facilities and migrating
customer traffic onto FaciliCom's international network. During this period,
FaciliCom has entered nine new countries, installed 14 gateway switches in 12
countries, acquired capacity in 12 additional fiber systems, and entered into 10
new interconnection and six new operating agreements. As of June 30, 1999,
FaciliCom had invested approximately $211.0 million in network facilities.
As a result of FaciliCom's infrastructure investments, it has been able to
increase the traffic volume delivered over its network (commonly referred to as
"on-net traffic") from 26.5% for the nine months ended June 30, 1998 to 41.7%
for the nine months ended June 30, 1999, and FaciliCom's gross margin increased
from 2.3% during the nine month period ended June 30, 1998, to 8.0% during the
nine month period ended June 30, 1999.
FaciliCom was founded in May 1995 to capitalize on opportunities for
facilities-based carriers in the international telecommunications services
industry. FaciliCom has targeted deregulating markets in order to benefit from
the significant demand for international long distance services in those markets
and the relatively favorable competitive conditions there. FaciliCom expects
that worldwide demand for high-quality international telecommunications services
will continue to grow as a result of:
- the globalization of the world's economies and the worldwide trend toward
deregulation of the telecommunications sector;
- declining prices and a wider selection of products and services driven by
greater competition as a result of deregulation;
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- technological advances, which have substantially increased the
transmission capacity and reduced the cost of fiber capacity;
- increased demand for internet access, data and other value-added
services; and
- increased telephone accessibility resulting from greater investment in
telecommunications infrastructure, including the deployment of wireless
networks.
In addition, FaciliCom's industry continues to evolve away from the
traditional pricing and operations model for exchanging telecommunications
traffic between international carriers, known as the international accounting
rate mechanism. As the international accounting rate mechanism model is
abandoned, FaciliCom will be able to pass cost savings to its customers, which
it believes will further increase demand for these services.
STRENGTHS
FaciliCom is positioning itself to become a leader in the rapidly growing
global market for international long distance voice, internet access, data and
other value-added services. FaciliCom enjoys competitive advantages which it
believes serve as a model for its continued successful growth as a diversified
telecommunications company, including:
Extensive Facilities-Based International Telecommunications Network. Since
1995, FaciliCom has built a carrier-grade network in 14 countries, including the
U.S. and the top 10 Western European international long distance markets.
FaciliCom is in negotiations to complete interconnection agreements with
additional carriers. FaciliCom believes that its early entrant approach
implemented through its local management and operations has allowed it to enter
into interconnection agreements more readily than companies without these
resources and provides it with a lower cost structure than its competitors
serving these regions who do not have these agreements. FaciliCom's network has
been designed and built to allow it to offer high-quality services, control its
termination and network costs and cost-effectively expand its service offerings.
By adding relatively inexpensive routers to its asynchronous transfer mode
network, FaciliCom can further expand its dial-up internet access services with
little additional investment. FaciliCom believes that its existing network gives
it an early entrant advantage and positions it to continue to increase its
revenues and improve gross margins.
Strong European Presence. FaciliCom has developed a strong European
presence, with 56.5% of FaciliCom's revenue for the nine month period ended June
30, 1999 originating from FaciliCom's European operations as compared to 31.1%
for the nine month period ended June 30, 1998. FaciliCom's European focus
enables it to capitalize on the higher prices associated with traffic
originating in Europe as compared to the U.S. Because FaciliCom's network is
concentrated in the leading European markets, it is able to take advantage of
increasing opportunities to carry cross-border European traffic on its network,
realize greater economies of scale in network management and sales and
marketing, and capitalize on strategic opportunities to build fiber systems such
as FCI One. In addition, this geographic concentration favorably positions
FaciliCom for entry into other deregulating European markets, such as Poland,
Portugal and the Czech Republic, on a more cost-effective basis, by adding a new
source of traffic which can be terminated throughout FaciliCom's network and by
reducing termination costs of network traffic entering these newly-deregulated
markets.
Established Customer Base. FaciliCom has established a wholesale customer
base of over 220 carriers in the U.S. and 13 European countries, including a
majority of the first-tier and emerging carriers, European wireless carriers and
seven of the ten largest global international carriers. This significant
customer base enables FaciliCom to rapidly and cost-effectively build traffic
volumes as it expands its network. Because many of its customers are also
high-quality carriers, FaciliCom is able to use their facilities on favorable
terms to carry traffic on routes where it has no facilities, thereby lowering
its network costs.
Successful Retail Operations in Scandinavia. Since its initial investment
in its Swedish subsidiary in 1995, FaciliCom has increased its retail customer
base from fewer than 2,000 to approximately 52,000
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small- to medium-sized business, and residential retail customers in Sweden,
Denmark, Norway and Finland. This customer base generated 5.0% of FaciliCom's
consolidated revenues for the nine month period ended June 30, 1999.
Proven Record of Strong Internal Growth. FaciliCom was established in May
1995 and has since rapidly increased its revenues and network traffic. For the
fiscal years ended September 30, 1996, 1997 and 1998, and the nine month period
ended June 30, 1999, FaciliCom's revenues were $11.9 million, $70.2 million,
$184.2 million and $279.7 million, respectively. In addition, for the fiscal
years ended 1996, 1997 and 1998, and the nine month period ended June 30, 1999,
FaciliCom's network carried 41.3 million, 252.3 million, 820.3 million and 1.4
billion minutes of traffic, respectively. FaciliCom's growth has been derived
mainly from internal expansion. FaciliCom has managed this rapid growth in a
manner that has permitted it to increase its customer base efficiently while
maintaining high standards of network quality and customer service.
Strong Management Team. FaciliCom has a highly experienced senior
management team with, on average, over 23 years of experience in the
telecommunications industry, including experience with such industry leaders as
Bell Atlantic, British Telecom, Cable & Wireless, Global One, Sprint, GTE, Viag
Interkom and NorTel Networks. Additionally, in each country in which FaciliCom
operates, it employs a local management team that is familiar with local legal
and regulatory issues, business practices, and cultural norms that affect
FaciliCom's business. The members of FaciliCom's team have proven their ability
to obtain licenses, recruit experienced staff, negotiate for interconnection
agreements with dominant national carriers, construct and operate a high-quality
network and provide superior customer service. FaciliCom believes that
experience that it has gained from operating in Europe over the last four years
provides it with a distinct advantage over newer entrants to these markets.
OPERATING MARKETS
FaciliCom currently terminates traffic through a combination of
interconnection and operating agreements, transit, refiling, resale and
international simple resale to over 200 countries worldwide and originate
traffic in Austria, Belgium, Denmark, Finland, France, Germany, Italy, The
Netherlands, Norway, Spain, Sweden, Switzerland, the U.K., and the U.S.
FaciliCom estimates that it has a market share of less than 1.0% of each of
these markets.
Austria. Austria has a population of approximately 8.1 million. By 1997,
the government had completed a 10-year privatization program of the
telecommunications industry. In December 1997, licenses for providing wireline
voice telephone services were issued to eight companies. At the same time, the
Supervisory Board of Post & Telekom Austria AG approved the separation of its
telecommunications operations from the national mail and bus services. The new
telecommunications company was named Telekom Austria AG, and Telecom Italia
purchased a 25% stake as its strategic partner.
Belgium. The population of Belgium is approximately 10.2 million. Although
Belgium liberalized its telecommunications services in accordance with the EU
directive on January 1, 1998, some barriers to entry still persist, including
significant interconnection charges that foreign carriers pay to Belgacom, the
Belgium dominant national carrier.
Denmark. With a population of approximately 5.2 million, Denmark has a
telecommunications market that generated approximately $3.6 billion in revenues
in 1996 according to the International Telecommunications Union. The Danish
Parliament approved legislation in May 1997 to liberalize its telecommunications
industry. The new law allows carriers to provide public voice services and to
build and lease networks. Most services, including voice telephony, may be
provided under a general class license. The telecommunications market in Denmark
has been historically dominated by the primary national carrier of Denmark, Tele
Denmark, which, according to TeleGeography 1999, accounted for 82.0% of
Denmark's international outgoing minutes in 1997. Since privatization, 12
companies providing facilities-based service have entered the Danish market. Key
European companies in Denmark's telecommunications service sector include Telia
(Sweden) and French Mobilix (a subsidiary of France Telecom).
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Finland. With a population of approximately 5.2 million, Finland's
telecommunications services market generated approximately $2.5 billion in
revenues in 1998, according to an estimate by the U.S. Department of State.
Finland fully liberalized the provision of voice telephony services in 1994, and
has recently eliminated its licensing requirements for the construction of fixed
telecommunications networks. Since deregulation, eight companies providing
facilities-based service have entered the Finnish market. According to
TeleGeography 1999, in 1997, the primary national carrier of Finland, Sonera
Ltd., accounted for 58.9% of Finland's international outgoing minutes, while
Finnet Group and Telia accounted for 28.2% and 9.3%, respectively.
France. The population of France is approximately 58.8 million. As of
January 1998, all telecommunications services were open to competition in
France, including the provision of public voice telephony. Since liberalization,
33 companies have entered the French market and compete with the national
carrier, France Telecom. Restrictions on market entry include a foreign equity
limit of 20%.
Germany. With a population of approximately 81.8 million, the German
telecommunications market is the third largest in the world with an estimated
$39 billion in revenues according to an estimate by the U.S. Department of
State. Germany is Europe's largest telecommunications market, accounting for
23.4% of the total market. Under German law, all telecommunications services,
both national and international, including public voice telephony, became open
to competition in Germany on January 1, 1998. Until January 1998, the German
national carrier, Deutsche Telekom A.G., operated the German telephony market
under a monopolistic regime. A number of new competitors have recently entered
the market. As of November 1998, Deutsche Telekom A.G. held approximately 80% of
the market for long distance services (including international calls).
Italy. With a population of approximately 57.3 million, the total 1999
telecommunications market in Italy, including both equipment and services, is
estimated at $32 billion, according to an estimate by the U.S. Department of
State. The market was liberalized on January 1, 1998, which allowed the
authorization of five new fixed-line carriers.
The Netherlands. With a population of approximately 15.9 million, the
Dutch telecommunications services market generated approximately $9.0 billion in
revenues in 1998 from public voice telephony, network and mobile telephony
services, according to the European Commission. The Dutch telecommunications
infrastructure, public switched voice telephony and telex markets were
liberalized on July 1, 1997. Since liberalization, more than 25 companies have
entered the Dutch market. The Dutch national carrier, KPN, accounted for
approximately 95% of The Netherlands' market for international outgoing minutes
in 1997, according to TeleGeography 1999.
Norway. Norway has a population of approximately 4.4 million. The
Norwegian telecommunications market for data transmission, voice telephony,
paging and other mobile services and satellite communications has been fully
liberalized since January 1, 1998. Until the liberalization in 1998, the
Norwegian national carrier, Telenor AS, accounted for 100% of Norway's market
for international outgoing minutes.
Spain. Spain has a population of approximately 39.8 million. Spain
liberalized its telecommunications market in December 1998. Prior to that time,
the government had phased in competition in basic telephony through licenses
granted to recently privatized Spanish second operator, Retevision, and to a
third operator, Lince (France Telecom), in addition to the incumbent operator
Telefonica.
Sweden. With a population of approximately 8.9 million, Sweden has a
telecommunications market that generated approximately $6.0 billion in revenues
in 1996 according to the International Telecommunications Union. Since Sweden
fully liberalized its telecommunications market in January 1998, more than 12
companies providing facilities-based service have entered the Swedish market.
Telia AB, the Swedish national carrier, and Tele-2 AB accounted for
approximately 66.0% and 22.0%, respectively, of Sweden's market for
international outgoing minutes in 1997, according to TeleGeography 1999. Telia
AB is a member of the Unisource consortium and is also authorized to provide
facilities-based services between the U.S. and Sweden.
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Switzerland. Switzerland has a population of approximately 7.4 million. In
1997, the Swiss Parliament enacted legislation to liberalize and privatize the
Swiss telecommunications sector, opening the market to investment and
competition from foreign firms. This liberalization took effect on January 1,
1998. According to the WTO Agreement, the Swiss government has committed to
complete liberalization of basic telecom services (facilities-based and resale,
public and non-public) for all market segments.
United Kingdom. With a population of approximately 58.9 million, the U.K.
has a telecommunications market that generated approximately $32.8 billion in
1998, according to an estimate by the British Office of Telecommunications
("Oftel"). According to Oftel, the U.K.'s international and domestic long
distance services market accounted for approximately $6.6 billion in revenues
for the year ended March 31, 1997, with international outgoing calls generating
$2.4 billion in revenue. The U.K. has substantially liberalized its
telecommunications market. However, the U.K. has applied to the EU for an
extension to the EU's requirements that require member states to introduce
pre-selection by January 2000. According to TeleGeography 1999, British Telecom
held 54.9% of the U.K.'s market for international outgoing minutes in 1997, and
Cable &Wireless Communications held 30.3%. In addition to British Telecom and
Cable & Wireless Communications, there are over 50 foreign carriers in the U.K.
that currently hold licenses authorizing them to interconnect with the dominant
national carrier.
United States. With a population of approximately 272.6 million, the U.S.
has a telecommunications services market that generated revenues of
approximately $231.2 billion in 1997, according to the FCC. The United States
has committed to open markets for essentially all basic telecommunications
services (facilities-based and resale) for all market segments. The U.S. long
distance market is highly deregulated and is the largest in the world. According
to the FCC, in 1997 long distance telephone revenues were approximately $100.8
billion, including approximately $17.7 billion from international services,
representing 17.5% of the total market. According to TeleGeography 1999, AT&T is
the largest international long distance carrier in the U.S. market, with
approximately 45.3% of the U.S. international outgoing minutes in 1997, while
MCI, Sprint and WorldCom had market shares of 26.0%, 12.2% and 6.2%,
respectively. AT&T, MCI WorldCom and Sprint are generally regarded as first-tier
carriers in the U.S. long distance market. Other large long distance companies
with more limited ownership of transmission capacity, including Frontier and
Qwest, are generally regarded as second-tier carriers. The remainder of the U.S.
long distance market comprises several hundred smaller companies, largely
resellers, which are generally regarded as the third-tier carriers.
NETWORK
General. FaciliCom has an extensive facilities-based international network
comprised of gateway switches, additional points of presence, an asynchronous
transfer mode transmission backbone, owned and leased fiber capacity and a
satellite earth station. FaciliCom's facilities-based network permits it to
terminate an increasing percentage of traffic on-net, allowing it to better
control both the quality and cost of telecommunications services that FaciliCom
provides to its customers. To provide high-quality telecommunications services,
FaciliCom's network employs digital switching and fiber technologies, uses
advanced signaling protocols and is supported by comprehensive monitoring and
technical services.
FaciliCom carries international traffic historically carried between U.S.
and foreign international long distance carriers over its own network. In
addition, FaciliCom's gateway switches and European points of presence allow it
to terminate traffic within countries, ensuring quality and lowering termination
costs. FaciliCom has also established interconnection and operating agreements
with national carriers in the markets where it has facilities.
Gateway Switches. FaciliCom currently operates 15 NorTel and two Ericsson
gateway switches in the U.S. (New York, New Jersey, Los Angeles and Miami) and
in Europe (Austria, Belgium, Denmark, Finland, France, Germany, Italy,
Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom).
Asynchronous Transfer Mode Transmission Backbone. FaciliCom currently
operates a high-capacity asynchronous transfer mode transmission backbone
between certain of its U.S. and European gateway
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switch locations. FaciliCom's asynchronous transfer mode backbone enables it to
combine switched voice, private line and data traffic, including frame relay and
internet protocol, on the same international circuits. FaciliCom believes that
its existing asynchronous transfer mode backbone provides a competitive
networking advantage because it is able to combine these forms of traffic onto
the same network, thereby eliminating the need to purchase capacity and related
equipment for different types of traffic. In addition, the switching technology
used in an asynchronous transfer mode system is more efficient than traditional
circuit-switched technology because an asynchronous transfer mode network,
unlike a circuit-based network, does not require a fixed amount of bandwidth to
be reserved for each phone call or data transmission. This allows voice and data
calls to be pooled, which enables it to carry more calls with the same amount of
bandwidth. This greater efficiency creates network cost savings that can be
passed on to FaciliCom's customers in the form of lower rates, and provides an
immediate cost advantage for connection from FaciliCom's nearest point of
presence to the chosen internet backbone interconnect point.
Fiber. FaciliCom seeks to obtain ownership interests in fiber systems
where it believes that its customers' demand will justify the investment in
those fixed assets. FaciliCom can generally earn a higher gross margin on
traffic routed through its network's owned fiber rather than traffic routed
through its network's leased fiber. However, when it is more cost effective to
do so, FaciliCom will lease fiber capacity on a short term basis on specific
routes.
FaciliCom currently has acquired fiber capacity on an indefeasible rights
of use or minimum assignable membership units basis in 18 fiber cable systems
(including Hermes, CIRCE, Flag, Qwest, CANTAT, ODIN and Southern Cross).
FaciliCom believes that no single agreement that it has relating to
indefeasible rights of use or to minimum assignable ownership units is material
to its financial condition or its business operations. With the passage of time,
an increasing amount of fiber capacity is becoming available, and the cost of
this capacity is expected to continue to decline rapidly. As a result, FaciliCom
believes that, when one or more of these agreements expires, it would be able to
replace, at similar costs and within reasonable time periods, similar capacity
on alternative competing fiber systems through purchases of minimum assignable
ownership units or indefeasible rights of use.
Ownership and Operation of Fiber Capacity/FCI One. FaciliCom purchases
fiber capacity on existing cable systems as demand for FaciliCom's services
justifies this investment. When fiber capacity is not available at reasonable
prices, FaciliCom may instead install and operate its own fiber cables.
FaciliCom's initial effort in this area consisted of FCI One, a 24-pair fiber
submarine cable that it owns and operates between Copenhagen, Denmark and Malmo,
Sweden. Currently, FaciliCom is only using one such fiber pair with a configured
capacity of STM-16.
Before Denmark granted licenses to additional facilities-based carriers,
Tele Denmark, the incumbent dominant carrier, possessed the exclusive right to
build international cables into Denmark, and fiber capacity into Denmark was
generally available only at high prices. When FaciliCom became licensed to
operate in Denmark as a facilities-based carrier, it also obtained the right to
build international cables. Given its current and forecasted capacity
requirements, FaciliCom determined it was more cost effective to build FCI One
than to lease capacity from Tele Denmark at high rates. FCI One became
operational in May 1999. In addition to cost savings on capacity that it uses,
FaciliCom can sell or lease excess capacity or swap capacity on FCI One for
capacity it requires on other routes. Since May 1999, FaciliCom has sold a
portion of the capacity on FCI One and is in discussions to sell or swap
additional capacity.
Points of Presence. In addition to its switch centers, FaciliCom has
installed a number of transmission points of presence in its network that
provide additional geographic locations for FaciliCom's customers and the local
public switched telephone network to interconnect with FaciliCom's network. In
the U.S., FaciliCom operates points of presence in Washington, D.C., Tampa,
Florida, New York, New York, and in Germany it operates points of presence in
Stuttgart, Hamburg, Dusseldorf and seven other cities. FaciliCom also operates
points of presence in London, England, Helsinki, Finland, and in Stockholm and
two other cities in Sweden. These points of presence allow FaciliCom to reduce
its costs
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for delivering traffic to public networks and make it easier for customers with
local networks to deliver traffic to FaciliCom's network.
Interconnection and Operating Agreements. FaciliCom enters into
interconnection agreements with the national carrier in each of the countries
where it has operating facilities so that it can originate and terminate traffic
in that country. Interconnection agreements enable FaciliCom to terminate
traffic in a country by connecting the local network of that country with
FaciliCom's network. Interconnection agreements typically allow FaciliCom to
terminate traffic in the countries in which it has these agreements at the
lowest available access cost, and to originate traffic from these countries when
a customer dials FaciliCom's carrier access code.
FaciliCom has entered into 12 interconnection agreements, including
agreements with the dominant national carrier in Austria, Denmark, Finland,
Germany, Italy, The Netherlands, Norway, Sweden, Switzerland and the U.K.
FaciliCom is currently negotiating for additional interconnection agreements
with the dominant national carriers in other European countries.
FaciliCom also has operating agreements with 16 national carriers and five
emerging carriers. An operating agreement provides for the exchange of
international long distance traffic between correspondent international long
distance providers that own facilities in different countries.
Satellite Facilities. FaciliCom owns and operates the Swedish
International Teleport, a 13-meter satellite earth station in Malmo, Sweden that
transmits to an INTELSAT satellite over the Indian Ocean. FaciliCom's status as
a member of INTELSAT enables it to easily expand its geographic coverage
worldwide through the acquisition of additional satellite transmission capacity
on a preferential basis. The earth station and INTELSAT satellite, which provide
coverage to Africa and most of Asia, currently connect customers on the Indian
subcontinent with locations in Europe and North America on a private line basis.
FaciliCom uses this facility to provide connectivity with carriers in developing
countries before international cable capacity becomes available there, and on
low-volume international routes. FaciliCom is also negotiating agreements with
several Asian carriers to interconnect with Sweden to transmit public
switched-voice traffic through FaciliCom's earth station.
Signaling Network. Modern carrier networks use standard protocols of the
International Telecommunications Union (CCITT-C7 and SS-7) to signal between
switches in order to set up connections and monitor call status. Most small
carriers use one channel of each trunk group to signal other carriers on what is
designated as an "F Link." This F Link signaling is adequate for call setup but
is subject to failure because it does not provide for any redundancy. If the F
Link fails the entire trunk group cannot be used. F Link signaling also does not
provide many network management features because its signal capability is
limited to one link between two switches. To overcome the drawbacks of F Link
signaling, more advanced network operators install modern and sophisticated
packet signaling switches called signal transfer points that enable their
switches to communicate with other switches in their network and with customer
and carrier networks. These signaling networks include redundant links to paired
signal transfer points and are virtually failsafe. FaciliCom has installed a
pair of redundant signal transfer points in Frankfurt and London and another
pair of signal transfer points in New Jersey and New York. As a result,
FaciliCom's network is more robust, and it is able to provide signaling services
to other carriers.
Network Reliability. FaciliCom's resilient network has diverse switching
and routing capabilities. For example, on the high-volume North America to
Europe routes, FaciliCom splits customer traffic between its U.S.-based gateway
switches, over three transatlantic cable routes and over each of its
European-based gateway switches. All of FaciliCom's gateway switches have backup
power systems, and each fiber cable has built-in redundancies that reroute
traffic in the event of an interruption in cable service. FaciliCom's paired
signal transfer points network with redundant signal paths also provides an
additional level of network integrity.
Network Monitoring and Technical Support. FaciliCom has technical staff
located in the U.S. and throughout its markets in Europe who provide support for
FaciliCom's network. FaciliCom's technical staff located in Europe provides
network management and operations support for FaciliCom's gateway switches.
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In addition, to support its NorTel switches, FaciliCom has implemented GTE's
support system. This system provides FaciliCom with integrated proactive network
operations, network message management and a customer contact system. FaciliCom
fully supports all network management and operations and functions 24 hours a
day, seven days a week from a central location in Washington, D.C.
FaciliCom's network operations center in Washington, D.C. monitors all of
the switches and transmission links in FaciliCom's network and receives
immediate signals alerting it to any abnormal network condition. Through this
facility, FaciliCom has the capability to reroute traffic if there is a cable
cut or an equipment failure. This center also monitors the quality of any
carriers FaciliCom uses to route off-net traffic and removes any of them from
its routing if they fall below FaciliCom's performance standards.
SERVICES
FaciliCom offers high-quality international telecommunications services
over its own international network and by interconnecting its network with the
networks of other carriers. FaciliCom provides primarily wholesale international
telecommunications voice services and internet access, data and other
value-added services in select European markets. FaciliCom recently expanded its
retail services in Scandinavia, and it is offering "dial around" or "casual
dialing" service in Finland and Sweden under the brand name Call One. For the
fiscal years ended September 30, 1997 and 1998, and the nine month period ended
June 30, 1999, wholesale services represented approximately 94.6%, 92.5% and
95.0%, respectively, of FaciliCom's consolidated revenues, and retail services
represented approximately 5.4%, 7.5% and 5.0%, respectively, of FaciliCom's
consolidated revenues.
Wholesale Services. FaciliCom provides wholesale international long
distance voice services to carrier customers located in the 14 countries in
which it operates. Other carriers interconnect with FaciliCom's network by
direct circuit connections from their networks to one of FaciliCom's gateway
switches. FaciliCom also provides service to switchless resellers by enabling
their customers to access FaciliCom's network from the national public switched
telephone network by dialed access through carrier access codes. FaciliCom
provides wholesale termination to over 200 countries using a mix of owned and
leased facilities, and interconnection, operating and resale agreements.
FaciliCom also offers to certain customers internet protocol and frame relay
services over FaciliCom's asynchronous transfer mode backbone.
Retail Services. FaciliCom provides international and domestic long
distance voice services to retail customers in Scandinavia. Retail customers
either subscribe to FaciliCom's services or access the services on a call by
call basis by dialing FaciliCom's carrier access code. In addition, FaciliCom
offers internet access and international private line service to business and
residential customers.
Voice. FaciliCom's retail customers may access its long distance voice
services in the following ways:
Direct Access. The telephone equipment used by subscribers is
directly connected to FaciliCom's switches through a private line and,
unless bill payments are overdue, the subscriber is allowed to make calls
up to a predetermined credit limit. Subscribers to this service do not have
to dial FaciliCom's access code in order to connect to FaciliCom's network.
The private line connections for FaciliCom's direct access services may be
leased from the public switched telephone network. In addition, these
connections may be radio links or digital subscriber lines. Direct access
customers are primarily small-to medium-sized businesses.
Casual Dialing. Any telephone in FaciliCom's markets which is
connected to the public switched telephone network can be used to dial
FaciliCom's access code and place domestic long distance or international
calls. The telephone user does not have to apply in advance to be
recognized as a customer. FaciliCom's gateway switch receives the calling
number from the public network and screens it in order to determine whether
it should be denied service for any reason, such as a failure to make
payments in the past. Casual dialing customers are primarily residential
users.
Indirect Access. To utilize this service, the telephone number of a
customer who satisfies FaciliCom's credit requirements is added to a list
in FaciliCom's switches. Unless the customer's
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payments are overdue, the customer may place calls that have a cost up to a
predetermined credit limit. Users of this method of access must dial
FaciliCom's access code to connect to FaciliCom's network through the
public switched telephone network. If the customer is a heavy user, such as
a small business, FaciliCom may equip its telephones with an automatic
dialer that will insert FaciliCom's access code whenever the customer seeks
to make a long distance or international call. This service is available in
countries that do not require equal access.
Equal Access. This method of access resembles the service that
FaciliCom provides to customers with indirect access. However, customers
can choose to subscribe to FaciliCom's network for all of their long
distance services and do not have to dial FaciliCom's access code in order
to connect to FaciliCom's network through the public switched telephone
network. Instead, the local operator will automatically route the
customer's calls to FaciliCom's network. The 13 European countries in which
FaciliCom operates are all scheduled to require equal access service within
the next three years.
Data. The retail data services that FaciliCom presently offers in
Scandinavia are as follows:
Internet Access. FaciliCom offers internet access service to
FaciliCom's retail customers in Finland. FaciliCom uses its own facilities
to connect customers to an internet backbone interconnect point. FaciliCom
bundles these services with its long distance and international voice
services to provide a single communications package for certain of its
customers.
Unlike in the U.S., where most local calls are free, dominant national
carriers in Europe charge retail local calling rates of as much as $0.10
per minute for a dial-up connection to an internet service provider.
FaciliCom believes that this situation has inhibited the growth of the use
of the internet in Europe. FaciliCom believes that companies like it will
stimulate internet usage by offering internet access services at lower
costs. FaciliCom's interconnection agreements allow any telephone line
where it has these agreements to dial FaciliCom's access code and be
connected with FaciliCom's network. FaciliCom pays the operator of the
public switched telephone network very low wholesale transport charges to
connect these calls to FaciliCom's network. Once the call is connected to
its network, FaciliCom can connect it to the internet through its own data
routers and its own asynchronous transfer mode backbone. This enables
FaciliCom to provide high-quality and low-cost dial-up internet access to
any home or business.
Private Data Lines. Another data service that FaciliCom provides is
private line connectivity for business customers, other data providers and
for video conferencing. These services are targeted to businesses that have
offices or operations in more than one country, and that require voice and
data connections between their locations. FaciliCom provides frame relay,
internet protocol and bandwidth connectivity between points on FaciliCom's
backbone network. Customers pay for the effective amount of bandwidth (64
kbps, 256 kbps, 2 mbps, etc.) that they purchase.
Voice Over Internet Protocol (VOIP). Technology has been developed
that enables origination and termination of voice traffic over internet
protocol networks. This is commonly referred to as VOIP. The initial
concept was to use the internet to transport this traffic for free. In
actual practice, the quality of voice transported over the internet varies
from acceptable to poor because of packet delays during high traffic
periods. It is possible to improve the voice quality of internet protocol
by routing the traffic over a dedicated intranet that utilizes private data
lines instead of the internet. FaciliCom provides VOIP intranet service on
its network. FaciliCom believes that business customers and residential
early technology adopters that have invested in technology based upon
internet protocol will be attracted to this service. No uniform approach to
VOIP's regulatory treatment has been developed, and FaciliCom cannot
predict the manner in which VOIP may be regulated in the future or the
impact of such regulation on FaciliCom's operations.
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CUSTOMERS
Wholesale Customers. FaciliCom's target wholesale customer base consists
primarily of dominant national carriers, other first-tier carriers, emerging
carriers and wireless carriers with international traffic. National carriers and
other first-tier carriers generally have their own international networks, but
use carriers such as FaciliCom for overflow traffic and in order to route
traffic at lower rates. Emerging and wireless carriers are rapidly growing
industry segments that generally rely on national carriers and wholesale
carriers like FaciliCom to provide international connectivity. As of June 30,
1999, FaciliCom provided service to over 220 carriers, including seven of the
ten largest global international carriers, and 40 multinational carriers that
originate traffic in more than one of FaciliCom's existing markets, together
with five wireless carriers. For the fiscal year ended September 30, 1998,
FaciliCom's five largest customers accounted for 21.9% of FaciliCom's
consolidated revenues. For the nine month period ended June 30, 1999,
FaciliCom's five largest customers accounted for 18.4% of FaciliCom's
consolidated revenues. FaciliCom anticipates that the percentage of revenues
attributable to FaciliCom's largest customers will decrease as FaciliCom's
customer base grows. FaciliCom's agreements with its customers do not currently
establish minimum term or usage requirements.
FaciliCom uses a comprehensive credit screening process when identifying
new wholesale customers. For the fiscal years ended September 30, 1997 and 1998,
and for the nine month period ended June 30, 1999, FaciliCom's bad debt expenses
represented 1.8%, 2.0% and 1.6%, respectively, of FaciliCom's consolidated
revenues. FaciliCom rates its potential customers' creditworthiness based on
several factors, including:
- traditional bank and trade reports, such as Dun & Bradstreet reports;
- internal assessments of FaciliCom's exposure based on the costs of
terminating international traffic in certain countries and the capacity
requested by the proposed carrier; and
- references provided by potential customers.
Depending on the results of FaciliCom's credit analysis, a customer's
payment terms and/or billing cycle may be adjusted to shorten the length of time
that FaciliCom's receivables are outstanding. In addition, FaciliCom may require
a customer to post collateral in the form of a security deposit or an
irrevocable letter of credit.
Retail Customers. FaciliCom's target retail customer base consists
primarily of small- to medium-sized businesses, and high volume residential
users of international telecommunications services. In July 1995, FaciliCom
began its retail operations in Sweden. Since that time, FaciliCom has grown its
retail customer base from fewer than 2,000 retail customers in Sweden to
approximately 52,000 retail customers in Scandinavia. Retail distribution not
only leverages FaciliCom's existing facilities but also improves profitability
through the sale of higher-margin services.
SALES AND MARKETING
Wholesale. FaciliCom's approach to marketing and selling wholesale
services consists of local sales staff, who are responsible for day-to-day
relationships with local carrier representatives and who have experience in the
industry and long standing relationships with such carriers. Additionally,
because FaciliCom has several international carrier customers which use it to
transport traffic from multiple locations, FaciliCom has a multinational global
account group, which coordinates sales to major international accounts in
multiple locations and is responsible for client relationships at the senior
management level. FaciliCom focuses on hiring and retaining experienced
marketing and sales people with extensive knowledge of the telecommunications
industry and who have existing relationships with decision makers at carrier
customers.
Retail. Although FaciliCom's main focus has been on international
wholesale service, FaciliCom has been serving retail customers since the middle
of 1995. FaciliCom reaches its retail customers through a variety of marketing
channels that are tailored to specific markets. FaciliCom targets small- to
medium-
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sized businesses in industry segments with high international telecommunications
needs, as well as high-volume residential users.
MANAGEMENT INFORMATION SYSTEMS
The need to bill customers timely and accurately, and to monitor and manage
network traffic profitability, requires the accurate operation of management
information systems. To meet these needs, FaciliCom contracts with Armstrong
Holdings for its billing and other management information services. Armstrong
Holdings, through its subsidiary Armstrong, owns 84.0% of the outstanding
capital stock of FaciliCom.
Subsidiaries of Armstrong Holdings provide billing, financial accounting
and specialized information technology services to its subsidiary companies,
including FaciliCom, from its data processing center located in Butler,
Pennsylvania. Armstrong Holdings's subsidiaries include independent
telecommunications companies and international telecommunications companies.
Based on its knowledge of billing in the telecommunications industry, Armstrong
Holdings has developed customized systems to provide call detail record
collection, processing, rating, reporting and bill rendering. These systems
enable FaciliCom to:
- analyze accurately its traffic, revenues and margins by customer and by
route on a daily basis;
- validate carrier settlements; and
- monitor least cost routing of customer traffic.
FaciliCom believes that contracting with Armstrong Holdings for these
customized systems gives it a strategic advantage over many emerging carriers
because FaciliCom receives timely and accurate reporting of its customer
traffic, revenues and margins without incurring the significant costs associated
with developing and maintaining its own data center. The Armstrong Holdings data
center utilizes IBM mainframe systems with full disaster recovery and back-up
facilities and provides 24 hours per day, seven days per week data center
support. Armstrong Holdings provides FaciliCom with experienced professionals
and programmers to further customize and support FaciliCom's growing and
changing needs for management information services. To date, FaciliCom has not
experienced any significant delays in billing customers. FaciliCom attempts to
bill its customers within five business days after a billing cycle has been
completed. FaciliCom believes that its arrangement with Armstrong Holdings
enables it to effectively and efficiently manage FaciliCom's growing
requirements relating to information technologies.
Armstrong Holdings has agreed to provide billing and management information
systems support for FaciliCom and FaciliCom's subsidiaries on terms that
FaciliCom believes are competitive with similar services offered in the
industry. This contract extends through September 30, 2002.
In consultation with Armstrong Holdings's staff, FaciliCom is currently
implementing a management information system to further enhance its ability to
monitor its growing operations. FaciliCom has engaged Perot Systems to develop a
data warehouse that will combine and store data from a number of information
systems and facilitate the presentation of data for management decision making.
FaciliCom uses its information technology and software for the following
purposes:
Call Detail Record Preprocess. When a customer initiates a call
through FaciliCom's network, each switch used to complete the call records
the details of the call. These details include the time of initiation, the
calling and called numbers, the type of call, called party answer and the
time of disconnect. These call detail records are sent to the Armstrong
Holdings data center, where they are preprocessed. Copies of the call
detail records and summary information regarding the volumes of traffic are
stored in the data warehouse.
Wholesale Billing. On a predetermined billing schedule, call detail
records for completed calls are rated, and wholesale bills are generated at
the Armstrong Holdings data center. Based on customer preference, the bills
are sent to customers in either a paper or an electronic format.
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Retail Billing. FaciliCom's retail billing in Scandinavia is
currently handled by locally-developed billing software. The billing system
in Finland receives call detail records directly from FaciliCom's switch in
Helsinki, Finland. Billing data for other Scandinavian countries is
preprocessed in the Armstrong Holdings data center and sent to Malmo,
Sweden in order to produce customer bills. Retail billing data is sent in
electronic format to local billing companies that bill and collect.
Customer Service. FaciliCom has developed customer service systems
that record and track customer trouble reports. FaciliCom is in the process
of installing an industry standard customer service system that will allow
customers to report service failures and other technical difficulties over
the internet.
Network Management. FaciliCom has installed software developed by GTE
that monitors the status of its network components and displays network
conditions in its network operations center. This system provides real time
information that FaciliCom's staff members can use to reroute traffic and
perform corrective action, and to analyze and repair network hardware or
software problems.
Inventory and Provisioning. FaciliCom has developed software that
keeps track of the status and condition of its network hardware components.
FaciliCom's staff members use this system to assign equipment to customer
or carrier circuits and to instruct FaciliCom's staff members abroad on the
proper connection of these circuits.
In addition, all of FaciliCom's administrative and technical locations
are connected by a corporate wide area network that runs over the backbone
network FaciliCom has constructed to handle customer traffic. An authorized
user with a personal computer at any of FaciliCom's offices can access all
of FaciliCom's corporate systems and databases. FaciliCom controls access
to this network through the use of firewalls, password protection and other
customary security measures.
FaciliCom has also installed mediation devices and software that were
part of a network monitoring system designed by GTE. These devices are
located in each of FaciliCom's switch centers and interface with major
network components, such as FaciliCom's gateway switches. These devices
gather data from the network in real time and transport it over FaciliCom's
corporate wide access network to its network operations center and to
Armstrong Holdings's data center.
COMPETITION
The international telecommunications industry is intensely competitive and
is significantly affected by regulatory changes, marketing and pricing decisions
of the larger industry participants and the introduction of new services made
possible by technological advances. FaciliCom competes in the international
telecommunications market on the basis of price, customer service, transmission
quality and breadth of service offerings, and its carrier customers are
especially price sensitive. FaciliCom's competitors include:
- large, facilities-based, multinational carriers, and smaller
facilities-based long distance service providers that have emerged as a
result of deregulation;
- switch-based resellers of international long distance services; and
- global alliances among some of the world's largest telecommunications
carriers.
Competition in the U.S. The U.S.-based international telecommunications
services market is dominated by AT&T, MCI WorldCom, Qwest and Sprint. FaciliCom
also competes in the U.S. with second-tier international carriers, including IDT
Corporation, Pacific Gateway Exchange, Inc., Primus Telecommunications Group,
Inc. and STAR Telecommunications, Inc. Several of these companies have
considerably greater financial and other resources and more extensive domestic
and international communications networks than FaciliCom does. In addition, the
FCC's order implementing the U.S.'s open market commitments to the WTO may make
it easier for some foreign carriers to enter the U.S. market, which would
increase FaciliCom's competition.
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Competition in Europe. In many international markets, a single carrier,
which is often a government-owned or a former monopoly carrier, controls access
to the local networks, enjoys better brand name recognition and customer loyalty
and possesses significant operational economies. These advantages include a
larger backbone network and operating agreements with other dominant national
carriers. These carriers generally have competitive advantages over FaciliCom
because of their close ties with the national regulatory authorities of their
home countries that may be reluctant to act in a way that fosters increased
competition for the local dominant provider. As a result, FaciliCom's ability to
increase its market share in these countries may be extremely limited.
Competition has begun to increase in the EU telecommunications markets in
connection with the deregulation of the telecommunications industry in most EU
countries, which began in January 1998. This increase in competition could
adversely affect revenue per minute and gross margins as a percentage of
revenues.
FaciliCom competes in 13 European markets by offering competitively priced
wholesale services, and it intends to offer competitively priced stand-alone and
bundled telecommunications services to retail customers. The principal
competitor in each of these markets is the dominant national carrier, such as
British Telecom, Deutsche Telekom, France Telecom, KPN (The Netherlands),
Swisscom, Tele Denmark and Telia (Sweden). Other competitors include: Cable and
Wireless, Cellnet Group, Colt, Energis, Esprit Telecom Group, RSL Communications
and Volaphone in the U.K.; O.tel.o Communications, Mannesmann ARCOR, VIAG
Interkom, MCI WorldCom in Germany; Enertel, MCI WorldCom and Telfort in The
Netherlands; diAx and Sunrise in Switzerland; and Mobilix and Telia in Denmark.
Additionally, FaciliCom may also face competition from other licensed public
telephone operators that are constructing their own facilities-based networks,
cable companies and switch-based resellers.
Competition from Global Alliances and Consolidation in the
Telecommunications Industry. FaciliCom anticipates that it will face additional
competition from global alliances among large long distance telecommunications
providers. In addition, consolidation in the telecommunications industry may
create even larger competitors with greater financial and other resources. The
effect of these proposed mergers and alliances could create increased
competition in the telecommunications services market and reduce the number of
customers that purchase wholesale international long distance services from
FaciliCom.
LICENSES AND REGULATION
United States. In the U.S., the provision of telecommunications common
carrier services is subject to the provisions of the Communications Act, the FCC
regulations promulgated thereunder and the applicable laws and regulations of
the various states administered by the relevant state public service
commissions. The FCC and the state commissions continue to regulate ownership of
transmission facilities, provision of services and the terms and conditions
under which such services are provided. Non-dominant carriers are required by
federal and state law and regulations to file tariffs listing the rates, terms
and conditions of the services they provide. The FCC and some state agencies
also impose prior approval requirements on transfers of control.
Regulatory requirements imposed on U.S. telecommunications service
providers will continue to evolve as a result of the WTO Agreement, federal
legislation, court decisions and new and revised policies of the FCC and state
commissions. The FCC continues to refine its international service rules to
promote competition, reflect and encourage liberalization in foreign countries
and reduce international accounting rates toward cost. As noted above, the FCC
adopted new lower accounting rate benchmarks that became effective January 1,
1998. More recently, the FCC adopted an order eliminating its international
settlements policy on competitive routes and as applied to arrangements between
U.S. carriers and foreign carriers that lack market power. Although the new
rules are not yet effective, FaciliCom expects them to decrease its regulatory
burden.
International Service Regulation. International common carriers, such as
FaciliCom, are required to obtain authority under Section 214 of the
Communications Act and file a tariff containing the rates, terms
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and conditions applicable to their services before initiating international
telecommunications services. FaciliCom has obtained "global" Section 214
authority from the FCC to use, on a facilities and resale basis, various
transmission media for international switched and private line services.
Non-dominant international carriers, such as FaciliCom, must file their
international tariffs and any revisions with one day's notice. FaciliCom has
filed international tariffs for switched and private line services with the FCC.
Additionally, international telecommunications service providers are required to
file copies of their contracts with other carriers, including foreign carrier
operating agreements, with the FCC within 30 days of execution. FaciliCom has
filed each of its foreign carrier agreements with the FCC. The FCC's rules also
require that FaciliCom periodically file a variety of reports regarding the
volume of its international traffic and revenues and use of international
facilities. FaciliCom has filed the required reports. Failure to comply with
these requirements could result in the imposition of fines or other penalties,
including, in an extreme case, the revocation of FaciliCom's authorizations.
FaciliCom's FCC authorization also permits it to resell international
private lines interconnected to the public switched telecommunications networks
for the provision of switched services between the U.S. and:
- WTO member countries that have been found by the FCC to offer equivalent
opportunities to U.S. carriers or in which the settlement rate for at
least 50% of the settled U.S.-billed traffic on the route in question is
at or below the settlement rate benchmark; and
- non-WTO member countries if the settlement rate for at least 50% of the
settled U.S.-billed traffic on the route in question is at or below the
settlement rate benchmark and that have been found by the FCC to offer
equivalent opportunities to U.S. carriers.
To date, the FCC has found that appropriately licensed U.S. carriers may
provide such services to 20 foreign markets including Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong (data and
facsimile services only), Iceland, Ireland, Israel, Italy, Japan, Luxembourg,
The Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland and the U.K.
The FCC has also simplified the process by which carriers may obtain FCC
approval to offer international simple resale to particular destinations.
Carriers may now petition the FCC to authorize the services using a streamlined
procedure if the petition clearly demonstrates that the destination is a WTO
member country and that settlement rates for more than 50% of the settled
U.S.-billed traffic on that route are at or below the FCC's benchmark settlement
rate. Once a carrier makes such a showing and the FCC approves international
simple resale on a route, all carriers holding a global Section 214
authorization will be permitted to offer international simple resale on that
route. FaciliCom anticipates that these new opportunities to engage in
international simple resale will result in reduced costs and prices, increased
competition and increased demand on these routes.
The FCC currently imposes certain restrictions upon the use of FaciliCom's
private lines between the U.S. and the countries in which international simple
resale has been authorized. FaciliCom may not route traffic to or from the U.S.
over a private line between the U.S. and one of these countries if the traffic
originates or terminates in a third country, the third country has not been
found by the FCC to offer equivalent resale opportunities and the traffic is not
routed to or from the third country and the approved country via a publicly
available service (i.e., "switched hubbing").
The FCC's Policies on Transit and Refile. FaciliCom may engage in the
practice whereby a carrier routes, through its facilities in a third country,
traffic originating from one country and destined for another country. The FCC
has permitted third country calling where all countries involved consent to the
routing arrangements. This arrangement is referred to as "transiting." Under
arrangements referred to as "refiling" or "reorigination," the carrier in the
destination country does not consent to receiving traffic from the originating
country and does not realize that the traffic it receives from the third country
is actually originating from a different country. Although this practice is
inconsistent with FCC polices, to date, the FCC has not enforced its policies
with respect to carriers engaging in refiling.
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Domestic Service Regulation. FaciliCom does not currently provide domestic
interstate or intrastate telecommunication services within the U.S., although it
plans to offer such services in the future. When FaciliCom offers such services,
its provision of such services will be subject to regulation by the FCC and
relevant state commissions, which regulate interstate and intrastate rates,
respectively. The majority of the states require FaciliCom to register or apply
for certification before initiating long-distance telecommunications services
within a single state. Fines and other penalties may be imposed for violations
of these rules.
Europe. In Europe, each country regulates its telecommunications industry.
The member states of the EU are obligated to implement legislation issued by the
European Commission, which is responsible for creating pan-European policies and
developing a regulatory framework to ensure an open, competitive
telecommunications market.
In 1990, the European Commission issued the services directive requiring
each member state of the EU to abolish existing monopolies in telecommunications
services with the exception of voice telephony. The intended effect of the
services directive was to permit the competitive offering of all services, other
than voice telephony, including value-added services and voice services to
closed user groups. However, as a result of local implementation of the services
directive through the adoption of national legislation, there are differing
interpretations of the definition of prohibited voice telephony and permitted
value-added and closed user group services. Voice services accessed by customers
through leased lines are permissible in all member states of the EU. The
European Commission has generally taken a narrow view of the services classified
as voice telephony, declaring that voice services may not be reserved to the
national carriers if:
- dedicated customer access is used to provide the service;
- the service confers new value-added benefits on users, such as
alternative billing methods; or
- calling is limited by a service provider to a group having legal,
economic or professional ties.
In March 1996, the EU adopted the full competition directive containing two
provisions which required EU member states to allow the creation of alternative
telecommunications infrastructures by July 1, 1996, and which reaffirmed the
obligation of EU member states to abolish the national carriers' monopolies in
voice telephony by 1998. The full competition directive encouraged EU member
states to accelerate liberalization of voice telephony. Some EU countries may
delay the abolition of the voice telephony monopoly based on exemptions
established in the full competition directive. These countries include Portugal
and Ireland (January 1, 2000) and Greece (December 31, 2000). However,
Luxembourg, Spain and Ireland have already implemented the full competition
directive in whole or in part.
Each EU member state in which FaciliCom currently conducts or plans to
conduct business has a different regulatory regime, and these differences are
expected to continue. The requirements for FaciliCom to obtain necessary
approvals vary considerably from country to country and are likely to change as
competition is permitted in new service sectors.
Asia, Pacific Rim and Latin America. The extent and timing of
liberalization, and the scope and nature of regulation varies among the Pacific
Rim, Asian and Latin American countries. FaciliCom's ability to provide voice
telephony services is restricted in some Asian, Pacific Rim and Latin American
countries. For example, China remains largely closed to competition. FaciliCom
has a pending application to provide international telecommunications services
in Hong Kong, where the local authorities have encouraged limited competition.
On July 1, 1997, the People's Republic of China resumed sovereignty over Hong
Kong, and FaciliCom cannot be certain that China will continue the existing
licensing regime with respect to the Hong Kong telecommunications industry. In
New Zealand, regulation of FaciliCom's proposed provision of telecommunications
services is relatively permissive, and FaciliCom has been granted registration
as an international services operator.
FaciliCom's services in Japan are subject to regulation by the Ministry of
Post and Telecommunications under the Telecommunications Business Law. In Japan,
FaciliCom must obtain a license as a Type I facilities-based business before it
may provide telecommunications services over its own facilities. FaciliCom must
register as a Special Type II business before it provides telecommunications
services over
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international circuits leased from another carrier, or provides domestic service
in Japan over leased circuits if the volume of traffic exceeds a set amount. A
registered Special Type II business may provide over leased lines value-added or
basic telecommunications services, or services to closed user groups. FaciliCom
must notify the Japanese ministry as a General Type II business only if it
provides domestic service in Japan over leased circuits and does not exceed the
traffic threshold that would require Special Type II. Although the Japanese
government until recently prohibited greater than 33.0% foreign ownership of a
Type I business, as well as the resale of international private lines
interconnected to the public switched telephone network at both ends, the
Japanese ministry is now awarding authorizations to foreign-affiliated carriers
to provide telecommunications services using their own facilities and to resell
interconnected international private lines. The Japanese ministry also regulates
the interconnection charges imposed by Type I businesses, and must approve
intercarrier agreements between Type I carriers or between Type I and Special
Type II carriers. FaciliCom has also filed an application in Japan requesting a
Type I telecommunications license requesting authorization to allow it to
construct and operate its own network facilities, as well as to originate and
terminate traffic over resold lines. The Type I license process is onerous and
involves extensive consultation with the Japanese ministry.
Licenses. Consistent with its global strategy, FaciliCom or one of
FaciliCom's local operating subsidiaries has received facilities-based and
resale authorization to provide telecommunications services in Austria, Canada,
Sweden, Denmark, The Netherlands, Germany, El Salvador, Finland, France, Italy,
Norway, Guatemala, Spain, Switzerland and the U.K. FaciliCom also participates
in the numbering plans of Sweden, Denmark, Finland, The Netherlands, Norway,
Switzerland and the U.K. FaciliCom is also licensed in Belgium as a provider of
non-reserved services, including voice services for closed user groups and
value-added services, and it has requested additional authorization to provide
international simple resale. FaciliCom has been awarded access codes in El
Salvador, Denmark, Finland, France, Guatemala, Italy, Norway, Sweden,
Switzerland and the U.K. to allow it to operate as a facilities-based provider
of international telecommunications services. FaciliCom has been granted
registration by the New Zealand Ministry of Commerce as an operator under the
Telecommunications (International Services) Regulation 1994. FaciliCom has
pending applications for various authorizations in Hong Kong.
In the U.S., FaciliCom has obtained international facilities and resale
licenses from the FCC. In addition, FaciliCom is certified or registered to
provide intrastate interexchange telecommunications services or may provide such
services based upon FaciliCom's unregulated status in 45 states. Applications
for certification are pending in five states. State issued certificates of
authority to provide intrastate interexchange telecommunications services
generally can be conditioned, modified, canceled, terminated or revoked by state
telecommunications commissions for failure to comply with state law or the
rules, regulations and policies of the state commissions.
EMPLOYEES
As of September 30, 1999, FaciliCom had 293 employees. None of FaciliCom's
U.S. employees are covered by a collective bargaining agreement; however,
certain of FaciliCom's European employees are members of labor unions. FaciliCom
believes that its relationship with its employees is good. On October 1, 1999,
as part of a corporate restructuring, FaciliCom reduced its total number of
employees to 251.
INTELLECTUAL PROPERTY
FaciliCom owns the registered service mark FaciliCom International for
international long distance telecommunications services, as well as other marks
that are used to provide some of FaciliCom's retail services in specific
countries.
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PROPERTIES
FaciliCom leases office space, including its principal headquarters in
Washington, D.C., and switch location space under operating leases and subleases
that expire at various dates through January 2009. The principal properties that
FaciliCom leased or subleased as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE LEASE EXPIRATION
<S> <C> <C>
Malmo, Sweden (Sales Office)................................ 9,218 December 1999
Oslo, Norway (Switch Location).............................. 42 February 2000
New York, NY (Switch Location).............................. 1,500 August 2000
Jersey City, NJ (Switch Location)........................... 2,404 September 2000
Sornaisten, Finland (Switch Location)....................... 1,130 June 2001
Amsterdam, The Netherlands (Sales Office)................... 3,379 December 2001
Malmo, Sweden (Switch Location)............................. 1,584 January 2002
Frankfurt, Germany (Sales Office)........................... 2,956 February 2002
London, U.K. (Switch Location).............................. 888 April 2002
Geneva, Switzerland (Sales Office).......................... 2,428 June 2002
Los Angeles, CA (Switch Location)........................... 5,350 November 2002
London, U.K. (Sales Office)................................. 3,839 January 2003
Frankfurt, Germany (Switch Location)........................ 2,798 February 2003
Amsterdam, The Netherlands (Switch Location)................ 1,161 May 2003
London, U.K. (Switch Location).............................. 546 September 2003
Helsinki, Finland (Sales Office and Switch Location)........ 3,769 October 2003
Malmo, Sweden (Sales Office and Switch Location)............ 18,458 November 2003
Milan, Italy (Sales Office and Switch Location)............. 6,297 July 2004
Paris, France (Sales Office and Switch Location)............ 5,438 January 2007
Brussels, Belgium (Sales Office and Switch Location)........ 10,253 March 2007
Copenhagen, Denmark (Sales and Switch Location)............. 6,104 August 2007
Miami, FL (Switch Location)................................. 3,578 November 2007
Washington, D.C. (Corporate Headquarters)................... 49,602 March 2008
Zurich, Switzerland (Sales Office and Switch Location)...... 7,603 June 2008
Madrid, Spain (Sales Office and Switch Location)............ 9,979 July 2008
Vienna, Austria (Sales Office and Switch Location).......... 9,775 July 2008
New York, NY (Switch Location).............................. 10,709 January 2009
</TABLE>
FaciliCom's leases typically contain provisions that enable it to renew
them for additional terms beyond their scheduled termination date.
LEGAL PROCEEDINGS
FaciliCom makes routine filings and is a party to regulatory proceedings
with the FCC relating to its operations that FaciliCom believes are customary
for its industry. FaciliCom is not a party to any lawsuit or proceeding which,
in its opinion, is likely to have a material adverse effect on its business.
CAPITAL STOCK
The authorized capital stock of FaciliCom consists of 300,000 shares of
common stock, par value $.01 per share, including 275,000 shares of voting stock
and 25,000 shares of non-voting stock. As of the date hereof, there were 225,205
shares of voting FaciliCom common stock and 1,182 shares of non-voting FaciliCom
common stock issued and outstanding. There is no established public trading
market for the FaciliCom common stock. No dividends have been declared or paid
on the FaciliCom common stock since October 1, 1996.
Holders of shares of voting FaciliCom common stock are entitled to one vote
per share on all matters to be voted upon by the stockholders. Holders of all
FaciliCom common stock are entitled to receive such
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dividends as FaciliCom's board of directors may declare in its discretion out of
funds legally available therefor. In the event of a liquidation, dissolution or
winding up of FaciliCom, the holders of shares of FaciliCom common stock are
entitled to a distribution of any remaining assets of FaciliCom. Holders of
shares of FaciliCom common stock have no cumulative voting or preemptive rights.
All outstanding shares of FaciliCom common stock are fully paid and
nonassessable.
LEGAL MATTERS
Long Aldridge & Norman LLP, Atlanta, Georgia, has passed upon certain
corporate legal matters on our behalf with respect to the exchange notes and our
common stock. In addition, Long Aldridge & Norman LLP will deliver its opinion
to us as to certain federal income tax consequences of the exchange offer and
consent solicitation.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules included in our Annual Report on Form 10-K/A
for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement of which this prospectus forms a part. Our financial statements and
schedules are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The financial statements of World Access, Inc. as of December 31, 1997 and
for each of the two years in the period ended December 31, 1997 incorporated in
this prospectus by reference to the Annual Report on Form 10-K/A of World
Access, Inc. for the year ended December 31, 1998 have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
dated March 5, 1998, except for the discontinued operations described in Note D,
which are as of April 9, 1999, given on the authority of that firm as experts in
auditing and accounting.
Ernst & Young LLP, independent auditors, have audited the combined
financial statements of Cherry Communications Incorporated (d/b/a Resurgens
Communications Group) and Cherry Communications U.K. Limited at December 31,
1997 and for the year then ended, included in our Current Report on Form 8-K
filed on July 27, 1998, as amended by Amendment No. 1 on Form 8-K/A filed on
September 4, 1998, and Amendment No. 2 on Form 8-K/A filed on September 25,
1998, as set forth in their report (which contains an explanatory paragraph
describing conditions that raise substantial doubt about the company's ability
to continue as a going concern as described in note 2 to the combined financial
statements) which is incorporated by reference in this prospectus and elsewhere
in the registration statement of which this prospectus forms a part. These
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
Grant Thornton LLP, independent auditors, have audited the combined
financial statements of Cherry Communications Incorporated (d/b/a Resurgens
Communications Group) and Cherry Communications U.K. Limited at December 31,
1996 and 1995 and for the years then ended, included in our Current Report on
Form 8-K filed on July 27, 1998, as amended by Amendment No. 1 on Form 8-K/A
filed on September 4, 1998, and Amendment No. 2 on Form 8-K/A filed on September
25, 1998, as set forth in their report, which is incorporated by reference in
this prospectus and elsewhere in the registration statement of which this
prospectus forms a part. These financial statements are incorporated by
reference in reliance on Grant Thornton LLP's report, given on their authority
as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Telco Systems, Inc. at August 30, 1998 and August 31,
1997, and for each of the three years in the period ended August 30, 1998
included in our Registration Statement on Form S-4 filed on November 10, 1998,
as set forth in their report, which is incorporated by reference in this
prospectus and elsewhere in the
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registration statement of which this prospectus forms a part. These financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The consolidated financial statements of FaciliCom International, Inc. and
subsidiaries as of September 30, 1998 and 1997 and for each of the three years
in the period ended September 30, 1998 included in this World Access prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of NACT Telecommunications, Inc. as
of September 30, 1997, and for each of the two years in the period ended
September 30, 1997 included in our Registration Statement on Form S-4 filed on
October 6, 1998, as amended by Amendment No. 1 to Form S-4 filed on October 7,
1998, and Amendment No. 2 to Form S-4 filed on October 7, 1998, as set forth in
their report which is incorporated by reference in this prospectus and elsewhere
in the registration statement of which this prospectus forms a part. These
financial statements are incorporated by reference in reliance on KPMG LLP's
report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities laws require us and FaciliCom to file information with
the Securities and Exchange Commission concerning our business and operations.
Accordingly, we and FaciliCom file annual, quarterly and special reports, proxy
statements and other information with the Commission. You can inspect and copy
this information at the public reference facility maintained by the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
You can also do so at the following regional offices of the Commission:
New York Regional Office
Seven World Trade Center
Suite 1300
New York, New York 10048
Chicago Regional Office
Northwest Atrium Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
You can get additional information about the operation of the Commission's
public reference facilities by calling the Commission at 1-800-SEC-0330. The
Commission also maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding companies that,
like us, file information electronically with the Commission. You can also
inspect information about us at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W., Washington, D.C. 20006.
This prospectus is part of a registration statement that we filed with the
Commission and omits certain information contained in the registration statement
as permitted by the Commission. Additional information about World Access and
our common stock is contained in the registration statement on Form S-4 of which
this prospectus forms a part, including certain exhibits and schedules. You can
obtain a copy of the registration statement from the Commission at the street
address or Internet site listed above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered part of this prospectus, and later information that we file with the
Commission will automatically update and supersede this information. We
incorporate by reference documents listed below and any future filings made with
the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the completion of this exchange offer.
We have filed the following documents with the Commission:
- Our Current Report on Form 8-K filed on August 19, 1999 (event date:
August 17, 1999) (File Number 0-29782);
- Our Current Report on Form 8-K filed on July 14, 1999 (event date: June
30, 1999) (File Number 0-29782);
- Our Current Report on Form 8-K filed on May 3, 1999 (event date: April
21, 1999) (File Number 0-29782);
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, as
amended by Form 10-Q/A filed on October 7, 1999 and Amendment No. 2 on
Form 10-Q/A filed on November 4, 1999 (File Number 0-29782);
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
as amended by Form 10-Q/A filed on August 31, 1999 (File Number 0-29782);
- Our Annual Report on Form 10-K for the year ended December 31, 1998, as
amended by Form 10-K/A filed on August 31, 1999, Amendment No. 2 on Form
10-K/A filed on October 7, 1999 and Amendment No. 3 on Form 10-K/A filed
on November 4, 1999 (File Number 0-29782);
- Our definitive proxy materials on Schedule 14A for our special meeting of
stockholders to be held December 7, 1999, as filed with the Commission on
November 5, 1999;
- The combined financial statements of Cherry Communications Incorporated
(d/b/a/ Resurgens Communications Group) and Cherry Communications U.K.
Limited included in WA Telcom's Current Report on Form 8-K filed on July
27, 1998 (event date: July 20, 1998), as amended by Amendment No. 1 on
Form 8-K/A filed on September 4, 1998, and Amendment No. 2 on Form 8-K/A
filed on September 25, 1998;
- The consolidated financial statements of Telco Systems, Inc. included in
our Registration Statement on Form S-4 (No. 333-67025), as filed with the
Commission on November 10, 1998.
- The consolidated financial statements of NACT Telecommunications, Inc.
included in our Registration Statement on Form S-4 (No. 333-65389), filed
with the Commission on October 6, 1998, as amended by Amendment No. 1 to
Form S-4 filed on October 7, 1998, and Amendment No. 2 to Form S-4 filed
on October 7, 1998.
- The consolidated financial statements of NACT Telecommunications, Inc.
included in NACT's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997 (File Number 000-22017).
- The combined unaudited interim financial statements of Cherry
Communications Incorporated (d/b/a Resurgens Communications Group) and
Cherry Communications U.K. Limited included in our Report on Form S-3
(No. 333-79097), Amendment No. 3, filed on November 5, 1999.
- Our description of the common stock included in the Registration
Statement on Form S-4 (No. 333-67025), as filed with the Commission on
November 10, 1998.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
World Access, Inc.
945 E. Paces Ferry Road
Suite 2200
Atlanta, Georgia 30326
Attention: Mr. Mark A. Gergel
Chief Financial Officer
Telephone: (404) 231-2025
TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO LATER THAN
NOVEMBER 30, 1999.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of the respective document.
We have not authorized anyone, including brokers and dealers, to give any
information or make any representation not contained in this prospectus and, if
given or made, such information or representation must not be relied upon as
having been authorized by us or any other person.
This prospectus does not constitute an offer to sell or solicitation of any
offer to buy any of the securities offered hereby in any jurisdiction in which
it is unlawful to make such offer or solicitation.
173
<PAGE> 177
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FACILICOM INTERNATIONAL, INC.
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of June 30, 1999
(Unaudited), September 30, 1998 and 1997............... F-3
Consolidated Statements of Operations and Comprehensive
Loss for the nine months ended June 30, 1999
(Unaudited) and 1998 (Unaudited) and each of the three
years in the period ended September 30, 1998........... F-4
Consolidated Statements of Capital Accounts for the nine
months ended June 30, 1999 (Unaudited) and each of the
three years in the period ended September 30, 1998..... F-5
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1999 and 1998 and each of the three
years in the period ended September 30, 1998........... F-6
Notes to Consolidated Financial Statements................ F-8
</TABLE>
F-1
<PAGE> 178
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
FaciliCom International, Inc.:
We have audited the accompanying consolidated balance sheets of FaciliCom
International, Inc. and subsidiaries (formerly FaciliCom International, LLC)
("FaciliCom") as of September 30, 1998 and 1997, and the related consolidated
statements of operations and comprehensive loss, capital accounts and cash flows
for each of the three years in the period ended September 30, 1998. These
financial statements are the responsibility of FaciliCom's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of FaciliCom International, Inc. and
subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
December 9, 1998
F-2
<PAGE> 179
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, -------------------
1999 1998
(UNAUDITED) 1997
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 18,696 $ 68,129 $ 1,016
Accounts receivable -- net of allowance for doubtful
accounts of $7,862 (Unaudited), $4,620 and $161 at June
30, 1999, September 30, 1998 and 1997, respectively..... 98,542 59,915 19,485
Marketable securities ($31,755 (Unaudited) at June 30,
1999 and $31,394 at September 30, 1998 restricted)...... 31,755 70,092 --
Prepaid expenses and other current assets................. 6,067 6,060 1,737
--------- -------- --------
Total current assets................................ 155,060 204,196 22,238
--------- -------- --------
Property and Equipment:
Transmission and communications equipment................. 121,838 97,849 16,593
Transmission and communications equipment-leased.......... 69,178 17,162 5,419
Furniture, fixtures and other............................. 19,874 11,154 1,266
--------- -------- --------
210,890 126,165 23,278
Less accumulated depreciation and amortization............ (25,122) (10,417) (3,034)
--------- -------- --------
Net property and equipment.......................... 185,768 115,748 20,244
--------- -------- --------
Other Assets:
Intangible assets, net of accumulated amortization of
$2,846
(Unaudited), $1,673 and $583 at June 30, 1999, September
30, 1998 and 1997, respectively........................ 4,949 5,630 1,535
Debt issue costs, net of accumulated amortization of
$1,527
(Unaudited) and $744 at June 30, 1999 and September 30,
1998, respectively..................................... 8,913 9,696 --
Advance to affiliate...................................... 550 490 --
Marketable securities-restricted.......................... 29,525 43,124 --
--------- -------- --------
Total other assets.................................. 43,937 58,940 1,535
--------- -------- --------
Total Assets........................................ $ 384,765 $378,884 $ 44,017
========= ======== ========
LIABILITIES AND CAPITAL ACCOUNTS
Current Liabilities:
Accounts payable.......................................... $ 95,269 $ 63,802 $ 24,205
Accounts payable -- transmission equipment................ 29,344 24,668 --
Accounts payable -- related party......................... 1,810 332 389
Accrued interest.......................................... 14,938 7,109 331
Other current obligations................................. 23,538 12,610 5,924
Line of credit............................................ 10,000 -- --
Capital lease obligations due within one year............. 11,490 3,407 573
Long-term debt due within one year........................ 347 394 1,043
--------- -------- --------
Total current liabilities........................... 186,736 112,322 32,465
--------- -------- --------
Other Liabilities:
Capital lease obligations................................. 4,004 4,791 1,723
Long-term debt............................................ 300,162 300,346 13,000
Loans from owners......................................... -- -- 6,250
--------- -------- --------
Total other liabilities............................. 304,166 305,137 20,973
--------- -------- --------
Commitments and Contingencies
Capital Accounts:
Common stock, $.01 par value -- 300,000 shares authorized;
226,923 and 225,741 issued and outstanding at June 30,
1999 (Unaudited) and September 30, 1998, respectively... 2 2 --
Additional paid-in capital................................ 37,658 36,534 --
Class A initial capital................................... -- -- 180
Class B initial capital................................... -- -- 60
Excess capital contributions -- Class A................... -- -- 16,296
Stock-based compensation.................................. 5,546 6,305 --
Accumulated other comprehensive (loss) income:
Holding gain on marketable securities................... -- 24 --
Foreign currency translation adjustments................ (5,819) 3,450 684
Accumulated deficit....................................... (143,524) (84,890) (26,641)
--------- -------- --------
Total capital accounts.............................. (106,137) (38,575) (9,421)
--------- -------- --------
Total liabilities and capital accounts.............. $ 384,765 $378,884 $ 44,017
========= ======== ========
</TABLE>
See notes to the consolidated financial statements.
F-3
<PAGE> 180
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30 YEARS ENDED SEPTEMBER 30,
------------------- -----------------------------
1999 1998 1998 1997
(UNAUDITED) 1996
<S> <C> <C> <C> <C> <C>
Revenues..................................... $279,695 $117,146 $184,246 $ 70,187 $11,891
Cost of revenues........................... 257,253 114,473 178,952 65,718 12,742
-------- -------- -------- -------- -------
Gross margin (deficit)..................... 22,442 2,673 5,294 4,469 (851)
-------- -------- -------- -------- -------
Operating expenses:
Selling, general and administrative..... 38,073 20,917 32,797 13,072 7,575
Stock-based compensation expense........ 364 5,706 6,017 -- --
Related party expense................... 2,281 917 1,550 439 7
Depreciation and amortization........... 16,895 5,314 8,816 2,318 1,143
-------- -------- -------- -------- -------
Total operating expenses........... 57,613 32,854 49,180 15,829 8,725
-------- -------- -------- -------- -------
Operating loss............................. (35,171) (30,181) (43,886) (11,360) (9,576)
-------- -------- -------- -------- -------
Other income (expense):
Interest expense-related party.......... -- (195) (195) (462) (26)
Interest expense........................ (25,690) (14,344) (22,417) (874) (286)
Interest income......................... 3,646 5,594 8,152 -- --
Gain on settlement agreement............ -- 791 791 -- --
Foreign exchange (loss) gain............ (1,346) (655) (391) (1,335) 226
-------- -------- -------- -------- -------
Total other expense................ (23,390) (8,809) (14,060) (2,671) (86)
-------- -------- -------- -------- -------
Loss before income taxes................... (58,561) (38,990) (57,946) (14,031) (9,662)
Income tax benefit......................... 6,682 6,475 11,351
-------- -------- -------- -------- -------
Net loss................................... (51,879) (32,515) (46,595) (14,031) (9,662)
Other comprehensive (loss) income:
Foreign currency translation
adjustment............................ (9,269) 561 2,766 929 4
-------- -------- -------- -------- -------
Total comprehensive loss........... $(61,148) $(31,954) $(43,829) $(13,102) $(9,658)
======== ======== ======== ======== =======
</TABLE>
See notes to the consolidated financial statements.
F-4
<PAGE> 181
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
HOLDING
COMMON STOCK ADDITIONAL CLASS A CLASS B EXCESS CAPITAL STOCK- LOSS ON
--------------- PAID-IN INITIAL INITIAL CONTRIBUTIONS BASED MARKETABLE
SHARES AMOUNT CAPITAL CAPITAL CAPITAL CLASS A COMPENSATION SECURITIES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995........ -- $ -- $ -- $ 180 $ 60 $ 2,594 $ -- $ --
Net loss.......................... -- -- -- -- -- -- -- --
Contributions..................... -- -- -- -- -- 7,083 -- --
Guaranteed return................. -- -- -- -- -- -- -- --
Contribution to excess
capital -- guaranteed return.... -- -- -- -- -- 499 -- --
Foreign currency translation
adjustments..................... -- -- -- -- -- -- -- --
--- ---- ------- ----- ---- -------- ------ ----
Balance, September 30, 1996........ -- -- -- 180 60 10,176 -- --
Net loss.......................... -- -- -- -- -- -- -- --
Converted loans from owners....... -- -- -- -- -- 5,396 -- --
Guaranteed return................. -- -- -- -- -- -- -- --
Contribution to excess
capital -- guaranteed return.... -- -- -- -- -- 724 -- --
Foreign currency translation
adjustments..................... -- -- -- -- -- -- -- --
--- ---- ------- ----- ---- -------- ------ ----
Balance, September 30, 1997........ -- -- -- 180 60 16,296 -- --
Net loss.......................... -- -- -- -- -- -- -- --
Contributions..................... -- -- -- -- -- 13,750 -- --
Converted loans from owners....... -- -- -- -- -- 6,250 -- --
Reorganization.................... 226 2 36,534 (180) (60) (36,296) -- --
Utilization of tax benefit of the
Company's operating loss by
AHI............................. -- -- -- -- -- -- -- --
Stock options granted............. -- -- -- -- -- -- 5,706 --
Phantom unit exchange............. -- -- -- -- -- -- 599 --
Holding gain on marketable
securities...................... -- -- -- -- -- -- -- 24
Foreign currency translation
adjustments..................... -- -- -- -- -- -- -- --
--- ---- ------- ----- ---- -------- ------ ----
Balance, September 30, 1998........ 226 2 36,534 -- -- -- 6,305 24
Net loss (Unaudited).............. -- -- -- -- -- -- -- --
Utilization of tax benefit of the
Company's operating loss by AHI
(Unaudited)..................... -- -- -- -- -- -- -- --
Stock options granted/exercised
(Unaudited)..................... 1 1,124 (759)
Holding loss on marketable
securities (Unaudited).......... (24)
Foreign currency translation
adjustments (Unaudited)......... -- -- -- -- -- -- -- --
--- ---- ------- ----- ---- -------- ------ ----
Balance, June 30, 1999
(Unaudited)....................... 227 $ 2 $37,658 $ -- $ -- $ -- $5,546 $ --
=== ==== ======= ===== ==== ======== ====== ====
<CAPTION>
FOREIGN
CURRENCY TOTAL
TRANSLATION ACCUMULATED CAPITAL
ADJUSTMENTS DEFICIT ACCOUNTS
<S> <C> <C> <C>
Balance, September 30, 1995........ $ -- $ (1,725) $ 1,109
Net loss.......................... -- (9,662) (9,662)
Contributions..................... -- -- 7,083
Guaranteed return................. -- (499) (499)
Contribution to excess
capital -- guaranteed return.... -- -- 499
Foreign currency translation
adjustments..................... (245) -- (245)
------- --------- ---------
Balance, September 30, 1996........ (245) (11,886) (1,715)
Net loss.......................... -- (14,031) (14,031)
Converted loans from owners....... -- -- 5,396
Guaranteed return................. -- (724) (724)
Contribution to excess
capital -- guaranteed return.... -- -- 724
Foreign currency translation
adjustments..................... 929 -- 929
------- --------- ---------
Balance, September 30, 1997........ 684 (26,641) (9,421)
Net loss.......................... -- (46,595) (46,595)
Contributions..................... -- -- 13,750
Converted loans from owners....... -- -- 6,250
Reorganization.................... -- -- --
Utilization of tax benefit of the
Company's operating loss by
AHI............................. -- (11,654) (11,654)
Stock options granted............. -- -- 5,706
Phantom unit exchange............. -- -- 599
Holding gain on marketable
securities...................... -- -- 24
Foreign currency translation
adjustments..................... 2,766 -- 2,766
------- --------- ---------
Balance, September 30, 1998........ 3,450 (84,890) (38,575)
Net loss (Unaudited).............. -- (51,879) (51,879)
Utilization of tax benefit of the
Company's operating loss by AHI
(Unaudited)..................... -- (6,755) (6,755)
Stock options granted/exercised
(Unaudited)..................... 365
Holding loss on marketable
securities (Unaudited).......... (24)
Foreign currency translation
adjustments (Unaudited)......... (9,269) -- (9,269)
------- --------- ---------
Balance, June 30, 1999
(Unaudited)....................... $(5,819) $(143,524) $(106,137)
======= ========= =========
</TABLE>
See notes to the consolidated financial statements.
F-5
<PAGE> 182
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
JUNE 30, SEPTEMBER 30,
-------------------- ------------------------------
1999 1998 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $(51,879) $ (32,515) $ (46,595) $(14,031) $(9,662)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.............. 16,895 5,314 8,816 2,318 1,143
Non-cash stock-based compensation.......... 364 5,706 6,017 -- --
Non-cash income tax benefit................ (6,753) (6,569) (11,654) -- --
Amortization of bond discount.............. (1,789) 762 237 -- --
Loss on disposal of property and
equipment............................... -- -- -- 130 --
Changes in operating assets and
liabilities:
Accounts receivable..................... (38,627) (19,881) (40,107) (14,260) (4,356)
Prepaid expenses and other current
assets................................ (7) (7,595) (3,792) (810) (770)
Accounts payable and other current
liabilities........................... 50,224 30,720 51,510 17,903 8,731
Accounts payable -- related party....... 1,478 (228) (57) 389 --
Advance to affiliate.................... (196) (2,018) (490) -- (499)
-------- --------- --------- -------- -------
Net cash used operating activities............. (30,290) (26,304) (36,115) (8,361) (5,413)
-------- --------- --------- -------- -------
Cash flows from investing activities:
Purchase of investments in subsidiaries...... -- (4,652) (4,652) -- --
Purchase of investments in available-for-sale
securities................................. (7,407) (64,234) (77,820) -- --
Maturities of available-for-sale
securities................................. 13,378 1,769 30,582 -- --
Sales of available-for-sale securities....... 32,798 4,037 7,046 -- --
Purchase of investments in held-to-maturity
securities................................. (1,164) (86,549) (87,683) -- --
Maturities of held-to-maturity securities.... 16,120 -- 14,446 -- --
Purchases of property and equipment.......... (72,288) (35,877) (66,487) (1,897) (2,004)
Other........................................ 331 44 (124) 233 930
-------- --------- --------- -------- -------
Net cash used in investing activities........ (18,232) (185,462) (184,692) (1,664) (1,074)
-------- --------- --------- -------- -------
Cash flows from financing activities:
Advances from owners......................... -- -- -- 9,726 2,029
Excess capital contributions................. -- 13,750 13,750 -- 7,083
Proceeds from debt issuance.................. -- 300,000 300,000 -- --
Proceeds from line of credit................. 10,000 -- -- -- --
Payments of long-term debt and capital
leases..................................... (10,742) (12,823) (18,156) (1,812) (540)
Payment of debt issuance costs............... (10,305) (10,440)
-------- --------- --------- -------- -------
Net cash provided by financing activities.... (742) 290,622 285,154 7,914 8,572
-------- --------- --------- -------- -------
Effect of exchange rate changes on cash........ (169) 561 2,766 929 4
-------- --------- --------- -------- -------
Increase (decrease) in cash and cash
equivalents.................................. (49,433) 79,417 67,113 (1,182) 2,089
Cash and cash equivalents, beginning of
period....................................... 68,129 1,016 1,016 2,198 109
-------- --------- --------- -------- -------
Cash and cash equivalents, end of period....... $ 18,696 $ 80,433 $ 68,129 $ 1,016 $ 2,198
======== ========= ========= ======== =======
Supplemental cash flow information:
Interest paid................................ $ 17,861 $ 1,181 $ 15,834 $ 747 $ 201
======== ========= ========= ======== =======
</TABLE>
- ------------------------------
NONCASH TRANSACTIONS:
(a) For the nine months ended June 30, 1998 and the fiscal year ended September
30, 1998, the majority owner converted $6,250 of loans into capital and a
$162 receivable was forgiven as part of the purchase of minority interest
which reduced prepaid expenses and other current assets and increased
goodwill.
(b) FCI received $480 in FCI-Sweden convertible debentures during the year
ended September 30, 1997 to satisfy an advance to affiliate, which reduced
advance to affiliate and advances from owners.
F-6
<PAGE> 183
(c) During the year ended September 30, 1997, the majority owner converted
$5,396 of loans and accrued interest into capital.
(d) FCI received property and equipment under capital leases and financing
agreements, which increased property and equipment and long-term
obligations $17,807 (Unaudited) and $10,755 (Unaudited) in the nine months
ended June 30, 1999 and 1998, respectively, and $10,755, $10,385 and $6,400
in the fiscal years ended September 30, 1998, 1997 and 1996, respectively.
In addition, for the nine months ended June 30, 1999 and 1998 and for the
fiscal year ended September 30, 1998, FCI received equipment which
increased property and equipment and accounts payable transmission
equipment by $4,676 (Unaudited), $25,744 (Unaudited) and $24,668,
respectively (of which $15,331 was not yet placed in service as of
September 30, 1998).
(e) FCI recognized a tax benefit of $6,755 (Unaudited) and $6,569 (Unaudited)
for the nine months ended June 30, 1999 and 1998, respectively, and $11,654
for the fiscal year ended September 30, 1998. In accordance with the tax
sharing agreement with AHI entered into on December 22, 1997, FCI recorded
a dividend to AHI for the amount of the benefit to be realized by AHI (See
Note 5 to the consolidated financial statements).
See notes to the consolidated financial statements.
F-7
<PAGE> 184
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL:
Organization. FaciliCom International, LLC ("FCI, LLC") is a Delaware
limited liability company that was formed on May 5, 1995 to engage in various
international telecommunications businesses. On December 22, 1997, the owners of
FCI, LLC entered into an Investment and Shareholders Agreement ("Agreement").
Under the Agreement, the owners of FCI, LLC transferred all of their respective
units in FCI, LLC and FCI (GP), LLC, a Delaware limited liability company, to
FaciliCom International, Inc. ("FCI"), a Delaware corporation, and additionally
Armstrong International Telecommunications, Inc. ("AIT") contributed $20,000,000
(in cash and assignment of indebtedness) to FCI, all in exchange for 225,741
shares of FCI's common stock. FCI was incorporated on November 20, 1997, and has
300,000 authorized shares of common stock. Since the reorganization was a
combination of entities under common control, it was accounted for by combining
the historical accounts of FCI, LLC, FCI (GP), LLC and FCI in a manner similar
to a pooling of interests. FCI is authorized by the Federal Communications
Commission (the "FCC") to provide global facilities-based services as well as
switched international services through resale of the services and facilities of
other international carriers. In addition, FCI has worldwide authorization for
private line resale of noninterconnected private line services and authorization
to resell interconnected private lines for switched services to Canada, the
United Kingdom, Sweden, and New Zealand. FCI, LLC was and FCI is a
majority-owned subsidiary of AIT, which is a wholly owned subsidiary of
Armstrong Holdings, Inc. ("Armstrong" or "AHI").
On July 21, 1995, FCI acquired 66.5% of the outstanding capital stock of
both Nordiska Tele8 AB ("Tele8" or "FCI-Sweden") and FGC, Inc. ("FGC"), entities
related through common ownership. Subsequently, FCI acquired up to 99% of
FCI-Sweden and sold all of its interest in FGC. The additional interest in
FCI-Sweden was the result of three separate transactions (see Note 8). On March
14, 1997, $1,600,000 of FCI-Sweden convertible debentures were converted into
7,400 shares of FCI-Sweden common stock, on May 15, 1997, FCI paid $3,600,000
for 14,400 shares of FCI-Sweden common stock and on October 23, 1997, FCI paid
$750,000 for substantially all of the minority interest outstanding and recorded
$750,000 of goodwill. Also, on October 23, 1997, FCI sold all of its interest in
FGC for $100 and recorded a loss of approximately $79,000 on the transaction.
FCI-Sweden is a corporation organized under the laws of Sweden to provide
national and international telecommunications services. These acquisitions were
accounted for as purchase transactions with the purchase price being allocated
to the assets and liabilities acquired based on their fair values as of the date
of acquisition. The excess of the purchase price over the fair value of the net
assets acquired was recorded as goodwill and is being amortized over five years.
The following summarizes the allocation of the original 1995 purchase price
to the major categories of assets acquired and liabilities assumed (in
thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 343
Property and equipment...................................... 1,760
Excess of cost over net assets of businesses acquired....... 1,715
Other intangibles........................................... 32
------
3,850
Less liabilities assumed.................................... 3,010
------
Cash paid......................................... $ 840
======
</TABLE>
On April 27, 1998, FCI entered into an agreement to purchase 100% of the
issued and outstanding capital stock of Oy Teleykkanen AB ("Tele 1" or
"FCI-Finland"), a corporation formed under the laws of Finland, for $4.0 million
in cash. FCI Finland is a Finnish provider of local and long distance
international telecommunication services and has a carrier agreement to exchange
customer traffic with Telecom Finland, the dominant carrier in Finland. This
acquisition was accounted for using the purchase method of
F-8
<PAGE> 185
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting. The excess of the purchase price over the fair value of the net
assets acquired was recorded as goodwill and is being amortized over five years.
The results of operations for Tele 1 were included in consolidated results of
operations since the date of acquisition.
The following summarizes the allocation of the purchase price to the major
categories of assets acquired and liabilities assumed (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $1,017
Property and equipment...................................... 976
Excess of cost over net assets of businesses acquired....... 3,911
Other assets................................................ 126
------
6,030
Less liabilities assumed.................................... 1,966
------
Cash paid......................................... $4,064
======
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Basis of Presentation. The accompanying consolidated financial
statements include the accounts of FCI and its majority owned and wholly owned
subsidiaries (together, "FaciliCom"). All intercompany transactions and balances
have been eliminated in consolidation. Because losses applicable to the minority
interest exceeded the minority interest in the equity capital and the minority
stockholder was not obligated to provide additional funding with respect to the
losses incurred, such losses were recorded by FaciliCom prior to the purchase of
the minority interest.
b. Cash and cash equivalents. FaciliCom considers its investments with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are stated at cost plus accrued interest and are highly liquid debt
instruments of the U.S. government and commercial corporations and money market
funds.
c. Property and Equipment. Property and equipment is stated at cost.
Depreciation is provided for financial reporting purposes using the
straight-line method. Depreciation expense includes the amortization of capital
leases. The estimated useful lives of property and equipment are as follows:
<TABLE>
<S> <C>
Transmission and communications equipment................... 5 to 25 years
Transmission and communications equipment-leased............ 5 to 25 years
Furniture, fixtures and other............................... 5 to 7 years
</TABLE>
FaciliCom capitalizes the costs of software and software upgrades purchased
for use in its transmission and communications equipment. FaciliCom expenses the
costs of software purchased for internal use. Maintenance and repairs are
expensed as incurred. Replacements and betterments are capitalized.
Depreciation expense for the fiscal years ended September 30, 1998, 1997
and 1996 was $7,383,000, $2,053,000 and $863,000.
FaciliCom periodically evaluates its long-lived assets to confirm that the
carrying values have not been impaired using the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 121.
d. Intangible Assets. Intangible assets, consisting primarily of goodwill,
are amortized using the straight-line method over 5 years.
FaciliCom periodically evaluates its intangible assets to confirm that the
carrying values have not been impaired using the provisions of SFAS No. 121.
F-9
<PAGE> 186
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
e. Income Taxes. FCI, LLC is a limited liability company and is not
subject to income tax, while FaciliCom International, Inc., incorporated on
November 20, 1997 as a Delaware corporation is subject to income taxes.
FaciliCom accounts for income taxes under the liability method in
accordance with the provisions set forth in SFAS No. 109, "Accounting for Income
Taxes," whereby deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. In assessing
realization of deferred tax assets, FaciliCom uses judgment in considering the
relative impact of negative and positive evidence. The weight given to the
potential effect of negative and positive evidence is commensurate with the
extent to which it can be objectively verified. Based on the weight of evidence,
both negative and positive, including the lack of historical earnings, if it is
more likely than not that some portion or all of a deferred tax asset will not
be realized, a valuation allowance is established.
f. Initial and Excess Capital Contributions. Excess capital contributions
were the amounts of capital an owner had contributed in excess of the owner's
initial capital commitment. The owners were credited with a guaranteed return
through September 30, 1997 for the use of their capital, and profits and losses
were allocated, in accordance with the provisions in the FCI LLC Limited
Liability Company Agreement ("LLC Agreement").
The guaranteed return was calculated as simple interest at a rate per annum
equal to the lowest rate of interest available to AIT or any of its affiliates
from time-to-time under any of their respective existing credit facilities. Upon
liquidation of FCI LLC, allocations of annual net profits are allocated first to
the Class A and Class B owners to the extent required to adjust capital
accounts, then to the extent of cumulative net losses previously allocated in
accordance with certain capital contribution priorities set forth in the LLC
Agreement and thereafter 75% to Class A and 25% to Class B owners. Allocations
of annual net losses are allocated to the extent of cumulative net profits
previously allocated and then to the extent of owner's capital contributions and
thereafter to the Class A owner. Net losses allocated to the Class B owner may
not cause such owner's account to result in a deficit. FaciliCom may make
distributions after first paying any unpaid guaranteed return and then in
accordance with the owner's respective capital contributions and thereafter 75%
to the Class A owner and 25% to the Class B owner. Upon dissolution, the LLC
Agreement provides for liquidation of FCI LLC's assets and any distribution to
owners will be in accordance with the balance of their respective capital
accounts. Following distribution of assets, owners having a capital account with
a deficit balance shall be required to restore the account. The LLC Agreement
provides that FCI LLC shall terminate on December 31, 2025. In consideration of
all capital contributions made through September 30, 1997, the Class A and Class
B owners owned 15,390,000 and 3,610,000 membership interests in FCI LLC,
respectively, representing 81% and 19%, respectively, of such interests.
g. Foreign Currency Translation. For non-U.S. subsidiaries, the functional
currency is the local currency. Assets and liabilities of those operations are
translated into U.S. dollars using year-end exchange rates; income and expenses
are translated using the average exchange rates for the reporting period.
Translation adjustments are reported as a separate component of other
accumulated comprehensive income (loss). Exchange losses and gains resulting
from foreign currency transactions are included in the results of operations
based upon the provisions of SFAS No. 52, "Foreign Currency Translation."
h. Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-10
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FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
i. Revenue Recognition. FaciliCom records revenues from the sale of
telecommunications services at the time of customer usage based upon minutes of
traffic processed at contractual fees. FaciliCom has entered into, and continues
to enter into, operating agreements with telecommunications carriers in several
foreign countries under which international long distance traffic is both
delivered and received. Under these agreements, the foreign carriers are
contractually obligated to adhere to the policy of the FCC, whereby traffic from
the foreign country is routed to U.S. based international carriers, such as
FaciliCom, in the same proportion as traffic carried into the country. Mutually
exchanged traffic between FaciliCom and foreign carriers is settled through a
formal settlement policy at an agreed upon rate which allows for the offsetting
of receivables and payables with the same carrier (settlement on a net basis).
Although FaciliCom can reasonably estimate the revenue it will receive under the
FCC's proportional share policy, there is no guarantee that FaciliCom will
receive return traffic and FaciliCom is unable to determine what impact changes
in future settlement rates will have on net payments made and revenue received.
Accordingly, FaciliCom does not record this revenue until the service is
provided and the minutes of traffic are processed. FaciliCom recognizes revenues
from prepaid calling cards when earned.
j. Cost of Revenues. Cost of revenue includes network costs which consist
of access, transport and termination costs. Such costs are recognized when
incurred in connection with the provision of telecommunication services,
including costs incurred under operating agreements.
k. Interim Financial Information. The interim financial data as of June
30, 1999, and for the nine month periods ended June 30, 1999 and 1998, is
Unaudited. The information reflects all adjustments consisting only of normal,
recurring adjustments that, in the opinion of management, are necessary to
present fairly the financial position and results of operations of FaciliCom for
the periods indicated. Results of operations for the interim periods are not
necessarily indicative of the results of operations for the full year.
l. Stock-Based Compensation. FaciliCom accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion ("APBO") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost is
measured as the excess, if any, of the market price of FaciliCom's stock at the
date of grant (determined by a valuation report) over the amount an employee
must pay to acquire the stock.
m. Financial Instruments. FaciliCom has financial instruments, which
include cash and cash equivalents, marketable securities and long-term debt
obligations. The carrying values of these instruments in the balance sheets,
except for certain marketable securities and 10 1/2% Senior Notes due 2008 (the
"Notes") (see Note 4), approximated their fair market value. See Note 16 for
disclosure of fair market value for marketable securities. The estimated fair
value of FaciliCom's Notes at September 30, 1998 was $261.0 million and was
estimated using quoted market prices.
The fair values of the instruments were based upon quoted market prices of
the same or similar instruments or on the rate available to FaciliCom for
instruments of similar maturities.
n. Fiber Optic Cable Arrangements. FaciliCom obtains capacity on certain
fiber optic cables under three types of arrangements. The Indefeasible Right of
Use ("IRU") basis provides FaciliCom the right to use a fiber optic cable, with
most of the rights and duties of ownership, but without the right to control or
manage the facility and without any right to salvage or duty to dispose of the
cable at the end of its useful life. Because of this lack of control and an IRU
term approximates the estimated economic life of the asset, FaciliCom accounts
for such leases as leased transmission and communications equipment and as
capital leases. The Minimum Assignable Ownership Units ("MAOU") basis provides
FaciliCom an ownership interest in the fiber optic cable with certain rights to
control and to manage the facility. Because of the ownership features, FaciliCom
records these fiber optic cables as owned transmission and communications
equipment and as long-term debt. The Carrier Lease Agreement basis involves a
shorter
F-11
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FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
term agreement which provides FaciliCom the right to use capacity on a cable but
without any rights and duties of ownership. FaciliCom accounts for such leases
as operating leases.
o. Impact of Recently Issued Accounting Standards. In June 1997 the FASB
issued SFAS No. 130, "Reporting Comprehensive Income," which (i) establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-purpose
financial statements, and (ii) requires an enterprise to report a total for
comprehensive income in condensed financial statements of interim periods.
FaciliCom adopted SFAS No. 130 in fiscal 1999 and has elected to display the
components of Comprehensive Income within the Consolidated Statements of
Operations and Comprehensive Loss. Prior period amounts have been appropriately
disclosed.
In June 1997 the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. The statement is effective for fiscal years beginning after
December 15, 1997. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measuring those
instruments at fair value, with the potential effect on operations dependent
upon certain conditions being met. The statement (as amended by SFAS No. 137) is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The implementation of SFAS No. 131 is not expected to have a material impact on
FaciliCom's financial position or results of operations. FaciliCom has not
determined the impact that implementing SFAS No. 133 will have on FaciliCom's
financial position or results of operations.
p. Reclassifications. Certain amounts in the September 30, 1997 and 1996
consolidated financial statements have been reclassified to conform with the
presentation of the September 30, 1998 consolidated financial statements.
3. OPERATING DEFICIT AND MANAGEMENT'S PLANS:
FaciliCom had a net loss of approximately $46.6 million for the year ended
September 30, 1998. On January 28, 1998, FaciliCom issued $300 million aggregate
principal amount of the Notes. FaciliCom believes that the net proceeds from the
offering of the Notes, together with cash provided by operating activities and
vendor financing, will provide FaciliCom with sufficient capital to fund planned
capital expenditures and anticipated losses and to make interest payments on the
Notes through at least September 30, 1999.
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS:
Long-Term Debt. During 1997, FCI entered into an Equipment Loan and
Security Agreement with NTFC Capital Corporation ("NTFC") to finance up to
$5,000,000 for the purchase of transmission and communications equipment.
Interest was payable quarterly and was calculated based upon the London
Interbank Offering Rate ("LIBOR") plus 4%. Quarterly principal payments were to
commence on June 30, 1999. The loan was collateralized by the related equipment
purchased under such agreement. FaciliCom used a portion of the proceeds from
the offering of Notes to pay off the indebtedness under the Equipment Loan and
Security Agreement and the agreement was terminated.
During 1995, FCI entered into an equipment financing agreement with
Ericsson I.F.S. to purchase certain equipment. The original agreement was
amended and restated on December 30, 1996, to increase the borrowing limit to
$7,000,000 and certain terms were further revised on June 12, 1997 and
F-12
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FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
November 21, 1997. Interest was calculated based upon LIBOR plus 4%. Quarterly
principal payments were to commence on June 30, 1998. The loan was
collateralized by the related equipment purchased under the financing agreement.
FaciliCom used a portion of the proceeds from the offering of Notes to pay off
the indebtedness under the equipment financing agreement and the agreement was
terminated.
On January 28, 1998, FCI issued $300 million aggregate principal amount of
Notes bearing interest at 10 1/2% due 2008 pursuant to an Indenture (the
"Offering"). The Notes are unsecured obligations of FCI and interest on the
Notes is payable semiannually in arrears on January 15 and July 15 of each year,
commencing on July 15, 1998.
The Notes are redeemable at the option of FCI, in whole or in part at any
time on or after January 15, 2003, at specified redemption prices plus accrued
and unpaid interest. In addition, at any time prior to January 15, 2001, FCI,
may redeem from time to time up to 35% of the originally issued aggregate
principal amount of the Notes at the specified redemption prices with the net
cash proceeds (as defined in the Indenture) of one or more public equity
offerings. In the event of a change in control of ownership of FCI, Inc., each
holder of the Notes has the right to require FCI, to purchase all or any of such
holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount.
FCI used approximately $86.5 million of the proceeds from the Offering to
purchase investments consisting of U.S. Government Obligations, which are
pledged as security and restricted for the first six scheduled interest payments
on the Notes (see Note 16).
The Notes require maintenance of certain financial and nonfinancial
covenants, including limitations on additional indebtedness, restricted payments
including dividends, transactions with affiliates, liens and asset sales.
Long-term debt at September 30, 1998 and 1997 consists of the following
(dollars in thousands):
<TABLE>
<CAPTION>
INTEREST RATE 1998 1997
<S> <C> <C> <C>
Indenture notes, due 2008.......................... 10.5% $300,000 $ --
NTFC debt.......................................... LIBOR + 4% -- 7,116
Ericsson debt...................................... LIBOR + 4% -- 5,094
Cable capacity debt, due 2001...................... LIBOR + 4.5% 740 1,134
Other.............................................. Various -- 699
-------- -------
Sub-total.......................................... 300,740 14,043
Less: Current portion of long-term debt............ (394) (1,043)
-------- -------
$300,346 $13,000
======== =======
</TABLE>
The LIBOR rate was 5.3% and 5.8% on September 30, 1998 and 1997,
respectively.
Capital Leases. FaciliCom leases certain fiber optic cables under
agreements permitting the use of the cables over periods up to 25 years with
payment requirements over periods not exceeding five years. Payments are made
quarterly and interest is calculated at LIBOR plus 4% to 4.5%.
F-13
<PAGE> 190
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum payments on long-term debt and capital lease obligations at
September 30, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
DEBT LEASES
<S> <C> <C>
1999........................................................ $ 394 $4,195
2000........................................................ 346 4,065
2001........................................................ -- 650
2002........................................................ -- 221
2003........................................................ -- --
Thereafter.................................................. 300,000 --
-------- ------
Total future minimum payments............................... $300,740 9,131
========
Less: Amount representing interest (using September 30, 1998
LIBOR rate)............................................... (933)
------
$8,198
======
</TABLE>
5. INCOME TAXES:
At September 30, 1998, FaciliCom has approximately $2.6 million of
cumulative net operating losses ("NOLs") to offset future U.S. federal taxable
income and approximately $25.3 million of NOLs to offset future foreign taxable
income for those subsidiaries taxed in foreign jurisdictions. The U.S. NOLs
expire in fifteen years, while the foreign NOLs do not expire. A valuation
allowance was established for the deferred assets related to the NOLs at
September 30, 1998.
Deferred tax assets of approximately $3,130,000 at September 30, 1997 were
related to the NOL carryforwards of foreign subsidiaries taxed in foreign
jurisdictions totaling approximately $11,100,000. A valuation allowance was
established for the amount of deferred tax assets at September 30, 1997.
On December 22, 1997, FaciliCom adopted a tax sharing agreement with AHI,
whereby FaciliCom is obligated to file a consolidated federal income tax return
with AHI and subsidiaries. Under the Agreement, FCI is obligated to pay, with
certain exceptions, its share of the consolidated tax liability to AHI and FCI
will not be paid by AHI for tax benefits realized in the consolidated tax
return. At December 31, 1997, FCI had approximately $1,018,000 of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes that amounted to
approximately $393,000 and was recorded as a deferred tax liability and deferred
income tax expense for the change in tax status for the year ended September 30,
1998.
From December 23, 1997 through September 30, 1998, the period after the
change in tax status, FCI recorded a tax benefit of $12.1 million based upon
FaciliCom's losses expected to be utilized by AHI. The net benefit recorded was
passed through to AHI.
The components of loss before income taxes for the periods ended September
30, 1998, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Domestic................................................... $43,432 $ 6,978 $3,009
Foreign.................................................... 14,514 7,053 6,653
------- ------- ------
Total............................................ $57,946 $14,031 $9,662
======= ======= ======
</TABLE>
F-14
<PAGE> 191
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the income tax provision for the years ended September
30, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax-asset foreign NOLs............................. $ 2,010 $ 1,120
Valuation allowance......................................... (2,010) (1,120)
------- -------
$ -- $ --
======= =======
</TABLE>
A reconciliation of the total tax benefit with the amount computed by
applying the statutory federal income tax rate to the loss before taxes for the
year ended September 30, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
1998
<S> <C>
Loss applying statutory rate................................ $19,700
Permanent differences....................................... (3,693)
Foreign country taxes....................................... (302)
Change in tax status........................................ (393)
State taxes................................................. 226
Valuation allowance......................................... (4,187)
-------
Income tax benefit.......................................... $11,351
=======
</TABLE>
There are no pro forma income tax amounts presented giving effect to the
change in tax status for the statements of operations presented as FaciliCom
would have been a stand alone taxpaying entity and a valuation allowance would
have been established for any net deferred tax benefit related to net operating
losses.
The components of deferred tax assets and liabilities at September 30, 1998
and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax asset -- foreign NOLs.......................... $ 7,718 $ --
Deferred tax asset -- domestic NOLs......................... 1,065 3,130
Property and equipment...................................... 600 --
Stock-based compensation.................................... 2,522 --
Valuation allowance......................................... (11,905) (3,130)
-------- -------
$ -- $ --
======== =======
</TABLE>
F-15
<PAGE> 192
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. OPERATING LEASES:
FaciliCom leases office facilities and certain fiber optic cables and
switching facilities under noncancelable operating leases. Rental expense for
the fiscal years ended September 30, 1998, 1997, and 1996 was $21.9 million,
$4.7 million and $1.4 million, respectively, of which $19.2 million, $3.8
million and $1.1 million relates to fiber optic cable leases, which are
generally for less than one year. Future minimum lease payments under
noncancelable operating leases as of September 30, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................................ $ 3,864
2000........................................................ 3,733
2001........................................................ 3,599
2002........................................................ 3,247
2003........................................................ 2,955
Thereafter.................................................. 13,659
-------
Total....................................................... 31,057
Less: Subleases............................................. (1,087)
-------
$29,970
=======
</TABLE>
7. BORROWINGS FROM OWNERS:
At September 30, 1996, FaciliCom had outstanding interest-bearing working
capital advances from Armstrong totaling $1,549,000. On November 1, 1996, FCI
entered into a Convertible Line of Credit Agreement with Armstrong. The
outstanding advances were converted into borrowings under the line of credit
agreement. Under such agreement, FCI had a $15,000,000 credit facility of which
$5,000,000 was available in cash and $10,000,000 was available for letter of
credit needs. Armstrong had the right, at any time on or before October 31,
1999, to convert the entire principal amount of the cash loan into a maximum of
3.1% of additional ownership and convert the letter of credit balance
outstanding into a maximum additional 4.44% ownership. In 1997, Armstrong
converted the outstanding balance of $5,396,000 under the cash portion of the
agreement into an ownership interest.
At September 30, 1997, FCI had $10,000,000 for letter of credit needs of
which it had outstanding letters of credit of $6,136,000 under the Convertible
Line of Credit Agreement.
In 1997, FCI entered into a Bridge Loan Agreement with Armstrong in which
FCI could borrow up to $10,000,000. Interest was calculated based upon prime
plus 1%. The prime rate was 8.5% at September 30, 1997. The loan was due on
October 1, 1998. The outstanding balance at September 30, 1997 was $6,250,000.
During the year ended September 30, 1998, Armstrong converted the outstanding
balance of $6,250,000 into an ownership interest (see Note 1).
Additionally, as of September 30, 1996, FCI-Sweden had outstanding
convertible debentures in the amount of $480,000 to a minority stockholder of
both FCI-Sweden and FGC (the "Minority Stockholder"). Such convertible
debentures accrued interest at LIBOR plus 4%. Interest was payable annually on
September 30, with the full principal amount due on September 30, 2003. In
December 1996, these convertible debentures were assigned to FCI (see Note 8).
FCI's total interest expense under the above borrowings was $195,000,
$462,000 and $26,000 for the years ended September 30, 1998, 1997 and 1996,
respectively.
F-16
<PAGE> 193
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. OTHER RELATED PARTY TRANSACTIONS:
As of September 30, 1996, FCI had an outstanding advance to the Minority
Stockholder of $499,000.
As of September 30, 1996, FCI and the Minority Stockholder held $1,120,000
and $480,000, respectively, of FCI-Sweden debentures totaling $1,600,000 which
earned interest at LIBOR plus 4%. The holder of the debentures had the right to
convert the outstanding principal balance into FCI-Sweden common stock at a
predetermined price ranging from $200 to $250 per share.
On December 23, 1996, the Minority Stockholder assigned its right, title
and interest in the FCI-Sweden convertible debentures to FCI to satisfy the
outstanding advance due to FCI from the Minority Stockholder. On March 14, 1997,
FCI converted all of its FCI-Sweden convertible debentures into 7,400 shares of
FCI-Sweden common stock. On May 15, 1997, FCI-Sweden issued 14,400 additional
shares of common stock to FCI for consideration of $3,600,000. Such transactions
increased FCI's ownership in FCI-Sweden to 89.6%.
In March 1996, Tele8 Kontakt, a subsidiary of FCI at that time, was awarded
a license agreement from the Swedish government for certain rights relating to
communications systems and technology. During October 1996, FCI distributed its
rights under such license agreement to its owners.
FCI has contracted with AHI, since its inception, for the performance of
certain services by AHI for FCI, including but not limited to financial
accounting, professional and billing services. In May 1998, an agreement was
entered into for such services. The agreement expires on September 30, 2002.
Expenses related to such contracted services of approximately $1.6 million,
$439,000 and $7,000 are included in the statements of operations for the years
ended September 30, 1998, 1997 and 1996, respectively.
The terms of the agreements include professional services billed at hourly
rates, check processing at an amount per check and data center services based on
usage and disk storage space. FaciliCom believes that the terms of the
agreements are competitive with similar services offered in the industry.
As of September 30, 1998 an affiliate of AHI had issued letters of credits
on behalf of FaciliCom totaling $9.4 million.
9. BENEFIT PLANS:
Foreign Operations. Various foreign subsidiaries contribute to their
respective government pension funds, social insurance, medical insurance and
unemployment charters for their employees. The total contribution was $1.3
million, $781,000 and $563,000 for the years ended September 30, 1998, 1997 and
1996, respectively.
401(k). Employees of FCI may participate in a salary reduction (401(k)
plan administered by AHI. All contributions represent employee salary
reductions.
10. CONCENTRATION OF RISK:
Financial instruments that potentially subject FaciliCom to concentration
of credit risk are accounts receivable. Four of FaciliCom's customers accounted
for approximately 13.0% and 31.0% of gross accounts receivable as of September
30, 1998 and 1997, respectively. FaciliCom performs on-going credit evaluations
of its customers and in certain circumstances requires collateral to support
customer receivables. However, many of FaciliCom's customers, including these
four, are suppliers to whom FaciliCom has accounts payable that mitigate this
risk.
In addition, FaciliCom is dependent upon certain suppliers for the
provision of telecommunication services to its customers. FaciliCom has not
experienced, and does not expect, any disruption of such services.
F-17
<PAGE> 194
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Approximately 24% and 41% of FaciliCom's revenues for the years ended
September 30, 1997 and 1996, respectively, were derived from two customers each
with percentages in excess of 10%. No one customer represented 10% or more of
FaciliCom's revenues for the year ended September 30, 1998.
11. COMMITMENTS:
Equipment. At September 30, 1998, FaciliCom had outstanding commitments to
purchase certain switching equipment for approximately $15 million.
In May 1998, FaciliCom entered into a Memorandum of Understanding ("MOU")
with Qwest. The MOU incorporates agreements to provide Qwest with international
direct dial termination service to various destinations and provides FaciliCom
an indefeasible right of use ("IRU") for domestic and international fiber optic
capacity. Deliveries of capacity under the IRU began in March 1999. The IRU is
for twenty-five years, for which FaciliCom has agreed to pay $24 million.
Delivery of two of the capacity segments occurred during the nine month period
ended June 30, 1999. The delivery of the remaining capacity is expected by
September 30, 1999. FaciliCom has recorded a liability related to the two
capacity segments that were delivered during the nine month period ended June
30, 1999. In addition, during a three-year period, Qwest has the right of first
refusal pursuant to additional capacity purchases made by FaciliCom.
FaciliCom has also entered into two agreements that provide FaciliCom with
IRU's for international fiber optic capacity for Europe and the Pacific Rim.
Deliveries of the capacity under the agreements are expected prior to November
1999. The IRU's are for ten to fifteen years, for which FaciliCom has agreed to
pay approximately $41.6 million through September 30, 2002, of which $2.5
million has already been paid as a deposit and an additional $24.1 million is
expected to be paid in the fiscal year ended September 30, 1999.
Subsequent to September 30, 1998, FaciliCom agreed to acquire additional
capacity in Europe and Scandinavia for $8.6 million. Deliveries and payment of
the capacity under these agreements are expected by September 30, 1999.
12. CONTINGENCIES AND LITIGATION:
FaciliCom is involved in various claims and possible actions arising in the
normal course of its business. Although the ultimate outcome of these claims
cannot be ascertained at this time, it is the opinion of FaciliCom's management,
based on its knowledge of the facts and advice of counsel, that the resolution
of such claims and actions will not have a material adverse effect on
FaciliCom's financial condition or results of operations.
In August 1997, FaciliCom entered into a settlement agreement relating to
litigation arising from a certain 1996 FCI-Sweden international telephone
services agreement and related billing, collection and factoring agreements with
third parties. For the fiscal year ended September 30, 1996, selling, general
and administrative expenses includes approximately $708,000 of losses relating
to the settlement of which $500,000 represents a reserve on advances, paid at
the time of the settlement agreement, on behalf of the telephone service
company. Under the settlement agreement all of the above amounts were paid to
fully satisfy any amounts which may be owing from FaciliCom and the telephone
services company to a company under a factoring agreement. At the date of
settlement, the management of FaciliCom believed the amounts advanced to the
telephone services company were uncollectible. The settlement agreement also
provides for the factoring company to assign to FaciliCom any and all receivable
claims the factoring company may have against the billing and collection agent
("Agent"). FaciliCom filed a complaint against the Agent for breach of contract
and related claims pursuant to an agreement between FaciliCom and the
F-18
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FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Agent. The Agent placed in escrow the sum of $1,431,324. On May 8, 1998, the
balance of the escrow account was distributed among various entities. FaciliCom
received $791,000.
13. STOCK-BASED COMPENSATION:
Through December 22, 1997, certain employees and directors were eligible to
participate in a Performance Unit Plan established by FaciliCom, under which a
maximum of 1,254,000 units could have been granted. A unit is a right to receive
a cash payment equal to the excess of the fair market value of a unit on its
maturity date over the initial value of a unit. Fair market value of a unit as
determined by the management committee of FaciliCom. At September 30, 1997 and
1996, 484,500 and 152,000 units had been granted, respectively. Participants
vested in their units over a period not to exceed two years and were entitled to
receive cash compensation equivalent to the value of the units at the time a
participant retires provided the participant had 10 years of continuous service
or, if earlier, upon the occurrence of certain events, including a change in
control of FaciliCom. FaciliCom accrued to expense over the participant's
service vesting period (10 years) amounts based on the value of the unit at year
end. Amounts charged to expense for this plan for the year ended September 30,
1997 was $288,000. No amounts were expensed in prior years.
On December 22, 1997, the Board of Directors adopted the 1997 Phantom Stock
Rights Plan (the "Phantom Stock Plan"). The Phantom Stock Plan provided for the
granting of phantom stock rights ("Phantom Shares") to certain directors,
officers and key employees of FaciliCom and its subsidiaries. The total number
of Phantom Shares eligible for grant pursuant to the Phantom Stock Plan was
6,175, subject to adjustments for stock splits and stock dividends.
All of the units granted under FaciliCom's Performance Unit Plan were
exchanged for equivalent phantom rights with equivalent terms under the new
phantom rights plan. Accordingly, 4,845 Phantom Shares had been granted of which
3,182 had vested. All of the provisions of the Phantom Stock Plan including
vesting, forfeiture and cash settlement mirror the provisions of FaciliCom's
Performance Unit Plan.
On March 31, 1998, the Board of Directors adopted the FaciliCom
International, Inc. 1998 Stock Option Plan (the "1998 Stock Option Plan"). By
resolution of the Board of Directors on March 31, 1998, FaciliCom's Certificate
of Incorporation was amended to create 25,000 shares of a non-voting class of
common stock. At September 30, 1998, FaciliCom has 300,000 authorized shares, of
which 275,000 are a voting class of common stock.
The 1998 Stock Option Plan provides for the grant of options to purchase
shares of FaciliCom's non-voting common stock to certain directors, officers,
key employees and advisors of FaciliCom. The aggregate number of options that
may be granted under the 1998 Stock Option Plan is 22,574 and no option may be
granted after March 31, 2008. No option is exercisable within the first six
months of grant and options expire after ten years.
Also on March 31, 1998, all of the Phantom Shares previously granted to
employees of FaciliCom under FaciliCom's Phantom Stock Plan were converted to
options under the 1998 Stock Option Plan, and FaciliCom granted additional
options to purchase 6,448 shares of non-voting common stock to employees,
directors and advisors under the 1998 Stock Option Plan. The exchange of
employees' Phantom Shares for options resulted in additional compensation cost
for the incremental value of the new option amortized over the vesting period of
the option that is shorter than the service period of the Phantom Shares. Total
unrecognized compensation cost approximated $1,672,375 at time of conversion.
F-19
<PAGE> 196
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the stock option activity at September 30, 1998 is as follows:
<TABLE>
<CAPTION>
OPTION SHARES OPTION SHARES OPTION SHARES OPTION SHARES
(EXERCISE (EXERCISE PRICE (EXERCISE PRICE (EXERCISE PRICE
PRICE $1) $263) $500) $1,000)
<S> <C> <C> <C> <C>
Options granted March 31, 1998..... 9,918 670 705 --
Options granted June 1, 1998....... -- -- 30 --
Options granted July 1, 1998....... -- -- -- 200
----- --- --- ---
Options outstanding at September
30, 1998......................... 9,918 670 735 200
===== === === ===
Options exercisable at September
30, 1998......................... 9,490 380
===== ===
</TABLE>
All of the options outstanding at September 30, 1998 have a 10-year life
and an option price range from $1.00 to $1,000 per option share. The options
vest over a period up to 5 years and at September 30, 1998 there were 8,826
options granted that vested immediately. FaciliCom recognized compensation cost
of $5,706,000 as of September 30, 1998 relating to options granted and
recognized compensation cost of $311,592 for the year ended September 30, 1998
relating to FaciliCom's Phantom Stock plan. For the year ended September 30,
1998 compensation cost includes $2,112,640 for 3,401 options with an exercise
price of $1.00 granted to certain non-employee directors and advisors related to
certain directors of FaciliCom.
The fair value of options granted at September 30, 1998 was as follows:
<TABLE>
<CAPTION>
OPTION SHARES OPTION FAIR VALUE
EXERCISE PRICE AT DATE OF GRANT
<S> <C>
$ 1.................................................... $640
$ 263..................................................... $423
$ 500..................................................... $306
$1,000.................................................... $135
</TABLE>
The fair value of the option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The assumptions used in the
Black-Scholes model are: dividend yield 0%, volatility 30%, risk free interest
rate of 6%, assumed forfeiture rate of 0% and an expected life of 3 to 5 years.
If FaciliCom would have recorded compensation cost for FaciliCom's stock
option plan consistent with the fair value-based method of accounting prescribed
under SFAS No. 123 it would have had an immaterial effect on the net loss of
FaciliCom for the fiscal year ended September 30, 1998.
On October 1, 1998, FaciliCom granted options to purchase 1,702 shares at
exercise prices ranging from $1 to $950. The options vest over 1 to 5 years and
are exercisable for 10 years. Approximately $589,000 of compensation expense
will be recorded for the options.
14. VALUATION AND QUALIFYING ACCOUNTS:
Activity in FaciliCom's allowance accounts for the periods ended September
30, 1998, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
DOUBTFUL ACCOUNTS
ADDITIONS
---------------------------
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND CHARGED TO BALANCE AT
PERIOD EXPENSE OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
<S> <C> <C> <C> <C> <C>
1996......................... $ -- $ -- $ -- $ -- $ --
1997......................... $ -- $1,263 $ -- $(1,102) $ 161
1998......................... $161 $3,771 $745 $ (57) $4,620
</TABLE>
F-20
<PAGE> 197
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DEFERRED TAX ASSET VALUATION
--------------------------------
CHARGED TO
BALANCE AT COSTS AND BALANCE AT
BEGINNING OF PERIOD EXPENSE DEDUCTIONS END OF PERIOD
<S> <C> <C> <C> <C>
1996................................ $ -- $1,120 $ -- $ 1,120
1997................................ $1,120 $2,010 $ -- $ 3,130
1998................................ $3,130 $8,221 $ -- $11,351
</TABLE>
15. GEOGRAPHIC DATA:
FaciliCom operates as a provider of international long-distance
telecommunications services. FaciliCom is a multinational company operating in
many countries including the United States, the United Kingdom, Sweden, Denmark,
France, Germany and The Netherlands. Sales between geographic areas represent
the providing of services through carrying and ultimately termination of
customer traffic originated in the other geographic area and are accounted for
based on established sales prices. In computing operating loss for foreign
operations, no allocations of certain general corporate expenses have been made.
Summary information with respect to FaciliCom's geographic operations is as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1998 1997 1996
<S> <C> <C> <C>
NET REVENUE
North America........................................ $ 142,126 $ 56,315 $ 8,363
Europe............................................... 112,392 24,187 7,347
Eliminations......................................... (70,272) (10,315) (3,819)
--------- -------- -------
Total........................................ $ 184,246 $ 70,187 $11,891
========= ======== =======
OPERATING LOSS
North America........................................ $ (29,553) $ (6,337) $(2,936)
Europe............................................... (14,333) (5,023) (6,640)
--------- -------- -------
Total........................................ $ (43,886) $(11,360) $(9,576)
========= ======== =======
ASSETS
North America........................................ $ 488,649 $ 25,035 $ 9,431
Europe............................................... 150,992 21,824 13,042
Eliminations......................................... (260,757) (2,842) (1,465)
--------- -------- -------
Total........................................ $ 378,884 $ 44,017 $21,008
========= ======== =======
</TABLE>
16. MARKETABLE SECURITIES:
In accordance with SFAS 115, FaciliCom's debt securities are considered
either held-to-maturity or available-for-sale. Held-to-maturity securities
represent those securities that FaciliCom has both the positive intent and the
ability to hold to maturity, and are carried at amortized cost. This
classification includes those securities purchased and pledged for payment of
interest on the Notes. Available-for-sale securities represent those securities
that do not meet that classification of held-to-maturity, are not actively
traded and are carried at fair value. Unrealized gains and losses on these
securities are excluded from earnings and are reported as a separate component
of capital accounts until realized.
F-21
<PAGE> 198
FACILICOM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated fair value of the marketable securities
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-Maturity
U.S. Government Securities Maturing in 1
year or less............................. $ 31,394 $ 79 $ -- $ 31,473
Maturing between 1 and 3 years.............. 43,124 546 -- 43,670
-------- ------- ---- --------
Total held-to-maturity.............. 74,518 625 -- 75,143
-------- ------- ---- --------
Available-for-sale
Commercial paper............................ 6,887 -- -- 6,887
Government backed securities................ 31,787 24 -- 31,811
-------- ------- ---- --------
Total available-for-sale............ 38,674 24 -- 38,698
-------- ------- ---- --------
Total marketable securities......... $113,192 $ 649 $ -- $113,841
-------- ------- ---- --------
AS REPORTED SEPTEMBER 30, 1998 (IN THOUSANDS):
Current Assets:
Held-to-maturity (at amortized cost)................... $31,394
Available-for-sale (at fair value)..................... 38,698
-------
Total current assets........................... $70,092
=======
Noncurrent Assets:
Held-to-maturity (at amortized cost)................... $43,124
=======
Capital Accounts:
Holding gain on marketable securities.................. $ 24
=======
</TABLE>
At June 30, 1999, there were no available-for-sale securities.
17. OTHER EVENTS (UNAUDITED):
Revolving Credit Facility. On May 24, 1999, FaciliCom entered into a $35.0
million revolving credit facility (the "Credit Facility"), which is scheduled to
terminate on May 23, 2000. As of June 30, 1999, FaciliCom had $10.0 million
outstanding under the Credit Facility. The Credit Facility contains interest
rate options based upon LIBOR or Prime, plus applicable margin percentages. The
Credit Facility contains certain restrictive covenants.
Subsequent to June 30, 1999, FaciliCom replaced certain switching equipment
with newer equipment. As such, in the 4th quarter of fiscal year ending
September 30, 1999, FaciliCom will record approximately a $3.8 million
write-down for the remaining net book value of the replaced equipment.
Subsequent to June 30, 1999, FaciliCom canceled 539 shares of its
outstanding voting stock and, simultaneously, issued 2,379 options under the
1998 Stock Option Plan to certain advisors at an exercise price of $.01 per
share, which vested immediately. As such, FaciliCom will record a 4th quarter
charge of approximately $3.3 million for related compensation expense.
F-22
<PAGE> 199
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOVEMBER 5, 1999
[WORLD ACCESS, INC., LOGO]
EXCHANGE OFFER AND CONSENT SOLICITATION
OUTSTANDING 10 1/2% SERIES B SENIOR NOTES DUE 2008
OF
FACILICOM INTERNATIONAL, INC.
EXCHANGED FOR
13.25% SENIOR NOTES DUE 2008 AND COMMON STOCK
OF
WORLD ACCESS, INC. AND CASH
-----------------------------------------------------
PROSPECTUS
AND
CONSENT SOLICITATION
-----------------------------------------------------
The Exchange Agent for the Exchange Offer is:
FIRST UNION NATIONAL BANK
1525 West W.T. Harris Boulevard
3C3 NC-1153
Charlotte, North Carolina 28262
By Facsimile:
(704) 590-7628
For Confirmation and/or Information Call:
(704) 590-7408
Any questions concerning the terms of the Exchange Offer may be directed to
the Exchange Agent.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell any securities or our
solicitation of your offer to buy any securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of World Access
or FaciliCom have not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE> 200
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate or limit the personal liability of directors of a
corporation to the corporation or to any of its security holders for monetary
damages for a breach of fiduciary duty as a director, except (i) for breach of
the director's duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
certain unlawful dividends and stock repurchases, or (iv) for any transaction
from which the director derived an improper personal benefit.
Section 145 of the DGCL provides that in the case of any action other than
one by or in the right of the corporation, a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
in such capacity on behalf of another corporation or enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action 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.
Section 145 of the DGCL provides that in the case of an action by or in the
right of a corporation to procure a judgment in its favor, a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any action or suit by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation in such capacity on behalf of another corporation
or enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted under standards similar to those set forth in the
preceding paragraph, except that no indemnification may be made in respect of
any action or claim as to which such person shall have been adjudged to be
liable to the corporation unless a court determines that such person is fairly
and reasonably entitled to indemnification.
Articles X and XI of the World Access, Inc. Restated Certificate of
Incorporation provide for indemnification of directors, officers and employees
to the fullest extent permissible under the DGCL.
Officers and directors of World Access are presently covered by insurance
which (with certain exceptions and with certain limitations) indemnifies them
against any losses or liabilities arising from any alleged "wrongful act"
including any alleged breach of duty, neglect, error, misstatement, misleading
statement, omissions or other act done or wrongfully attempted. The cost of such
insurance is borne by World Access as permitted by the DGCL.
World Access has entered into separate indemnification agreements with its
directors and non-director officers at the level of Vice President and above.
These indemnification agreements provide as follows:
- there is a rebuttable presumption that the director or officer has met
the applicable standard of conduct required for indemnification;
- World Access will advance litigation expenses to a director or officer at
his request provided that he undertakes to repay the amount advanced if
it is ultimately determined that he is not entitled to indemnification
for such expenses;
- World Access will indemnify a director of officer for amounts paid in
settlement of a derivative suit;
- in the event of a determination by the disinterested members of the board
of directors or independent counsel that a director or officer did not
meet the standard of conduct required for indemnification, the director
or officer may contest this determination by petitioning a court or
II-1
<PAGE> 201
commencing any arbitration proceeding conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association to make an independent
determination of whether such director or officer is entitled to indemnification
under his indemnification agreement; and
- World Access will reimburse a director or officer for expenses incurred
enforcing his rights under his indemnification agreement.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits. The following exhibits are filed as part of this
registration statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of August 17, 1999,
among World Access, Inc., FaciliCom International, Inc.,
Armstrong International Telecommunications, Inc., Epic
Interests, Inc. and BFV Associates, Inc. (incorporated by
reference to Appendix A to World Access' Proxy Statement
dated November 5, 1999 relating to the Special Meeting of
Stockholders to be held on December 7, 1999).
3.1 -- Certificate of Incorporation of World Access and Amendments
to Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to World Access' Form S-4 filed October 6,
1998, Registration No. 333-65389, Amendment to Certificate
of Incorporation incorporated by reference to Exhibit 3.2 of
WA Telcom Products Co., Inc.'s ("Old World Access") Form 8-K
filed October 28, 1998).
3.2 -- Amendment to Certificate of Incorporation (incorporated by
reference to Exhibit 3.2 to World Access' Form 10-K for the
year ended December 31, 1998, filed April 9, 1999).
3.3 -- Bylaws of World Access (incorporated by reference to Exhibit
34.2 to World Access' Form S-4 filed October 6, 1998, No.
333-65389).
4.1 -- Indenture dated as of October 1, 1997 by and between World
Access, Inc. and First Union Bank, as trustee (incorporated
by reference to Exhibit 4.1 to Old World Access Form 8-K,
filed October 8, 1997).
4.2 -- First Supplemental Indenture dated October 28, 1998 between
World Access, Inc., WA Telcom Products Co., Inc. and First
Union Bank, as Trustee (incorporated by reference to Exhibit
4.1 to World Access' Form 8-K filed October 28, 1998).
4.3 -- Indenture between FaciliCom International, Inc. and State
Street Bank and Trust Company dated January 28, 1998.
4.4 -- First Supplemental Indenture, dated as of April 26, 1999, to
FaciliCom Indenture.
4.5 -- Form of Second Supplemental Indenture to FaciliCom
Indenture.
4.6 -- Form of Indenture between World Access, Inc. and First Union
National Bank, as Trustee.
4.7 -- Form of Collateral Pledge Agreement between World Access,
Inc. and First Union National Bank.
4.8 -- Agreement to Exchange and Consent, dated as of October 12,
1999 by and among World Access, FaciliCom and certain
holders of FaciliCom notes.
4.9 -- Voting Agreement, dated August 17, 1999 by and among
FaciliCom, Armstrong International Telecommunications, Inc.,
BFV Associates, Inc, Epic Interests, Inc., WorldCom Network
Services, The 1818 Fund and John D. Phillips (incorporated
by reference to Appendix C to World Access' Proxy Statement
dated November 5, 1999 relating to the Special Meeting of
Stockholders to be held on December 7, 1999).
4.10 -- Form of Stock Purchase Agreements, dated as of October 13,
1999, by and between World Access, Inc. and Gilbert Global
Equity Partners, L.P., Gilbert Global Equity Partners
(Bermuda) L.P., GGEP/GECC Equity Partners, L.P., Zilkha
Capital Partners, L.P., Erie Indemnity Company, Erie
Insurance Exchange, Geocapital V, L.P. and Ezra K. Zilkha.
</TABLE>
II-2
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
4.11 -- Form of Registration Rights Agreement between World Access,
Inc. and Armstrong International Telecommunications, Inc.,
BFV Associates, Inc., Epic Interests, Inc. and Anand Kumar
(incorporated by reference to Exhibit 6.3 to Appendix A to
World Access' Proxy Statement dated November 5, 1999
relating to the Special Meeting of Stockholders to be held
on December 7, 1999).
4.12 -- Form of Certificate of Designation of World Access, Inc.
Convertible Preferred Stock, Series C (incorporated by
reference to Exhibit 1.7(b) to Appendix A to World Access'
Proxy Statement dated November 5, 1999 relating to the
Special Meeting of Stockholders to be held on December 7,
1999).
4.13 -- Collateral Pledge and Security Agreement, dated as of
January 28, 1998 from FaciliCom International, Inc.,
pledgor, to State Street Bank and Trust Company, trustee.
5.1 -- Opinion of Long Aldridge & Norman LLP regarding legality of
notes and common stock.
8.1 -- Opinion of Long Aldridge & Norman LLP regarding certain tax
matters.
10.1 -- World Access, Inc. 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to Old World
Access' Registration Statement on Form S-8, filed on July
25, 1991, No. 33-41255-A).
10.2 -- Amendment to World Access, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to Old World
Access' Form 10-K for the year ended December 31, 1993,
filed March 31, 1994).
10.3 -- Second Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to Old World Access' Form 10-K for
the year ended December 31, 1993, filed March 31, 1994).
10.4 -- Third Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.26 to Old World Access' Form S-2,
Amendment No. 2, filed on February 14, 1995, No. 33-87026).
10.5 -- World Access, Inc. Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.40 to Old World
Access' Form 10-K for the year ended December 31, 1995,
filed April 10, 1996).
10.6 -- Directors' Warrant Incentive Plan (incorporated by reference
to Exhibit 10.41 to Old World Access' Form 10-K for the year
ended December 31, 1995, filed April 10, 1996).
10.7 -- Fourth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.32 to Old World Access' Form 10-K
for the year ended December 31, 1996, filed April 11, 1997).
10.8 -- Fifth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1996, filed April 11, 1997).
10.9 -- Amendment One to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.33 to Old World
Access' Form 10-K for the year ended December 31, 1996,
filed April 11, 1997).
10.10 -- Amendment One to Directors' Warrant Incentive Plan
(incorporated by reference to Exhibit 10.31 to Old World
Access' Form 10-K for the year ended December 31, 1996,
filed April 11, 1997).
10.11 -- Amendment Two to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.21 to Old World
Access' Form 10-K for the year ended December 31, 1997,
filed April 15, 1998).
10.12 -- Amendment Two to Directors' Warrant Incentive Plan
(incorporated by reference to Exhibit 10.22 to Old World
Access' Form 10-K for the year ended December 31, 1997,
filed April 15, 1998).
10.13 -- Sixth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.22 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.14 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Steven A. Odom (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
</TABLE>
II-3
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
10.15 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Hensley E. West (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.16 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Mark A. Gergel (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.17 -- License Agreement dated July 1, 1996, by and between
International Communication Technologies, Inc., World Access
and Eagle Telephonics, Inc. (incorporated by reference to
Exhibit 10.36 to Old World Access' Form 10-K for the year
ended December 31, 1996, filed April 11, 1997).
10.18 -- Agreement and Plan of Merger between and among World Access,
Inc. and CIS Acquisition Corp. and Thomas R. Canham; Brian
A. Schuchman; and Cellular Infrastructure Supply, Inc. (with
exhibits thereto) (incorporated by reference to Exhibit Z to
Old World Access' Form 8-K, filed April 10, 1997).
10.19 -- Registration Rights Agreement dated October 1, 1997 by and
between World Access, Inc., BT Alex Brown Incorporated and
Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.2 to Old World Access' Form 8-K,
filed October 8, 1997).
10.20 -- Agreement and Plan of Merger by and among World Access,
Inc., Cellular Infrastructure Supply, Inc., Advanced
TechCom, Inc. and Ernest H. Lin dated as of December 24,
1997 (incorporated by reference to Exhibit 2.1 to Old World
Access' Form 8-K, filed February 13, 1998).
10.21 -- Amendment Three to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.21 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.22 -- Executive Employment Agreement between World Access, Inc.
and Steven A. Odom dated as of December 14, 1998
(incorporated by reference to Exhibit 10.22 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.23 -- Executive Employment Agreement between World Access, Inc.
and Mark A. Gergel dated as of December 14, 1998
(incorporated by reference to Exhibit 10.23 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.24 -- Letter Agreement with Hensley E. West, dated as of December
14, 1998 (incorporated by reference to Exhibit 10.24 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.25 -- World Access, Inc. 1998 Incentive Equity Plan, as amended
(incorporated by reference to Exhibit 10.25 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.26 -- Assignment and Assumption Agreement dated October 29, 1998
between World Access, Inc. and WA Telcom Products Co., Inc.
(incorporated by reference to Exhibit 10.1 to World Access'
Form 8-K filed October 28, 1998).
10.27 -- Form of Indemnification Agreement with directors and
officers (incorporated by reference to Appendix H to World
Access' Joint Proxy Statement/Prospectus dated November 10,
1998 relating to the Special Meeting of Stockholders held on
November 30, 1998).
10.28 -- Schedule of all officers and directors who have signed an
Indemnification Agreement referred to in Exhibit 10.27
(incorporated by reference to Exhibit 10.28 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.29 -- Credit Agreement dated as of December 30, 1998 between Telco
Systems, Inc., World Access Holdings, Inc. and NationsBank,
N.A. as Administrative Agent and Fleet National Bank as
Syndication Agent and Bank Creditanstalt Corporate Finance,
Inc. (incorporated by reference to Exhibit 10.29 to World
Access' Form 10-K for the year ended December 31, 1998,
filed April 9, 1999).
</TABLE>
II-4
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
10.30 -- Guaranty dated as of December 30, 1998 between World Access,
Telco, World Access Holdings, Inc., NationsBank, N.A. as
Administrative Agent and the lenders party to the Credit
Agreement referred to in Exhibit 10.29 (incorporated by
reference to Exhibit 10.30 to World Access' Form 10-K for
the year ended December 31, 1998, filed April 9, 1999).
10.31 -- Pledge Agreement dated as of December 31, 1998 by World
Access in favor of NationsBank, N.A. as Administrative Agent
and the lenders party to the Credit Agreement referred to in
Exhibit 10.29 (incorporated by reference to Exhibit 10.31 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.32 -- Security Agreement dated as of December 31, 1998 by World
Access in favor of NationsBank, N.A. as Administrative Agent
and the lenders party to the Credit Agreement referred to in
Exhibit 10.29 (incorporated by reference to Exhibit 10.32 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.33 -- Disbursement Agreement dated as of December 14, 1998 by and
among World Access, Cherry Communications Incorporated
(d/b/a Resurgens Communications Group) and William H.
Cauthen, Esq. (incorporated by reference to Exhibit 10.33 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.34 -- Agreement and Plan of Merger and Reorganization by and among
World Access, Inc., WAXS INC., WA Merger Corp. and Cherry
Communications Incorporated (d/b/a Resurgens Communications
Group) dated as of May 12, 1998, as amended (incorporated by
reference to Appendix A to World Access' Proxy Statement
dated November 12, 1998 relating to the Special Meeting of
Stockholders held on December 14, 1998).
10.35 -- Share Exchange Agreement by and among World Access, Inc.,
WAXS INC., Cherry Communications U.K. Limited and
Renaissance Partners II, dated as of May 12, 1998
(incorporated by reference to Appendix B to World Access'
Proxy Statement dated November 12, 1998 relating to the
Special Meeting of Stockholders held on December 14, 1998).
12.1* -- Computation of Ratio of Earnings to Fixed Charges for World
Access.
12.2* -- Computation of Ratio of Earnings to Fixed Charges for
FaciliCom.
21.1* -- Subsidiaries of the Registrant.
23.1 -- Consent of Long Aldridge & Norman LLP (included in Exhibit
5.1).
23.2 -- Consent of Ernst & Young LLP with respect to the financial
statements of World Access, Inc.
23.3 -- Consent of Deloitte & Touche LLP with respect to the
financial statements of FaciliCom International, Inc.
23.4 -- Consent of PricewaterhouseCoopers LLP with respect to the
financial statements of World Access, Inc.
23.5 -- Consent of Ernst & Young LLP with respect to the financial
statements of Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) and Cherry Communications
U.K. Limited.
23.6 -- Consent of Grant Thornton LLP with respect to the financial
statements of Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) and Cherry Communications
U.K. Limited.
23.7 -- Consent of Ernst & Young LLP with respect to the financial
statements of Telco Systems, Inc.
23.8 -- Consent of KPMG LLP with respect to the financial statements
of NACT Telecommunications, Inc.
24.1* -- Power of Attorney of World Access.
25.1 -- Statement of eligibility of trustee of Exchange Notes.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agency Agreement.
99.4 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
</TABLE>
II-5
<PAGE> 205
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
99.5 -- Form of Letter to Clients.
99.6 -- Consent of Walter J. Burmeister.
99.7 -- Consent of Kirby J. Campbell.
99.8 -- Consent of Bryan Cipoletti.
99.9 -- Consent of Massimo Prelz Oltramonti.
99.10 -- Consent of John P. Rigas.
99.11 -- Consent of Dru A. Sedwick.
</TABLE>
- ---------------
* Previously filed.
(B) Financial Statement Schedule. The financial statements schedule that
is required by Regulation S-X is incorporated herein by reference to our Annual
Report on Form 10-K for the year ended December 31, 1998.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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 Securities Act
of 1933 and is, therefore, unenforceable. In 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 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE> 206
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 this 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 this registration statement when it became effective.
II-7
<PAGE> 207
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on November 5, 1999.
WORLD ACCESS, INC.
(formerly known as "WAXS INC.")
By: /s/ JOHN D. PHILLIPS
------------------------------------
John D. Phillips
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated as of November 5, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
<C> <S>
* Chairman, President and Chief Executive
- --------------------------------------------- Officer (Principal Executive Officer)
John D. Phillips
/s/ MARK A. GERGEL Director, Executive Vice President and Chief
- --------------------------------------------- Financial Officer (Principal Financial
Mark A. Gergel Officer)
* Vice President and Corporate Controller
- --------------------------------------------- (Principal Accounting Officer)
Martin D. Kidder
* Director
- ---------------------------------------------
Stephen J. Clearman
* Director
- ---------------------------------------------
John P. Imlay, Jr.
* Director
- ---------------------------------------------
Carl E. Sanders
* Director
- ---------------------------------------------
Lawrence C. Tucker
*By: /s/ MARK A. GERGEL
- ---------------------------------------------
Mark A. Gergel, Attorney-in-fact
</TABLE>
II-8
<PAGE> 208
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of August 17, 1999,
among World Access, Inc., FaciliCom International, Inc.,
Armstrong International Telecommunications, Inc., Epic
Interests, Inc. and BFV Associates, Inc. (incorporated by
reference to Appendix A to World Access' Proxy Statement
dated November 5, 1999 relating to the Special Meeting of
stockholders to be held on December 7, 1999).
3.1 -- Certificate of Incorporation of World Access and Amendments
to Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 to World Access' Form S-4 filed October 6,
1998, Registration No. 333-65389, Amendment to Certificate
of Incorporation incorporated by reference to Exhibit 3.2 of
WA Telcom Products Co., Inc.'s ("Old World Access") Form 8-K
filed October 28, 1998).
3.2 -- Amendment to Certificate of Incorporation (incorporated by
reference to Exhibit 3.2 to World Access' Form 10-K for the
year ended December 31, 1998, filed April 9, 1999).
3.3 -- Bylaws of World Access (incorporated by reference to Exhibit
34.2 to World Access' Form S-4 filed October 6, 1998, No.
333-65389).
4.1 -- Indenture dated as of October 1, 1997 by and between World
Access, Inc. and First Union Bank, as trustee (incorporated
by reference to Exhibit 4.1 to Old World Access Form 8-K,
filed October 8, 1997).
4.2 -- First Supplemental Indenture dated October 28, 1998 between
World Access, Inc., WA Telcom Products Co., Inc. and First
Union Bank, as Trustee (incorporated by reference to Exhibit
4.1 to World Access' Form 8-K filed October 28, 1998).
4.3 -- Indenture between FaciliCom International, Inc. and State
Street Bank and Trust Company dated January 28, 1998.
4.4 -- First Supplemental Indenture, dated as of April 26, 1999, to
FaciliCom Indenture.
4.5 -- Form of Second Supplemental Indenture to FaciliCom
Indenture.
4.6 -- Form of Indenture between World Access, Inc. and First Union
National Bank, as Trustee.
4.7 -- Form of Collateral Pledge Agreement between World Access,
Inc. and First Union National Bank.
4.8 -- Agreement to Exchange and Consent, dated as of October 12,
1999 by and among World Access, FaciliCom and certain
holders of FaciliCom notes.
4.9 -- Voting Agreement, dated August 17, 1999 by and among
FaciliCom, Armstrong International Telecommunications, Inc.,
BFV Associates, Inc, Epic Interests, Inc., WorldCom Network
Services, The 1818 Fund and John D. Phillips (incorporated
by reference to Appendix C to World Access' Proxy Statement
dated November 5, 1999 relating to the Special Meeting of
Stockholders to be held on December 7, 1999.
4.10 -- Form of Stock Purchase Agreements, dated as of October 13,
1999, by and between World Access, Inc. and Gilbert Global
Equity Partners, L.P., Gilbert Global Equity Partners
(Bermuda) L.P., GGEP/GECC Equity Partners, L.P., Zilkha
Capital Partners, L.P., Erie Indemnity Company, Erie
Insurance Exchange, Geocapital V, L.P. and Ezra K. Zilkha.
4.11 -- Form of Registration Rights Agreement between World Access,
Inc. and Armstrong International Telecommunications, Inc.,
BFV Associates, Inc., Epic Interests, Inc. and Anand Kumar
(incorporated by reference to Exhibit 6.3 to Appendix A to
World Access' Proxy Statement dated November 5, 1999
relating to the Special Meeting of Stockholders to be held
on December 7, 1999).
4.12 -- Form of Certificate of Designation of World Access, Inc.
Convertible Preferred Stock, Series C (incorporated by
reference to Exhibit 1.7(b) to Appendix A to World Access'
Proxy Statement dated November 5, 1999 relating to the
Special Meeting of Stockholders to be held on December 7,
1999).
4.13 -- Collateral Pledge and Security Agreement, dated as of
January 28, 1998 from FaciliCom International, Inc.,
pledgor, to State Street Bank and Trust Company, trustee.
</TABLE>
II-9
<PAGE> 209
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
5.1 -- Opinion of Long Aldridge & Norman LLP regarding legality of
exchange notes and common stock.
8.1 -- Opinion of Long Aldridge & Norman LLP regarding certain tax
matters.
10.1 -- World Access, Inc. 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.1 to Amendment No. 1 to Old World
Access' Registration Statement on Form S-8, filed on July
25, 1991, No. 33-41255-A).
10.2 -- Amendment to World Access, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to Old World
Access' Form 10-K for the year ended December 31, 1993,
filed March 31, 1994).
10.3 -- Second Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.3 to Old World Access' Form 10-K for
the year ended December 31, 1993, filed March 31, 1994).
10.4 -- Third Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.26 to Old World Access' Form S-2,
Amendment No. 2, filed on February 14, 1995, No. 33-87026).
10.5 -- World Access, Inc. Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.40 to Old World
Access' Form 10-K for the year ended December 31, 1995,
filed April 10, 1996).
10.6 -- Directors' Warrant Incentive Plan (incorporated by reference
to Exhibit 10.41 to Old World Access' Form 10-K for the year
ended December 31, 1995, filed April 10, 1996).
10.7 -- Fourth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.32 to Old World Access' Form 10-K
for the year ended December 31, 1996, filed April 11, 1997).
10.8 -- Fifth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1996, filed April 11, 1997).
10.9 -- Amendment One to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.33 to Old World
Access' Form 10-K for the year ended December 31, 1996,
filed April 11, 1997).
10.10 -- Amendment One to Directors' Warrant Incentive Plan
(incorporated by reference to Exhibit 10.31 to Old World
Access' Form 10-K for the year ended December 31, 1996,
filed April 11, 1997).
10.11 -- Amendment Two to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.21 to Old World
Access' Form 10-K for the year ended December 31, 1997,
filed April 15, 1998).
10.12 -- Amendment Two to Directors' Warrant Incentive Plan
(incorporated by reference to Exhibit 10.22 to Old World
Access' Form 10-K for the year ended December 31, 1997,
filed April 15, 1998).
10.13 -- Sixth Amendment to 1991 Stock Option Plan (incorporated by
reference to Exhibit 10.22 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.14 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Steven A. Odom (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.15 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Hensley E. West (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.16 -- Severance Protection Agreement dated November 1, 1997 by and
between World Access, Inc. and Mark A. Gergel (incorporated
by reference to Exhibit 10.33 to Old World Access' Form 10-K
for the year ended December 31, 1997, filed April 15, 1998).
10.17 -- License Agreement dated July 1, 1996, by and between
International Communication Technologies, Inc., World Access
and Eagle Telephonics, Inc. (incorporated by reference to
Exhibit 10.36 to Old World Access' Form 10-K for the year
ended December 31, 1996, filed April 11, 1997).
</TABLE>
II-10
<PAGE> 210
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
10.18 -- Agreement and Plan of Merger between and among World Access,
Inc. and CIS Acquisition Corp. and Thomas R. Canham; Brian
A. Schuchman; and Cellular Infrastructure Supply, Inc. (with
exhibits thereto) (incorporated by reference to Exhibit Z to
Old World Access' Form 8-K, filed April 10, 1997).
10.19 -- Registration Rights Agreement dated October 1, 1997 by and
between World Access, Inc., BT Alex Brown Incorporated and
Prudential Securities Incorporated (incorporated by
reference to Exhibit 10.2 to Old World Access' Form 8-K,
filed October 8, 1997).
10.20 -- Agreement and Plan of Merger by and among World Access,
Inc., Cellular Infrastructure Supply, Inc., Advanced
TechCom, Inc. and Ernest H. Lin dated as of December 24,
1997 (incorporated by reference to Exhibit 2.1 to Old World
Access' Form 8-K, filed February 13, 1998).
10.21 -- Amendment Three to Outside Directors' Warrant Plan
(incorporated by reference to Exhibit 10.21 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.22 -- Executive Employment Agreement between World Access, Inc.
and Steven A. Odom dated as of December 14, 1998
(incorporated by reference to Exhibit 10.22 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.23 -- Executive Employment Agreement between World Access, Inc.
and Mark A. Gergel dated as of December 14, 1998
(incorporated by reference to Exhibit 10.23 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.24 -- Letter Agreement with Hensley E. West, dated as of December
14, 1998 (incorporated by reference to Exhibit 10.24 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.25 -- World Access, Inc. 1998 Incentive Equity Plan, as amended
(incorporated by reference to Exhibit 10.25 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.26 -- Assignment and Assumption Agreement dated October 29, 1998
between World Access, Inc. and WA Telcom Products Co., Inc.
(incorporated by reference to Exhibit 10.1 to World Access'
Form 8-K filed October 28, 1998).
10.27 -- Form of Indemnification Agreement with directors and
officers (incorporated by reference to Appendix H to World
Access' Joint Proxy Statement/Prospectus dated November 10,
1998 relating to the Special Meeting of Stockholders held on
November 30, 1998).
10.28 -- Schedule of all officers and directors who have signed an
Indemnification Agreement referred to in Exhibit 10.27
(incorporated by reference to Exhibit 10.28 to World Access'
Form 10-K for the year ended December 31, 1998, filed April
9, 1999).
10.29 -- Credit Agreement dated as of December 30, 1998 between Telco
Systems, Inc., World Access Holdings, Inc. and NationsBank,
N.A. as Administrative Agent and Fleet National Bank as
Syndication Agent and Bank Creditanstalt Corporate Finance,
Inc. (incorporated by reference to Exhibit 10.29 to World
Access' Form 10-K for the year ended December 31, 1998,
filed April 9, 1999).
10.30 -- Guaranty dated as of December 30, 1998 between World Access,
Telco, World Access Holdings, Inc., NationsBank, N.A. as
Administrative Agent and the lenders party to the Credit
Agreement referred to in Exhibit 10.29 (incorporated by
reference to Exhibit 10.30 to World Access' Form 10-K for
the year ended December 31, 1998, filed April 9, 1999).
10.31 -- Pledge Agreement dated as of December 31, 1998 by World
Access in favor of NationsBank, N.A. as Administrative Agent
and the lenders party to the Credit Agreement referred to in
Exhibit 10.29 (incorporated by reference to Exhibit 10.31 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.32 -- Security Agreement dated as of December 31, 1998 by World
Access in favor of NationsBank, N.A. as Administrative Agent
and the lenders party to the Credit Agreement referred to in
Exhibit 10.29 (incorporated by reference to Exhibit 10.32 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
</TABLE>
II-11
<PAGE> 211
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<C> <C> <S>
10.33 -- Disbursement Agreement dated as of December 14, 1998 by and
among World Access, Cherry Communications Incorporated
(d/b/a Resurgens Communications Group) and William H.
Cauthen, Esq. (incorporated by reference to Exhibit 10.33 to
World Access' Form 10-K for the year ended December 31,
1998, filed April 9, 1999).
10.34 -- Agreement and Plan of Merger and Reorganization by and among
World Access, Inc., WAXS INC., WA Merger Corp. and Cherry
Communications Incorporated (d/b/a Resurgens Communications
Group) dated as of May 12, 1998, as amended (incorporated by
reference to Appendix A to World Access' Proxy Statement
dated November 12, 1998 relating to the Special Meeting of
Stockholders held on December 14, 1998).
10.35 -- Share Exchange Agreement by and among World Access, Inc.,
WAXS INC., Cherry Communications U.K. Limited and
Renaissance Partners II, dated as of May 12, 1998
(incorporated by reference to Appendix B to World Access'
Proxy Statement dated November 12, 1998 relating to the
Special Meeting of Stockholders held on December 14, 1998).
12.1* -- Computation of Ratio of Earnings to Fixed Charges for World
Access.
12.2* -- Computation of Ratio of Earnings to Fixed Charges for
FaciliCom.
21.1* -- Subsidiaries of the Registrant.
23.1 -- Consent of Long Aldridge & Norman LLP (included in Exhibit
5.1).
23.2 -- Consent of Ernst & Young LLP with respect to the financial
statements of World Access, Inc.
23.3 -- Consent of Deloitte & Touche LLP with respect to the
financial statements of FaciliCom International, Inc.
23.4 -- Consent of PricewaterhouseCoopers LLP with respect to the
financial statements of World Access, Inc.
23.5 -- Consent of Ernst & Young LLP with respect to the financial
statements of Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) and Cherry Communications
U.K. Limited.
23.6 -- Consent of Grant Thornton LLP with respect to the financial
statements of Cherry Communications Incorporated (d/b/a
Resurgens Communications Group) and Cherry Communications
U.K. Limited.
23.7 -- Consent of Ernst & Young LLP with respect to the financial
statements of Telco Systems, Inc.
23.8 -- Consent of KPMG LLP with respect to the financial statements
of NACT Telecommunications, Inc.
24.1* -- Power of Attorney of World Access (included in the signature
pages hereto).
25.1 -- Statement of eligibility of trustee of Exchange Notes.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agency Agreement.
99.4 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.5 -- Form of Letter to Clients.
99.6 -- Consent of Walter J. Burmeister.
99.7 -- Consent of Kirby J. Campbell.
99.8 -- Consent of Bryan Cipoletti.
99.9 -- Consent of Massimo Prelz Oltramonti.
99.10 -- Consent of John P. Rigas.
99.11 -- Consent of Dru A. Sedwick.
</TABLE>
- ---------------
* Previously filed.
II-12
<PAGE> 1
Exhibit 4.3
================================================================================
FACILICOM INTERNATIONAL, INC.,
Issuer
TO
STATE STREET BANK AND TRUST COMPANY,
Trustee
----------------------
Indenture
Dated as of January 28, 1998
----------------------
$300,000,000
10 1/2% Senior Notes due 2008
10 1/2% Series B Senior Notes due 2008
================================================================================
<PAGE> 2
FACILICOM INTERNATIONAL, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January 28, 1998
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
(S) 310(a)(1).............................................. 607
(a)(2).............................................. 607
(b)................................................. 608
(S) 312(c)................................................. 701
(S) 314(a)................................................. 703
(a)(4).............................................. 1008(a)
(c)(1).............................................. 102
(c)(2).............................................. 102
(e)................................................. 102
(S) 315(b)................................................. 601
(S) 316(a)(last sentence).................................. 101 ("Outstanding")
(a)(1)(A)........................................... 502, 512
(a)(1)(B)........................................... 513
(b)................................................. 508
(c)................................................. 104(d)
(S) 317(a)(1).............................................. 503
(a)(2).............................................. 504
(b)................................................. 1003
(S) 318(a)................................................. 111
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES............................................................................ 1
RECITALS OF THE COMPANY............................................................ 1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION....................................... 1
SECTION 101. Definitions................................................. 1
SECTION 102. Compliance Certificates and Opinions........................ 22
SECTION 103. Form of Documents Delivered to Trustee...................... 23
SECTION 104. Acts of Holders............................................. 23
SECTION 105. Notices, Etc., to Trustee, Company.......................... 25
SECTION 106. Notice to Holders; Waiver................................... 25
SECTION 107. Effect of Headings and Table of Contents.................... 25
SECTION 108. Successors and Assigns...................................... 26
SECTION 109. Separability Clause......................................... 26
SECTION 110. Benefits of Indenture....................................... 26
SECTION 111. Governing Law............................................... 26
SECTION 112. Legal Holidays.............................................. 26
ARTICLE TWO NOTE FORMS................................................... 27
SECTION 201. Forms Generally............................................. 27
SECTION 202. Restrictive Legends......................................... 28
ARTICLE THREE THE NOTES.................................................... 30
SECTION 301. Title and Terms............................................. 30
SECTION 302. Denominations............................................... 31
SECTION 303. Execution, Authentication, Delivery and Dating.............. 31
SECTION 304. Temporary Notes............................................. 32
SECTION 305. Registration, Registration of Transfer and Exchange......... 32
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes................. 34
SECTION 307. Payment of Interest; Interest Rights Preserved.............. 34
SECTION 308. Persons Deemed Owners....................................... 36
SECTION 309. Cancellation................................................ 36
SECTION 310. Computation of Interest..................................... 36
SECTION 311. Book-Entry Provisions for Global Notes...................... 36
SECTION 312. Transfer Provisions......................................... 38
ARTICLE FOUR SATISFACTION AND DISCHARGE................................... 41
SECTION 401. Satisfaction and Discharge of Indenture..................... 41
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 402. Application of Trust Money.................................. 42
ARTICLE FIVE REMEDIES..................................................... 43
SECTION 501. Events of Default.......................................... 43
SECTION 502. Acceleration of Maturity; Rescission and Annulment......... 45
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee............................................... 45
SECTION 504. Trustee May File Proofs of Claim........................... 46
SECTION 505. Trustee May Enforce Claims Without Possession of Notes..... 47
SECTION 506. Application of Money Collected............................. 47
SECTION 507. Limitation on Suits........................................ 48
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest..................................... 48
SECTION 509. Restoration of Rights and Remedies......................... 49
SECTION 510. Rights and Remedies Cumulative............................. 49
SECTION 511. Delay or Omission Not Waiver............................... 49
SECTION 512. Control by Holders......................................... 49
SECTION 513. Waiver of Past Defaults.................................... 50
SECTION 514. Waiver of Stay or Extension Laws........................... 50
ARTICLE SIX THE TRUSTEE................................................. 50
SECTION 601. Notice of Defaults......................................... 50
SECTION 602. Certain Rights of Trustee.................................. 51
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Notes................................................. 52
SECTION 604. May Hold Notes............................................. 53
SECTION 605. Money Held in Trust........................................ 53
SECTION 606. Compensation and Reimbursement............................. 53
SECTION 607. Corporate Trustee Required; Eligibility.................... 54
SECTION 608. Resignation and Removal; Appointment of Successor.......... 54
SECTION 609. Acceptance of Appointment by Successor..................... 55
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business.............................................. 56
ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY........... 56
SECTION 701. Disclosure of Names and Addresses of Holders............... 56
SECTION 702. Reports by Trustee......................................... 57
SECTION 703. Reports by Company......................................... 57
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE....... 58
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms....... 58
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 802. Successor Substituted...................................... 59
SECTION 803. Notes to Be Secured in Certain Events...................... 59
ARTICLE NINE SUPPLEMENTAL INDENTURES..................................... 59
SECTION 901. Supplemental Indentures Without Consent of Holders......... 59
SECTION 902. Supplemental Indentures with Consent of Holders............ 60
SECTION 903. Execution of Supplemental Indentures....................... 61
SECTION 904. Effect of Supplemental Indentures.......................... 61
SECTION 905. Conformity with Trust Indenture Act........................ 62
SECTION 906. Reference in Notes to Supplemental Indentures.............. 62
SECTION 907. Notice of Supplemental Indentures.......................... 62
ARTICLE TEN COVENANTS................................................... 62
SECTION 1001. Payment of Principal, Premium, if Any, and Interest....... 62
SECTION 1002. Maintenance of Office or Agency........................... 62
SECTION 1003. Money for Note Payments to Be Held in Trust............... 63
SECTION 1004. Corporate Existence....................................... 64
SECTION 1005. Payment of Taxes and Other Claims......................... 64
SECTION 1006. Maintenance of Properties................................. 65
SECTION 1007. Insurance................................................. 65
SECTION 1008. Statement by Officers as to Default....................... 65
SECTION 1009. Provision of Financial Statements and Reports............. 66
SECTION 1010. Repurchase of Notes upon Change of Control................ 66
SECTION 1011. Limitation on Indebtedness................................ 68
SECTION 1012. Limitation on Restricted Payments......................... 71
SECTION 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries....................... 73
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries................................. 75
SECTION 1015. Limitation on Transactions with Stockholders
and Affiliates.......................................... 75
SECTION 1016. Limitation on Liens....................................... 76
SECTION 1017. Limitation on Asset Sales................................. 76
SECTION 1018. Limitation on Issuances of Guarantees of Indebtedness
by Restricted Subsidiaries.............................. 78
SECTION 1019. Business of the Company; Restriction on Transfers
of Existing Business.................................... 79
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries.... 79
SECTION 1021. Limitation on Sale-Leaseback Transactions................. 79
SECTION 1022. Waiver of Certain Covenants............................... 80
ARTICLE ELEVEN REDEMPTION OF NOTES......................................... 80
</TABLE>
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<TABLE>
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<S> <C> <C>
SECTION 1101. Right of Redemption....................................... 80
SECTION 1102. Applicability of Article.................................. 80
SECTION 1103. Election to Redeem; Notice to Trustee..................... 81
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.............. 81
SECTION 1105. Notice of Redemption...................................... 81
SECTION 1106. Deposit of Redemption Price............................... 82
SECTION 1107. Notes Payable on Redemption Date.......................... 82
SECTION 1108. Notes Redeemed in Part.................................... 83
ARTICLE TWELVE SECURITY.................................................... 83
SECTION 1201. Security.................................................. 83
ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE.......................... 84
SECTION 1301. Company's Option to Effect Defeasance or Covenant
Defeasance.............................................. 84
SECTION 1302. Defeasance and Discharge.................................. 85
SECTION 1303. Covenant Defeasance....................................... 85
SECTION 1304. Conditions to Defeasance or Covenant Defeasance........... 85
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions..... 87
SECTION 1306. Reinstatement............................................. 88
</TABLE>
TESTIMONIUM
SIGNATURES AND SEALS
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate to Be Delivered upon Termination of Restricted
Period
EXHIBIT C Form of Regulation S Certificate
SCHEDULE A
-iv-
<PAGE> 7
INDENTURE, dated as of January 28, 1998, between FACILICOM
INTERNATIONAL, INC., a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal office
at 1401 New York Avenue, NW, 8th Floor, Washington, D.C. 20005, as issuer, and
STATE STREET BANK AND TRUST COMPANY, a trust company duly organized and existing
under the laws of The Commonwealth of Massachusetts, Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 10
1/2% Senior Notes due 2008 (the "Initial Notes"), and its 10 1/2% Series B
Senior Notes due 2008 (the "Exchange Notes" and, together with the Initial
Notes, the "Notes"), of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
Upon the issuance of Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
<PAGE> 8
2
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a 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 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 such Asset Acquisition shall not be
considered as Indebtedness.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Armstrong" means Armstrong Holdings, Inc., which owns
Armstrong International Telecommunications, Inc., of which the Company is a
majority owned indirect Subsidiary.
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person (other than the Company or any of its
Restricted Subsidiaries) that constitute substantially all of a division or line
of business of such Person.
<PAGE> 9
3
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute a division or line of business
of the Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Capital Stock of any
Restricted Subsidiary (other than in respect of any director's qualifying shares
or investments by foreign nationals mandated by applicable law), (ii) all or
substantially all of the property and assets of an operating unit or business of
the Company or any of its Restricted Subsidiaries or (iii) any other property
and assets of the Company or any of its Restricted Subsidiaries outside the
ordinary course of business of the Company or such Restricted Subsidiary and, in
each case, that is not governed by Article Eight and which, in the case of any
of clause (i), (ii) or (iii) above, whether in one transaction or a series of
related transactions, (a) have a fair market value in excess of $1 million or
(b) are for net proceeds in excess of $1 million; provided that sales or other
dispositions of inventory, receivables and other current assets in the ordinary
course of business shall not be included within the meaning of "Asset Sale".
"Attributable Value" means, as to any particular lease under
which any Person is at the time liable other than a Capitalized Lease
Obligation, and at any date as of which the amount thereof is to be determined,
the total net amount of rent required to be paid by such person under such lease
during the remaining term thereof (whether or not such lease is terminable at
the option of the lessee prior to the end of such term), including any period
for which such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall be
the aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Attributable Value" means, as to a Capitalized Lease Obligation under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the capitalized amount thereof that would appear on the face
of a balance sheet of such Person in accordance with GAAP.
"Average Life" means, with respect to any Indebtedness, as at
any date of determination, the quotient obtained by dividing (i) the sum of the
products of (a) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness and (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
<PAGE> 10
4
"Board of Directors" means the board of directors of the
Company or its equivalent, including managers of a limited liability company,
general partners of a partnership or trustees of a business trust, or any duly
authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by
the secretary or any assistant secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or The City of Boston are authorized or obligated by law or executive order
to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Certificated Notes" has the meaning specified in Section 201.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than Armstrong or FMG) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total
voting power of the then outstanding Voting Stock of the Company on a fully
diluted basis; (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 transaction or a series
of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole to any such "person" or "group"
(other than to the Company or a Restricted Subsidiary); (iv) the merger or
consolidation of the Company, with or into another corporation or the merger of
another corporation with or into the Company in one or a series of related
transactions with the effect that immediately after such transaction any such
"person" or "group" of persons or entities shall have become the beneficial
owner of securities of the surviving corporation of such merger or consolidation
representing a majority of the total
<PAGE> 11
5
voting power of the then outstanding Voting Stock of the surviving corporation;
or (v) the adoption of a plan relating to the liquidation or dissolution of the
Company.
"Change of Control Offer" has the meaning specified in Section
1010.
"Change of Control Payment" has the meaning specified in
Section 1010.
"Change of Control Payment Date" has the meaning specified in
Section 1010.
"Closing Date" means the date on which the Initial Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) of such Person's common stock, whether
now outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its chairman, its president, any
Vice President, its treasurer or any assistant treasurer, and delivered to the
Trustee.
"Consolidated Cash Flow" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Consolidated Net Income (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iv) depreciation expense, to the extent such amount was
deducted in calculating Consolidated Net Income, (v) amortization expense, to
the extent such amount was deducted in calculating Consolidated Net Income, and
(vi) all other non-cash items reducing Consolidated Net Income (excluding any
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period), less all non-cash items increasing
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charges" means, for any period,
Consolidated Interest Expense plus dividends declared and payable on Preferred
Stock.
<PAGE> 12
6
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with any Interest Rate
Agreements; and interest on Indebtedness that is Guaranteed or secured by the
Company or any of its Restricted Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period.
"Consolidated Net Income" means, with respect to any Person,
for any period, the consolidated net income (or loss) of such Person and its
Restricted Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (i) all extraordinary gains or losses, (ii) net income (or
loss) of any Person combined in such Person or one of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iii) gains or losses (on an after-tax basis) in
respect of any Asset Sales by such Person or one of its Restricted Subsidiaries,
(iv) the net income of any Restricted Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its stockholders, (v) any gain or loss realized as a
result of the cumulative effect of a change in accounting principles, (vi) any
amount paid or accrued as dividends on Preferred Stock of the Company or
Preferred Stock of any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries and (vii) the net income (or
loss) of any Person (other than net income (or loss) attributable to a
Restricted Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
of its Restricted Subsidiaries by such other Person during such period.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of the Capital Stock of the Company or any of its Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the principal corporate trust
operations office of the Trustee, at which at any particular time its corporate
trust business shall be administered,
<PAGE> 13
7
which office at the date of execution of this Indenture is located at 225
Franklin Street, Boston Massachusetts 02110, Attention: Corporate Trust
Department.
"corporation" includes corporations, associations, companies
and business trusts.
"covenant defeasance" has the meaning specified in Section
1303.
"Credit Facilities" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" means, for the period
beginning on the Closing Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"Cumulative Consolidated Fixed Charges" means the Consolidated
Fixed Charges of the Company and its Restricted Subsidiaries for the period
beginning on the Closing Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, determined on a consolidated basis in accordance with GAAP.
"Cumulative Consolidated Interest Expense" means, for the
period beginning on the Closing Date through and including the end of the last
fiscal quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, Consolidated Interest Expense of the Company and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement and any other arrangement and agreement designed to
provide protection against fluctuations in currency (or currency unit) values.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1302.
"Depositary" means The Depository Trust Company, its nominees
and successors or any replacement thereof.
<PAGE> 14
8
"Eligible Accounts Receivable" means the accounts receivable
(net of any reserves and allowances for doubtful accounts in accordance with
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 GAAP.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, and has outstanding debt with a rating of "A-3"
or higher according to Moody's Investors Service, Inc., or "A-" or higher
according to Standard & Poor's Ratings Services (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)), at the time as of which any
investment or rollover therein is made.
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1017.
"Excess Proceeds Offer" has the meaning specified in Section
1017.
"Excess Proceeds Payment" has the meaning specified in Section
1017.
"Excess Proceeds Payment Date" has the meaning specified in
Section 1017.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that such Exchange Notes
shall not contain terms with respect to transfer restrictions and shall be
registered under the Securities Act) that are issued and exchanged for the
Initial Notes in accordance with the Exchange Offer, as provided for in the
Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders
of the Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness outstanding on the
date hereof.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
<PAGE> 15
9
"FMG" means FCI Management Group, a Pennsylvania general
partnership and holder of a minority interest in the Company.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession of the United States.
"Global Notes" means any of the Rule 144A Global Notes or
Regulation S Global Notes.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" means a Person in whose name a Note is registered in
the Register.
"Incur" or "Incurrence" means, with respect to any
Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become
liable for or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an Incurrence of
Indebtedness by reason of the acquisition of more than 50% of the Capital Stock
of any Person; provided that neither the accrual of interest nor the accretion
of original issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Lease Obligations and the Attributable Value under any
Sale-Leaseback Transaction of such Person, (vi) all Indebtedness of other
Persons secured by a
<PAGE> 16
10
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination or (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such
Person, (viii) the maximum fixed redemption or repurchase price of Redeemable
Stock of such Person at the time of determination and (ix) to the extent not
otherwise included in this definition, obligations under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation;
provided (x) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (y) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indenture" means this instrument and the Pledge Agreement as
originally executed and as they may from time to time be supplemented or amended
by one or more indentures supplemental hereto and pledge agreements supplemental
thereto entered into pursuant to the applicable provisions hereof.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" has the meaning stated in the first recital of
this Indenture.
"Initial Purchasers" means Lehman Brothers Inc. and BT Alex.
Brown Incorporated.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreements" means any interest rate swap
agreements, interest rate cap agreements, interest rate insurance, and other
arrangements and agreements designed to provide protection against fluctuations
in interest rates.
"Interest Rate Protection Obligations" means the obligations
of any Person pursuant to any Interest Rate Agreements.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of
<PAGE> 17
11
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person. For purposes of
the definition of "Unrestricted Subsidiary" and Sections 1012 and 1014, (i)
"Investment" shall include (a) the fair market value of the assets (net of
liabilities) of any Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary of the Company is designated an Unrestricted Subsidiary
and shall exclude the fair market value of the assets (net of liabilities) of
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company and (b) the fair market value,
in the case of a sale of Capital Stock in accordance with Section 1014 such that
a Person no longer constitutes a Restricted Subsidiary, of the remaining assets
(net of liabilities) of such Person after such sale, and shall exclude the fair
market value of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined by the Board of Directors in good
faith.
"IRU" means Indefeasible Right of Use, which is the right to
use a telecommunications system with most of the rights and duties of ownership,
but without the right to control or manage such facility and, depending upon the
particular agreement, without any right to salvage or duty to dispose of such
system's cable at the end of its useful life.
"Issue Date" means January 28, 1998, the date the Initial
Notes are initially issued.
"Lien" means any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance upon or with respect to
any property of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"MAOU" means Minimum Assignable Ownership Units which is
capacity on a telecommunications system that has been acquired on an ownership
basis.
"Marketable Securities" means: (i) U.S. Government Obligations
which have a remaining weighted average life to maturity of not more than one
year from the date of Investment therein; (ii) any time deposit account, money
market deposit and certificate of deposit maturing not more than 180 days after
the date of acquisition issued by, or time deposit of, an Eligible Institution;
(iii) certificates of deposit, Eurodollar time deposits and bankers' acceptances
with maturity of 90 days or less and overnight bank deposits of any financial
institution that is organized under the laws of the United States of America or
any state hereof, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $300 million (or, to the extent
non-United States dollar denominated, the United States Dollar Equivalent of
<PAGE> 18
12
such amount) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one " nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act); (iv)
commercial paper maturing not more than 180 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Company) with a rating,
at the time as of which any investment therein is made, of "P-1" or higher
according to Moody's Investors Service, Inc., or "A-1" or higher according to
Standard & Poor's Ratings Services (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)); (v) auction rate preferred securities whose
rates are reset based on market level for a par security not more than 90 days
after the date of acquisition with a rating, at the time as of which any
investment therein is made, of "A-3" or higher according to Moody's Investors
Service, Inc., or "A-" or higher according to Standard & Poor's Ratings Services
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) and issued by a corporation that is not an Affiliate of the Company; (vi)
any banker's acceptance or money market deposit accounts issued or offered by an
Eligible Institution; (vii) repurchase obligations with a term of not more than
seven days for U.S. Government Obligations entered into with an Eligible
Institution; (viii) any obligations of the Trustee to the extent such
obligations qualify as such under clauses (i) through (vii) above and (ix) any
fund investing exclusively in investments of the types described in clauses (i)
through (viii) above.
"Maturity", when used with respect to any Notes, means the
date on which the principal of such Notes or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption or otherwise.
"Maturity Date" means January 15, 2008.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes payable as a result of such Asset Sale without regard to the consolidated
results of operations of the Company and its Restricted Subsidiaries, taken as a
whole (after taking into account any available offsetting tax credits or
deductions and an tax sharing arrangements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any 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
<PAGE> 19
13
conformity with GAAP, and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"Notes" means any of the Notes as defined in the first recital
of this Indenture and more particularly means any Notes authenticated and
delivered under this Indenture.
"Officer's Certificate" means a certificate signed by the
chairman, the president, a Vice President, the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1302
and 1303, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Thirteen; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands the Notes are valid obligations of the Company;
<PAGE> 20
14
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by Section 313 of the TIA, Notes
owned by the Company or any other obligor upon the Notes or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee actually knows to be so owned shall be so disregarded. Notes so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Notes and that the pledgee is not the Company or any
other obligor upon the Notes or any Affiliate of the Company or such other
obligor.
"Participant" means, with respect to the Depositary or its
nominee, an institution that has an account therewith.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Notes on behalf of the Company. The initial Paying
Agent shall be the Trustee.
"Payment Account" has the meaning specified in Section 402.
"Permitted Business" means any business involving voice, data
and other telecommunications services.
"Permitted Indebtedness" has the meaning specified in Section
1011(b).
"Permitted Investment" means (i) an Investment in a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into, or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; (ii) any Investment in Marketable Securities or
Pledged Securities; (iii) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP; (iv) loans or advances to officers and
employees made in the ordinary course of business that do not in the aggregate
exceed $1 million at any time outstanding; (v) stock, obligations or securities
received in satisfaction of judgments; (vi) Investments in any Person received
as consideration for Asset Sales to the extent permitted under Section 1017;
(vii) Investments in any Person at any one time outstanding (measured on the
date each such Investment was made without giving effect to subsequent changes
in value) in an aggregate amount not to exceed the greater of (A) $15 million or
(B) 5% of the Company's total consolidated assets; (viii) Investments in
deposits with respect to leases or utilities provided to third parties in the
ordinary course of business; (ix) Investments in Currency Agreements and
Interest Rate Agreements on commercially reasonable terms entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
in connection with the operation of the business of the Company or its
Restricted Subsidiaries; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any
<PAGE> 21
15
time other than as a result of fluctuations in foreign currency exchange rates
or interest rates or by reason of fees, indemnities and compensation payable
thereunder; (x) repurchases or redemptions by the Company of Capital Stock from
officers and other employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such individuals, in an aggregate amount not exceeding $1 million
in any calendar year and $3 million from the date of this Indenture; and (xi)
Investments in evidences of Indebtedness, securities or other property received
from another Person by the Company or any of its Restricted Subsidiaries in
connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such Person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for evidences of
Indebtedness, securities or other property of such Person held by the Company or
any of its Subsidiaries, or for other liabilities or obligations of such Person
to the Company or any of its Subsidiaries that were created, in accordance with
the terms of this Indenture.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property purchased or leased after the Closing Date;
provided that (a) such Lien is created solely for the purpose of securing
Indebtedness Incurred in compliance with Section 1011 (1) to finance the cost
(including the cost of design, development, construction, acquisition,
installation or integration) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (2) to refinance any Indebtedness previously
so secured, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating
<PAGE> 22
16
to such property or assets; (ix) any interest or title of a lessor in the
property subject to any Capitalized Lease Obligation or operating lease; (x)
Liens arising from filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of stock or Indebtedness of, any
corporation existing at the time such corporation becomes, or becomes a part of,
any Restricted Subsidiary; provided that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other than
the property or assets acquired and were not created in contemplation of such
transaction; (xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary of the Company that does not give rise to
an Event of Default; (xiv) Liens securing reimbursement obligations with respect
to letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xv) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xvi) Liens
encumbering customary initial deposits and margin deposits and other Liens that
are either within the general parameters customary in the industry or incurred
in the ordinary course of business, in each case, securing Indebtedness under
Interest Rate Agreements and Currency Agreements; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business in accordance with the past practices of the
Company and its Restricted Subsidiaries prior to the Closing Date; (xviii) Liens
existing on the Closing Date or securing the Notes or any Guarantee of the
Notes; (xix) Liens granted after the Closing Date on any assets or Capital Stock
of the Company or its Restricted Subsidiaries created in favor of the Holders;
(xx) Liens securing Indebtedness which is incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (viii) of paragraph
(b) of Section 1011; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced; and (xxi) Liens
securing Indebtedness under Credit Facilities incurred in compliance with clause
(iv) of paragraph (b) of Section 1011.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge Account" means an account established with the Trustee
in its name as Trustee hereunder pursuant to the terms of the Pledge Agreement
for the deposit of the Pledged Securities purchased by the Company with a
portion of the net proceeds from the Offering.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the date of this Indenture, from the Company to the
Trustee, governing the Pledge Account and the disbursement of funds therefrom.
"Pledged Securities" means the securities purchased by the
Company with a portion of the net proceeds from the Offering, which shall
consist of U.S. Government Obligations, to be deposited in the Pledge Account.
The Pledged Securities may be held in book-entry form through State Street Bank
and Trust Company acting as securities intermediary.
<PAGE> 23
17
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations, rights or other equivalents (however
designated, whether voting or non-voting) of such Person's preferred or
preference stock, whether now outstanding or issued after the date of the
Indenture, including, without limitation, all series and classes of such
preferred or preference stock.
"Private Placement Legend" has the meaning specified in
Section 202.
"Pro Forma Consolidated Cash Flow" means, for any period, the
Consolidated Cash Flow of the Company for such period calculated on a pro forma
basis to give effect to any Asset Disposition or Asset Acquisition not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Disposition or Asset Acquisition had taken place on the first day of such
period.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Money Indebtedness" means the principal of, premium,
if any, and interest on, and any other payment obligations in respect of, any
Indebtedness of the Company incurred to finance the purchase of plant, property,
equipment, machinery or similar assets (including, without limitation,
indebtedness for money borrowed for such purpose and indebtedness in respect of
installment payment arrangements).
"Purchase Price" has the meaning set forth in Section 1010.
"Qualified Institutional Buyers" or "QIBs" has the meaning set
forth in Section 201.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms (or by the terms of any security into which it
is exchangeable) or otherwise is (i) required to be redeemed on or prior to the
date that is 123 days after the date of the Stated Maturity of the Notes, (ii)
redeemable at the option of the holder of such class or series of Capital Stock
at any time on or prior to the date that is 123 days after the date of the
Stated Maturity of the Notes or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity on or prior to the date that is 123 days after the date of
the Stated Maturity of the Notes; provided that any Capital Stock that would not
<PAGE> 24
18
constitute Redeemable Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring on or prior
to the date that is 123 days after the date of the Stated Maturity of the Notes
shall not constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 1010 and 1017
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provisions, on or prior to
the date that is 123 days after the date of the Company's repurchase of such
Notes as are required to be repurchased pursuant to Sections 1010 and 1017.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Register" and "Registrar" have the respective meanings
specified in Section 305.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and between the Initial
Purchasers and the Company, concerning the registration and exchange of the
Notes, a conformed copy of which has been delivered to the Trustee.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 1 or July 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificated Notes" has the meaning specified in
Section 201.
"Regulation S Global Notes" has the meaning specified in
Section 201.
"Regulation S Permanent Global Notes" has the meaning
specified in Section 201.
"Regulation S Temporary Global Notes" has the meaning
specified in Section 201.
"Responsible Officer", when used with respect to the Trustee,
means any officer of its corporate trust department or similar group having
direct responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust
<PAGE> 25
19
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning specified in Section
1012.
"Restricted Period" has the meaning specified in Section 201.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A Certificated Notes" has the meaning specified in
Section 201.
"Rule 144A Global Notes" has the meaning specified in Section
201.
"Sale-Leaseback Transaction" of any person means an
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by such person of any property or asset of such
person which has been or is being sold or transferred by such person after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangements may be terminated by the lessee
without payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
<PAGE> 26
20
"Telecommunications Assets" means, with respect to any Person,
equipment used in the telecommunications business or ownership rights with
respect to IRUs, MAOUs or minimum investment units (or similar ownership
interests) in fiber optic cable and international or domestic telecommunications
switches or other transmission facilities (or Common Stock of a Person that
becomes a Restricted Subsidiary, the Assets of which consist primarily of any
such Telecommunications Assets), in each case purchased or acquired through a
Capitalized Lease Obligation by the Company or a Restricted Subsidiary after the
Closing Date.
"Tested Transaction" has the meaning stated in the definition
of "United States Dollar Equivalent".
"TMG" means Telecommunications Management Group, Inc., a
company that has provided consulting services to the Company from time to time
and of which two executive officers of the Company are co-founders and
significant shareholders.
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed, except
as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect in New York State.
"United States Dollar Equivalent" means, with respect to any
monetary amount in a currency other than the United States dollar, at any time
for the determination thereof, the amount of United States dollars obtained by
converting such foreign currency involved in such computation into United States
dollars at the spot rate for the purchase of United States dollars with the
applicable foreign currency as quoted by Reuters at approximately 11:00 a.m.
(New York City time) on the date not more than two business days prior to such
determination. For purposes of determining whether any Indebtedness can be
incurred (including Permitted Indebtedness), any Investment can be made and any
transaction described in Section 1015 can be undertaken (a "Tested
Transaction"), the United States Dollar Equivalent of such Indebtedness,
<PAGE> 27
21
Investment or transaction described in Section 1015 will be determined on the
date Incurred, made or undertaken and no subsequent change in the United States
Dollar Equivalent shall cause such Tested Transaction to have been Incurred,
made or undertaken in violation of this Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided (A) that the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such Subsidiary
has assets greater than $1,000, that such designation would be permitted under
Section 1012, and such Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
the first paragraph of Section 1011 and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"U.S. Government Obligations" has the meaning specified in
Section 1304.
"U.S. Person" has the meaning given to such term in Regulation
S under the Securities Act.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
<PAGE> 28
22
"Wholly Owned", with respect to any Subsidiary, means a
Subsidiary of the Company if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by the Company or one or
more Wholly Owned Subsidiaries of the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
<PAGE> 29
23
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
<PAGE> 30
24
Act, but the Company shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall b the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the
date 30 days prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is completed. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Notes have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the Outstanding Notes shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 105. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other
<PAGE> 31
25
Holders. Any notice mailed to a Holder in the manner herein prescribed shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and "agreements" in this Indenture by the
Company shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Notes Registrar and their successors hereunder, and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York. Upon the
issuance of Exchange Notes, if any, or the effectiveness of the Shelf
Registration Statement, this Indenture will be subject to the provisions of the
Trust Indenture Act that are required to be part of this Indenture and shall, to
the extent applicable, be governed by such provisions. Each of the parties
hereto submits to the jurisdiction of the U.S. federal and any New York state
court located in the Borough of Manhattan, The City
<PAGE> 32
26
and State of New York with respect to any actions brought against it as
defendant in any suit, action or proceeding arising out of or relative to this
Indenture or the Notes and waives any rights to which it may be entitled on
account of place of residence or domicile.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
sinking fund payment date or Stated Maturity or Maturity of any Note shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or of the Notes) payment of principal (or premium, if any) or interest need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on such Interest Payment Date, Redemption
Date or sinking fund payment date, or at the Stated Maturity or Maturity;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date, sinking fund payment date, Stated
Maturity or Maturity, as the case may be.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange agreements to which the Company
is subject or usage. The Company shall approve the form of the Notes and any
notation, legend or endorsement on the Notes. Each Note shall be dated the date
of its authentication.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold to qualified institutional buyers
("Qualified Institutional Buyers" or "QIBs") in reliance on Rule 144A under the
Securities Act shall be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Rule 144A Global Notes"), registered in the name of the Depositary or
the nominee of the Depositary, deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Rule 144A Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, in
accordance with the instructions given by the Holder thereof, as hereinafter
provided.
<PAGE> 33
27
Notes offered and sold in offshore transactions in reliance on
Regulation S under the Securities Act shall be issued initially in the form of
one or more temporary global Notes ("Regulation S Temporary Global Note") in
registered form substantially in the form set forth in Exhibit A, registered in
the name of the Depositary or the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. At any time following
March 9, 1998 (the "Restricted Period"), upon receipt by the Trustee and the
Company of a certificate substantially in the form of Exhibit B hereto, one or
more permanent global Notes in registered form substantially in the form set
forth in Exhibit A (the "Regulation S Permanent Global Notes"; and together with
the Regulation S Temporary Global Notes, the "Regulation S Global Notes"), duly
executed by the Company and authenticated by the Trustee as hereinafter
provided, shall be deposited with the Trustee, as custodian for the Depositary,
and the Registrar shall reflect on its books and records the date and a decrease
in the principal amount of the Regulation S Temporary Global Note in an amount
equal to the principal amount of the beneficial interest in the Regulation S
Temporary Global Note transferred.
Notes issued pursuant to Section 312 in exchange for interests
in Rule 144A Global Notes shall be issued in the form of permanent certificated
Notes in registered form in substantially the form set forth in Exhibit A (the
"Rule 144A Certificated Notes"). Notes issued pursuant to Section 312 in
exchange for interests in the Regulation S Global Notes shall be in the form of
permanent certificated Notes in registered form substantially in the form set
forth in Exhibit A (the "Regulation S Certificated Notes").
The Regulation S Certificated Notes and Rule 144A Certificated
Notes are sometimes collectively herein referred to as the "Certificated Notes".
The Rule 144A Global Notes and the Regulation S Global Notes are sometimes
collectively referred to herein as the "Global Notes". Ownership of beneficial
interests in Global Notes will be limited to Participants or Indirect
Participants.
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 202. Restrictive Legends.
Unless and until a Note is exchanged for an Exchange Note in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, Rule 144A Global Notes, Regulation S Temporary Global Notes
and each Rule 144A Certificated Note shall bear the following legend (the
"Private Placement Legend") on the face thereof:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED,
<PAGE> 34
28
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 NOTE BY ITS
ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS
PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY
PREDECESSOR NOTE OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR NOTE OF
THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESTRICTED PERIOD") OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR
SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER, IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM
APPEARING ON THE REVERSE SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE SIDE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESTRICTED PERIOD. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
<PAGE> 35
29
UNLESS THIS CERTIFICATE IS PRESENTED, BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $300,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304,
305, 306, 906, 1010, 1017 or 1108.
The Initial Notes shall be known and designated as the "10
1/2% Senior Notes due 2008" of the Company and the Exchange Notes shall be known
and designated as the "10 1/2% Series B Senior Notes due 2008" of the Company.
The Stated Maturity of the principal of the Notes shall be January 15, 2008 and
they shall bear interest at the rate of 10 1/2% per annum, payable on January 15
and July 15 of each year, commencing on July 15, 1998, until the principal
thereof is paid or duly provided for Interest on the Notes will accrue from the
most recent Interest Payment Date for which interest has been paid or, if no
interest has been paid, from the Issue Date.
The principal of (and premium and Liquidated Damages, if any)
and interest on the Notes shall be payable at the office or agency of the
Company maintained for such purpose pursuant to Section 1002, or, at the option
of the Company, interest may be paid by check mailed
<PAGE> 36
30
to addresses of the Persons entitled thereto as such addresses shall appear on
the Register; provided that all payments with respect to the Global Notes and
Certificated Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
chairman, its president, chief financial officer or any Vice President. The
signature of any of these officers on the Notes may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Initial Notes executed by
the Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Initial Notes directing the Trustee to
authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Notes. On Company Order, the Trustee shall authenticate for
original issue Exchange Notes in an aggregate principal amount not to exceed
$300,000,000; provided that such Exchange Notes shall be issuable only upon the
valid surrender for cancellation of Initial Notes of a like aggregate principal
amount in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement and a Company Order for the authentication of such securities
certifying that all conditions precedent to the issuance have been complied with
(including the effectiveness of a registration statement related thereto). In
each case, the Trustee shall be entitled to receive an Officer's Certificate and
an Opinion of Counsel of the Company that it may reasonably request in
connection with such authentication of Notes. Such order shall specify the
amount of Notes to be authenticated and the date on which the original issue of
Initial Notes or Exchange Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
<PAGE> 37
31
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication, substantially in the form provided for in Exhibit
A, duly executed by the Trustee by manual signature of an authorized officer,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety in a transaction or a series of transactions to any Person, and the
successor Person resulting from such consolidation, or surviving such merger, or
into which the Company shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like principal amount;
and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Notes as specified in such request for the purpose of
such exchange. If Notes shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Notes, such successor
Person, at the option of the Holders but without expense to them, shall provide
for the exchange of all Notes at the time Outstanding for Notes authenticated
and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002 without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
<PAGE> 38
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SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. At all reasonable times, the Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar (the
"Registrar") for the purpose of registering Notes and transfers of Notes as
herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Notes which the Holder making the
exchange is entitled to receive; provided that no exchange of Initial Notes for
Exchange Notes shall occur until an Exchange Offer Registration Statement shall
have been declared effective by the Commission, the Trustee shall have received
an Officer's Certificate confirming that the Exchange Offer Registration
Statement has been declared effective by the Commission and the Initial Notes to
be exchanged for the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed and be accompanied by a written
instrument of transfer, in form satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 304, 906, 1010, 1017 or 1108 not
involving any transfer.
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The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section 1104
and ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any Note
so selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon Company Order the Trustee shall authenticate and deliver,
in exchange for any such mutilated Note or in lieu of any such destroyed, lost
or stolen Note, a new Note of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 306, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 306 in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section 306 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name such Note (or Predecessor Notes) is registered at the close of
business on the Regular Record Date (or if a Predecessor Note is outstanding on
such Regular Record Date, such Predecessor Note) for such interest at the office
or agency of the Company maintained for such purpose pursuant to Section 1002
or, at the option of the Company, interest may be paid by check mailed to the
address of
<PAGE> 40
34
the Person entitled thereto as such address shall appear on the Register;
provided that all payments with respect to Global Notes and Certificated Notes
the Holders of which have given wire transfer instructions to the Company will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by virtue
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Notes (such
defaulted interest and interest thereon herein collectively called "Defaulted
Interest") may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date ("Special Record Date") for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Note and the date of the proposed payment,
and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
given in the manner provided for in Section 106 not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so given, such Defaulted Interest shall be paid to the Persons in
whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section 307, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall
<PAGE> 41
35
carry the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to, and promptly cancelled by, the Trustee. The Company may at any
time deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Notes previously authenticated hereunder
which the Company has not issued and sold, and all Notes so delivered shall be
promptly cancelled by the Trustee. If the Company shall so acquire any of the
Notes, however, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section, except as expressly permitted by this Indenture. All cancelled
Notes held by the Trustee shall be disposed of by the Trustee in accordance with
its customary procedures and certification of their disposal delivered to the
Company unless by Company Order the Company shall direct that cancelled Notes be
returned to it after being appropriately designated as cancelled.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 202.
Except as provided in Section 311(b), owners of beneficial
interests in the Global Notes will not have Notes registered in their names,
will not receive physical delivery of Notes in
<PAGE> 42
36
certificated form and will not be considered the registered owner or Holder
thereof under this Indenture for any purpose.
Members of, or Participants in, the Depositary shall have no
rights under this Indenture with respect to any Global Note, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Note. The registered Holder of a Global Note may grant proxies and
otherwise authorize any person, including Participants and persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Notes
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note shall
be limited to transfers of such Global Note in whole, but not in part, to the
Depositary, a nominee of the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
in accordance with the rules and procedures of the Depositary and the provisions
of Section 312 hereof. Rule 144A Certificated Notes and Regulation S
Certificated Notes shall be transferred to beneficial owners in exchange for
their beneficial interests in the Rule 144A Global Note(s) or the Regulation S
Global Note(s), as the case may be, if (i) the Depositary (A) notifies the
Company that it is unwilling or unable to continue as depository for the Global
Notes and the Company thereupon fails to appoint a successor depository or (B)
has ceased to be clearing agency registered under the Exchange Act; (ii) there
shall have occurred and be continuing an Event of Default with respect to the
Notes; or (iii) the Company, at its option, notifies the Trustee in writing that
it elects to cause issuance of the Notes in certificated form; provided that in
no event shall the Regulation S Temporary Global Note be exchanged by the
Company for Certificated Notes prior to (x) the end of the Restricted Period and
(y) receipt by the Trustee and the Company of a certificate substantially in the
form of Exhibit B hereto. In connection with a transfer of an entire Global Note
to beneficial owners pursuant to clause (i), (ii) or (iii) of this paragraph
(b), the applicable Global Note shall be deemed to be surrendered to the Trustee
for cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the applicable Global Note, an equal
aggregate principal amount of Rule 144A Certificated Notes (in the case of the
Rule 144A Global Note) or Regulation S Certificated Notes (in the case of the
Regulation S Global Note), as the case may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
<PAGE> 43
37
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) Any Rule 144A Certificated Note delivered in exchange for
an interest in the Rule 144A Global Note pursuant to paragraph (b) of this
Section shall, unless such exchange is made on or after the date which is two
years following the date hereof, or such shorter period of time as permitted
under Rule 144(k) under the Securities Act, and except as otherwise provided in
Section 312, bear the Private Placement Legend.
SECTION 312. Transfer Provisions.
Unless and until a Note is exchanged for an Exchange Note in
connection with an effective Registration Statement pursuant to the Registration
Rights Agreement, the following provisions shall apply:
(a) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Rule 144A
Certificated Note or an interest in the Rule 144A Global Note to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) Rule 144A
Certificated Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Note for its own account (or an account with respect
to which it exercises sole investment discretion) and that each of it
and any such account is a QIB, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A or (y) an interest in the Rule 144A Global Note,
the transfer of such interest may be effected only through the
book-entry system maintained by the Depositary.
(ii) If the proposed transferee is a Participant, and the Note
to be transferred consists of Rule 144A Certificated Notes, upon
receipt by the Registrar of the documents referred to in clause (i)(x)
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Rule
144A Global Note in an amount equal to the principal amount of the Rule
144A Certificated Notes to be transferred, and the Trustee shall cancel
the Rule 144A Certificated Note so transferred.
<PAGE> 44
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(b) Transfers of Interests in the Regulation S Temporary
Global Note to QIBs. The following provisions shall apply with respect to
registration of any proposed transfer of interests in the Regulation S Temporary
Global Note:
(i) The Registrar shall register the transfer of any Note (x)
if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit C hereto or (y) if the proposed transferee is a
QIB and the proposed transferor has checked the box provided for on the
form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that each of it and
any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is a Participant, upon receipt
by the Registrar of the documents referred to in clause (i)(x) above
and instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Rule
144A Global Note in an amount equal to the principal amount of the
Regulation S Temporary Global Note to be transferred, and the Trustee
shall decrease the amount of the Regulation S Temporary Global Note.
(c) Transfers of Interests in the Regulation S Permanent
Global Note or Regulation S Certificated Notes to U.S. Persons. The following
provisions shall apply with respect to registration of any proposed Transfer of
interests in the Regulation S Permanent Global Note or Regulation S Certificated
Notes to U.S. Persons:
(i) The Registrar shall register the transfer of any such
Note without requiring any additional certification.
(ii) (A) If the proposed transferor is a Participant holding a
beneficial interest in the Regulation S Permanent Global Note, upon
receipt by the Registrar of instructions in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of the Regulation S Permanent Global Note in an amount
equal to the principal amount of the beneficial interest in the
Regulation S Permanent Global Not to be transferred, and (B) if the
proposed transferee is a Participant, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Rule
<PAGE> 45
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144A Global Note in an amount equal to the principal amount of the
Regulation S Certificated Notes or the Regulation S Permanent Global
Note, as the case may be, to be transferred, and the Trustee shall
cancel the Certificated Note, if any, so transferred or decrease the
amount of the Regulation S Permanent Global Note.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Note to a Non-U.S.
Person:
(i) Prior to March 9, 1998, the Registrar shall register any
proposed transfer of a Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit C hereto from the
proposed transferor.
(ii) On and after March 9, 1998, the Registrar shall register
any proposed transfer to any Non-U.S. Person if the Note to be
transferred is a Rule 144A Certificated Note or an interest in the Rule
144A Global Note, upon receipt of a certificate substantially in the
form of Exhibit C hereto from the proposed transferor.
(iii) (A) If the proposed transferor is a Participant holding
a beneficial interest in the Rule 144A Global Note, upon receipt by the
Registrar of the documents, if any, required by paragraph (ii) and
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the Rule 144A Global
Note in an amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Note to be transferred, and (B) if the
proposed transferee is a Participant, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the
Regulation S Global Note in an amount equal to the principal amount of
the Rule 144A Certificated Notes or the Rule 144A Global Note, as the
case may be, to be transferred, and the Trustee shall cancel the
Certificated Note, if any, so transferred or decrease the amount of the
Rule 144A Global Note.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i)(A) the circumstances contemplated by the fourth paragraph of
Section 201 or Section 312(d)(ii) exist or (B) the requested transfer is after
the time period referred to in Rule 144(k) under the Securities Act or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it shall transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such
<PAGE> 46
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Note set forth in this Indenture. In connection with an transfer of Notes, each
Holder agrees by its acceptance of the Notes to furnish the Registrar or the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act; provided that the Registrar shall not be
required to determine (but may rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 311 or this Section
312. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE FOUR y
SATISFACTION AND DISCHARGE y
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Notes as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(i) either
(A) All Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306 and (ii) Notes for whose payment money has
theretofore been deposited in trust with the Trustee or any
Paying Agent or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Notes not theretofore delivered
to the Trustee for cancellation (other than Notes which have
been destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306)
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
<PAGE> 47
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(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose in an amount
sufficient to pay and discharge the entire Indebtedness on
such Notes not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any), interest
and Liquidated Damages, if any, to the date of such deposit
(in the case of Notes which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be,
together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment
thereof at Stated Maturity or redemption, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (b) of
clause (1) of this Section, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
On or prior to the effective date of this Indenture, the
Trustee shall establish a segregated, non-interest bearing corporate trust
account (the "Payment Account") maintained by the Trustee for the benefit of the
Holders in which all amounts paid to the Trustee for the benefit of the Holders
in respect of the Notes will be held (except for amount designated to be
deposited into the Pledge Account) and from which the Trustee (if the Trustee is
the Paying Agent) shall make payments to the Holders in accordance with this
Indenture and the Notes. Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to Section 401 and
otherwise pursuant to this Indenture shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee.
ARTICLE FIVE
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REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest or Liquidated
Damages, if any, on any Note when due and payable as to any Interest
Payment Date falling on or prior to January 15, 2001; or
(2) default in the payment of interest or Liquidated Damages,
if any, on any Note when due and payable as to any Interest Payment
Date following after January 15, 2001, and any such failure continued
for a period of 30 days; or
(3) default in the payment of the principal of (or premium,
if any, on) any Note at its Stated Maturity, upon acceleration,
redemption or otherwise; or
(4) default in the payment of principal or interest or
Liquidated Damages, if any, on any Note required to be purchased
pursuant to an Excess Proceeds Offer as described in Section 1017 or
pursuant to a Change of Control Offer as described in Section 1010; or
(5) failure to perform or comply with the provisions of
Section 801; or
(6) default in the performance or breach of any covenant or
agreement of the Company in this Indenture or under the Notes (other
than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with elsewhere in this Section),
and continuance of such default or breach for a period of 30
consecutive days after there has been given to the Company by the
Trustee or the Holders of at least 25% or more in aggregate principal
amount of the Notes then Outstanding a written notice specifying such
default or breach; or
(7) (A) there shall have occurred with respect to any issue
or issues of Indebtedness of the Company or any Restricted Subsidiary
having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of
default that has caused the Holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and
such Indebtedness has not been discharged in full or such acceleration
has not been rescinded or annulled by the expiration of any applicable
grace period and/or (II) the failure to make a principal payment at
the final (but not any interim) fixed Maturity Date thereon and such
defaulted payment shall not have been made, waived or extended by the
expiration of any applicable grace period; or
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(8) any final judgment or order (not covered by insurance)
for the payment of money in excess of $5 million in the aggregate for
all such final judgments or orders against all such Persons (treating
any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Restricted Subsidiary and shall
not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(9) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any of its Significant Subsidiaries or for all or substantially all of
the property and assets of the Company or any of its Significant
Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case,
such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or
(10) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such
law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries
or for all or substantially all of the property and assets of the
Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors; or
(11) the Company asserts in writing that the Pledge Agreement
ceases to be in full force and effect before payment in full of the
obligations thereunder.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(9) or 501(10)) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes Outstanding by a notice in writing to the Company
(and to the Trustee if such notice given by such Holders), may, and the Trustee
at the request of such Holders shall, declare the principal of, premium, if
any, and accrued but unpaid interest and Liquidated Damages, if any, on all the
Notes to be immediately due and payable. Upon any such declaration of
acceleration, such principal of, premium, if any, accrued interest and
Liquidated Damages, if any, shall become immediately due and payable. If an
Event of Default specified in Section 501(9) or 501(10) occurs, then the
principal of, premium, if any, accrued interest and Liquidated Damages, if any,
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
<PAGE> 50
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At any time after a declaration of acceleration has been
made, the Holders of at least a majority in aggregate principal amount of the
Notes Outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) all existing Events of Default, other than the nonpayment
of amounts of principal of, premium, if any, accrued and unpaid
interest and Liquidated Damages, if any, on the Notes which have
become due solely by such declaration of acceleration, have been cured
or waived subject to the limitations set forth in Section 513; and
(2) the rescission, in the opinion of Counsel, would not
conflict with any judgment or decrees of a court of competent
jurisdiction.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because an Event of Default
specified in Section 501(7) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the Holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned
by the Holders of such Indebtedness or a trustee, fiduciary or agent for such
Holders, within 60 days after such declaration of acceleration in respect of
the Notes, and no other Event of Default has occurred during such 60-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest and Liquidated Damages, if any, on any Note when such
interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
the Company shall pay to the Trustee for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal (and
premium and Liquidated Damages, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest
and Liquidated Damages, if any, at the rate borne by the Notes, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, fees
expenses, disbursements and advances of the Trustee, its agents and counsel.
<PAGE> 51
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If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, interest or
Liquidated Damages, if any) shall be entitled and empowered, by intervention in
such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium and Liquidated Damages, if any) and interest
owing and unpaid in respect of the Notes and to file such other papers
or documents and take other actions as the Trustee may deem necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any, or Liquidated Damages, if any) or interest, upon
presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium and Liquidated Damages, if any) and interest
on the Notes in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Notes for
principal (and premium and Liquidated Damages, if any) and interest,
respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
Except to enforce the right to receive payment of principal
or premium, if any, or interest or Liquidated Damages, if any, when due, no
Holder of any Notes shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless the following
conditions have been met:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the
Trustee to pursue the remedy in respect of such Event of Default in
its own name as trustee hereunder;
<PAGE> 53
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(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to the Trustee against any costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee has failed to institute any such proceeding
for 60 days after its receipt of such notice, request and offer of
indemnity; and
(5) during such 60-day period, no direction inconsistent with
such written request has been given to the Trustee by the Holders of a
majority or more in aggregate principal amount of the Outstanding
Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment, as provided herein (including, if applicable, Article
Thirteen) and in such Note of the principal of (and premium and Liquidated
Damages, if any) and (subject to Section 307) interest on such Note on the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment on or after such Stated Maturities, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter
<PAGE> 54
48
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided that
(1) the Trustee need not take any action that conflicts with
law or this Indenture, which might involve the Trustee in personal
liability or which, in the good faith determination of the Trustee,
may be unduly prejudicial to rights Holders not joining in the giving
of such direction, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes may on behalf of the Holders of all
the Notes waive any past default hereunder and its consequences, except a
default
(1) in respect of the payment of the principal of (or premium
or Liquidated Damages, if any) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no
<PAGE> 55
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such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder of the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default of the character
specified in Section 501(7), no such notice to Holders shall be given until at
least 30 days after the occurrence thereof.
In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
<PAGE> 56
50
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, may require and rely upon an
Officer's Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(9) any permissive right or power available to the Trustee
under this Indenture or any supplement hereto shall not be construed
to be a mandatory duty or obligation;
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51
(10) the Trustee shall not be charged with knowledge of any
matter (including any default, other than as described in Section
501(1), (2) or (3)) unless and except to the extent actually known to
a Responsible Officer of the Trustee or to the extent written notice
thereof is received by the Trustee at the Corporate Trust Office; and
(11) the Trustee shall have no liability for any inaccuracy
in the books or records of, or for any actions or omissions of, DTC,
Euroclear or CEDEL or any depository acting on behalf of any of them.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
The Trustee shall not be required to examine any of the
reports and documents filed with it pursuant to Sections 703 or 1009 to
determine whether or not the Company is in compliance with the covenants set
forth at Sections 1010 through 1021.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes.
The recitals contained in this Indenture and in the Notes,
except for the Trustees certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility on Form T-1 supplied to the
Company are true and accurate, subject to the qualifications set forth therein.
The Trustee shall not be accountable for the use or application by the Company
of Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Paying Agent, any Registrar or any other
agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder shall be
segregated from other funds. The Trustee shall be under no liability for
interest on any money received by it hereunder.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
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(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder and under the
Pledge Agreement (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture and under the Pledge
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection
with the acceptance and administration of its duties under the Pledge
Agreement or the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law; provided, however, that if any such amounts are not paid as
expenses of administration, they may be collected by the Trustee as amounts
payable to it pursuant to Section 506.
The provisions of this Section 606 shall survive the
termination of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall
be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50 million. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and
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surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 607, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the
provisions of TIA Section 310(b) after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 607 and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of
<PAGE> 60
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the Holders of a majority in aggregate principal amount of the Outstanding
Notes delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee appointed by the
Company. If no successor Trustee shall have been so appointed by the Company or
the Holders and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Note for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided for in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder (provided such corporation shall be otherwise qualified and eligible
under this Article), without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
In case at that time any of the Notes shall not have been authenticated, any
successor Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all
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such cases such certificates shall have the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee shall
have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY
TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after February 15 of each year commencing with
the first February 15 after the first issuance of Notes, the Trustee shall
transmit to the Holders, in the manner and to the extent provided in TIA
Section 313(c), a brief report dated as of such February 15 if required by TIA
Section 313(a).
SECTION 703. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the
Trustee and the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which
may be required pursuant to Section 13 of the Securities Exchange Act
of 1934 in respect of a security listed and registered on a national
securities exchange as may be prescribed from tim to time in such
rules and regulations;
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(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with, or merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to, any
Person or permit any Person to merge with or into the Company and the Company
shall not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other Person or Persons, unless:
(1) either (A) the Company shall be the continuing Person or
(B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or
leased such property and assets of the Company (i) shall be a
corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and (ii) shall
expressly assume, by an indenture supplemental hereto, duly executed
and delivered to the Trustee, all of the obligations of the Company
with respect to all the Notes and under this Indenture;
(2) immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default shall have occurred
and be continuing;
(3) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
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(4) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00
of Indebtedness under paragraph (a) of Section 1011; and
(5) the Company delivers to the Trustee an Officer's
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (3) and (4) above) and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such
supplemental indenture complies with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
provided, however, that clauses (3) and (4) above shall not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and in the event of any such conveyance or transfer, the Company (which term
shall for this purpose mean the Person named as the "Company" in the first
paragraph of this Indenture or any successor Person which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this
Indenture and the Notes and may be dissolved and liquidated.
SECTION 803. Notes to Be Secured in Certain Events.
If, upon any such consolidation of the Company with, or
merger of the Company into, any other corporation, or upon any conveyance,
lease or transfer of the property of the Company substantially as an entirety
to any other Person, any property or assets of the Company would thereupon
become subject to any Lien, then unless such Lien could be created pursuant to
Section 1016 without equally and ratably securing the Notes, the Company, prior
to or simultaneously with such consolidation, merger, conveyance, lease or
transfer, will, as to such property or assets, secure the Notes Outstanding
(together with, if the Company shall so determine any other Indebtedness of the
Company now existing or hereinafter created which is not subordinate in right
of payment to the Notes) equally and ratably with (or prior to) the
Indebtedness which upon such consolidation, merger, conveyance, lease or
transfer is to become secured as to such property or assets by such Lien, or
shall cause such Notes to be so secured.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action
shall not adversely affect the interests of the Holders in any
material respect; or
(6) to secure the Notes pursuant to the requirements of
Section 803 or Section 1016 or otherwise.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
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(ii) reduce the principal amount of, or premium, if any, or
interest on any Note or extend the time for payment of interest on, or
alter the redemption provisions of, any Note;
(iii) change the place or currency of payment of principal
of, or premium, if any, or interest on any Note;
(iv) impair the right of any Holder to receive payment of,
principal of and interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment
on or after the Stated Maturity (or, in the case of a redemption, on
or after the Redemption Date) of any Note;
(v) reduce the percentage of Outstanding Notes the consent
of whose Holders is necessary to modify, amend, waive, supplement or
consent to take any action under this Indenture or the Notes;
(vi) waive a default in the payment of principal of,
premium, if any, or accrued and unpaid interest or Liquidated Damages,
if any, on the Notes;
(vii) reduce or change the rate or time for payment of
interest on the Notes;
(viii) reduce or change the rate or time for payment of
Liquidated Damages, if any;
(ix) modify any provisions of any Guarantees in a manner
adverse to the Holders; or
(x) modify any provisions of this Section 902 or Sections
513 and 1022, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Note
affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustees own
rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and upon Company Order authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Note affected
thereby, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.
The Company covenants and agrees for the benefit of the
Holders that it shall duly and punctually pay the principal of (and premium and
Liquidated Damages, if any) and interest on the Notes in accordance with the
terms of the Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in The City of New York, an office
or agency where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The
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office of the Trustee located at 61 Broadway, New York, New York 10006 shall be
such office or agency of the Company, unless the Company shall designate and
maintain some other office or agency for one or more of such purposes. In
addition, the Company shall maintain an office or agency where the Notes may be
presented or surrendered for payment (which shall be the Corporate Trust Office
of the Trustee, unless the Company shall designate and maintain some other
office or agency for one or more such purposes). The Company shall give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind any such
designation; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or
agency in The City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and any
change in the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it shall, on or before each due date of the principal of (or premium or
Liquidated Damages, if any) or interest on any of the Notes, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to
pay the principal of (or premium or Liquidated Damages, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and shall promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Notes, it shall, on or before each due date of the principal of (or premium
or Liquidated Damages, if any) or interest on any Notes, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium and Liquidated
Damages, if any) or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee the Company shall promptly notify the
Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section 1003, that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal
of (and premium and Liquidated Damages, if any) or interest on Notes
in trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as herein
provided;
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(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Notes) in the making of any payment of
principal (and premium and Liquidated Damages, if any) or interest on
the Notes; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same terms as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium or Liquidated Damages, if any) or interest on any Note and remaining
unclaimed for two years after such principal, premium, interest or Liquidated
Damages has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries as a whole and that
the loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or
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imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary and (b) all lawful claims for labor,
materials and supplies, which, if unpaid, might by law become a lien (other
than a Permitted Lien) upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company
or any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officer's Certificate from the principal
executive officer, principal financial officer or principal accounting officer
to the effect that a review has been conducted of the activities of the Company
and the Company's performance under this Indenture, and that the Company has
fulfilled its obligations thereunder or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. For purposes of this Section 1008(a), such compliance shall
be determined without regard to any period of grace or requirement of notice
under this Indenture.
(b) When any Default has occurred and is continuing under
this Indenture, or if the trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $1,000,000) shall deliver to
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the Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officer's Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
(c) When any Registration Default (as defined in the
Registration Rights Agreement) occurs, the Company shall immediately deliver to
the Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officer's Certificate specifying the nature of such
Registration Default. In addition, the Company shall deliver to the Trustee on
each Interest Payment Date during the continuance of a Registration Default and
on the Interest Payment Date following the cure of a Registration Default, an
Officer's Certificate specifying the amount of Liquidated Damages which have
accrued and which are then owing under the Registration Rights Agreement.
SECTION 1009. Provision of Financial Statements and Reports.
(a) After the Company has completed the Exchange Offer, the
Company shall file on a timely basis with the Commission, to the extent such
filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company would be required to
file if it were subject to Section 13 or 15 of the Exchange Act. All such
annual reports shall include the geographic segment financial information
contemplated by Item 101(d) of Regulation S-K under the Securities Act, and all
such quarterly reports shall provide the same type of interim financial
information that, as of the date of this Indenture, is the Company's practice
to provide.
(b) The Company shall also be required (i) to file with the
Trustee, and provide to each Holder, without cost to such Holder, copies of
such reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which the
Company would be required to file such reports and documents if the Company
were so required and (ii) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder promptly upon request.
SECTION 1010. Repurchase of Notes upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder
shall have the right to require the Company to repurchase such Holder's Notes
in whole or in part (the "Change of Control Offer"), at a purchase price (the
"Purchase Price") in cash in an amount equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase (subject to the right of Holders of record to receive
interest on the relevant Interest Payment Date) (the "Change of Control
Payment") in accordance with the procedures set forth in paragraphs (c) and (d)
of this Section.
(b) [Reserved]
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(c) Within 30 days following any Change of Control, the
Company shall give to each Holder and the Trustee in the manner
provided in Section 106 a notice stating:
(i) that a Change of Control has occurred, that the Change
of Control Offer is being made pursuant to this Section 1010 and that
all Notes validly tendered will be accepted for payment;
(ii) the circumstances and relevant facts regarding such
Change of Control (including but not limited to information with
respect to pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control);
(iii) the Purchase Price and date of purchase (which shall be
a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change of Control Payment Date");
(iv) that any Note not tendered will continue to accrue
interest pursuant to its terms;
(v) that, unless the Company defaults in the payment of
the Change of Control Payment, any Note accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest and
Liquidated Damages, if any, on and after the Change of Control Payment
Date;
(vi) that Holders electing to have any Note or portion
thereof purchased pursuant to the Change of Control Offer will be
required to surrender such Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of such
Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Change of Control Payment Date;
(vii) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Change of
Control Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of
$1,000 or integral multiples thereof.
(d) [Reserved].
(e) On the Change of Control Payment Date, the Company
shall:
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(i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent money sufficient to pay
the purchase price of all Notes or portions thereof so accepted; and
(ii) deliver, or cause to be delivered, to the Trustee, all
Notes or portions thereof so accepted together with an Officer's
Certificate specifying the Notes or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail, to the
Holders so accepted, payment in an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail to such Holders a
new Note equal in principal amount to any unpurchased portion of the
Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of
Control Payment Date. For purposes of this Section 1010, the Trustee
shall act as Paying Agent.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes a Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control
occurs and the Company is required to repurchase the Notes under this Section
1010.
SECTION 1011. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company may Incur Indebtedness if immediately thereafter the ratio of (i) the
aggregate principal amount (or accreted value, as the case may be) of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the Pro Forma Consolidated
Cash Flow for the preceding two full fiscal quarters multiplied by two,
determined on a pro forma basis as if any such Indebtedness had been Incurred
and the proceeds thereof had been applied at the beginning of such two fiscal
quarters, would be greater than zero and less than 5 to 1.
(b) The foregoing limitations of paragraph (a) of this
covenant will not apply to any of the following Indebtedness ("Permitted
Indebtedness"), each of which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the Notes;
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(ii) Indebtedness of the Company or any Restricted
Subsidiary outstanding on the Issue Date;
(iii) Indebtedness of the Company or any Restricted
Subsidiary under one or more Credit Facilities, in an aggregate
principal amount at any one time outstanding not to exceed the greater
of (x) $35 million and (y) 80% of Eligible Accounts Receivable at any
one time outstanding, subject to any permanent reductions required by
any other terms of this Indenture;
(iv) Indebtedness of the Company or any Restricted
Subsidiary Incurred to finance the cost (including the cost of design,
development, construction, acquisition, installation or integration)
of Telecommunications Assets;
(v) Indebtedness of a Restricted Subsidiary owed to and
held by the Company or another Restricted Subsidiary, except that (A)
any transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to the Company or another Restricted
Subsidiary) or (B) the sale, transfer or other disposition by the
Company or any Restricted Subsidiary of Capital Stock of a Restricted
Subsidiary which is owed Indebtedness of another Restricted Subsidiary
shall, in each case, be an Incurrence of Indebtedness by such
Restricted Subsidiary, subject to the other provisions of this
Indenture;
(vi) Indebtedness of the Company owed to and held by a
Restricted Subsidiary which is unsecured and subordinated in right to
the payment and performance to the obligations of the Company under
this Indenture and the Notes, except that the limitations of paragraph
(a) of this Section 1011 shall apply to such Indebtedness at such time
as (A) any transfer of such Indebtedness by a Restricted Subsidiary
(other than to another Restricted Subsidiary) and (B) the sale,
transfer or other disposition by the Company or any Restricted
Subsidiary of Capital Stock of a Restricted Subsidiary which is owed
such Indebtedness, subject to other provisions of this Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary
issued in exchange for, or the net proceeds of which are used to
refinance (whether by amendment, renewal, extension or refunding),
then outstanding Indebtedness of the Company or a Restricted
Subsidiary, other than Indebtedness Incurred under clauses (iii), (v),
(vi), (viii), (ix), (xi) and (xii) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrue interest, and reasonable
fees and expenses); provided that such new Indebtedness shall only be
permitted under this clause (vii) if: (A) in case the Notes are
refinanced in part or the Indebtedness to be refinanced is pari passu
with the Notes, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made pari passu with, or
subordinate in right of payment to, the remaining Notes, (B) in case
the Indebtedness to be refinanced is subordinated in right of payment
to the Notes, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made subordinate in right
of payment to the
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Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes and (C) such new Indebtedness, determined as
of the date of Incurrence of such new Indebtedness, does not mature
prior to the Stated Maturity of the Indebtedness to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least
equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may
Indebtedness of the Company be refinanced by means of any Indebtedness
of any Restricted Subsidiary pursuant to this clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any
one time outstanding, 2.00 times the Net Cash Proceeds from the
issuance and sale, other than to a Subsidiary, of Common Stock (other
than Redeemable Stock) of the Company (less the amount of such
proceeds used to make Restricted Payments as provided in clause (iii)
or (iv) of the second paragraph of Section 1012) and (y) the Company
or Acquired Indebtedness of a Restricted Subsidiary not to exceed, at
one time outstanding, the fair market value of any Telecommunications
Assets acquired by the Company in exchange for Common Stock of the
Company issued after the Issue Date; provided, however, that in
determining the fair market value of any such Telecommunications
Assets so acquired, if the estimated fair market value of such
Telecommunications Assets exceeds (A) $2 million (as estimated in good
faith by the Board of Directors), then the fair market value of such
Telecommunications Assets will be determined by a majority of the
Board of Directors of the Company, which determination will be
evidenced by a resolution thereof, and (B) $10 million (as estimated
in good faith by the Board of Directors), then the Company shall
deliver the Trustee a written appraisal as to the fair market value of
such Telecommunications Assets prepared by a nationally recognized
investment banking or public accounting firm (or, if no such
investment banking or public accounting firm is qualified to prepare
such an appraisal, by a nationally recognized appraisal firm); and
provided further that such Indebtedness does not mature prior to the
Stated Maturity of the Notes and the Average Life of such Indebtedness
is longer than that of the Notes;
(ix) Indebtedness of the Company or any Restricted
Subsidiary (A) in respect of performance, surety or appeal bonds or
letters of credit supporting trade payables, in each case provided in
the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements covering Indebtedness of the Company;
provided that such agreements do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations
in foreign currency exchange rate or interest rates or by reason of
fees, indemnities and compensation payable thereunder, and (C) arising
from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of the Company (other
than Guarantees of Indebtedness Incurred by any Person acquiring all
or any portion of such business, assets or Restricted Subsidiary for
the purpose of financing such acquisition), in a principal amount not
to exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition;
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(x) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly (A) used to repurchase Notes tendered in
a Change of Control Offer or (B) deposited to defease all of the Notes
pursuant to Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by
a Guarantee of the Notes permitted by and made in accordance with
Section 1018; and
(xii) Indebtedness of the Company or any Restricted
Subsidiary in addition to that permitted to be incurred pursuant to
clauses (i) through (xi) above in an aggregate principal amount not in
excess of $10 million (or, to the extent not denominated in United
States dollars, the United States Dollar Equivalent thereof) at any
one time outstanding.
(c) For purposes of determining any particular amount of
indebtedness under this Section 1011, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included; provided,
however, that the foregoing shall not in any way be deemed to limit the
provisions of Section 1018. For purposes of determining compliance with this
Section 1011, in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion may, at the time of such Incurrence, (i)
classify such item of Indebtedness under and comply with either of paragraph
(a) or (b) of this covenant (or any of such definitions), as applicable, (ii)
classify and divide such item of Indebtedness into more than one of such
paragraphs (or definitions), as applicable, and (iii) elect to comply with such
paragraphs (or definitions), as applicable in any order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) (A) declare or pay any dividend or
make any distribution in respect of the Company's Capital Stock to the holders
thereof (other than dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) of the Company or in options,
warrants or other rights to acquire such shares of Capital Stock) or (B)
declare or pay any dividend or make any distribution in respect of the Capital
Stock of any Restricted Subsidiary to any Person other than dividends and
distributions payable to the Company or any Restricted Subsidiary or to all
holders of Capital Stock of such Restricted Subsidiary on a pro rata basis;
(ii) purchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of the Company (including options, warrants or other rights to
acquire such shares of Capital Stock) held by any Person or any shares o
Capital Stock of any Restricted Subsidiary (including options, warrants and
other rights to acquire such shares of Capital Stock) held by any Affiliate of
the Company (other than a wholly owned Restricted Subsidiary) or any holder (or
any Affiliate thereof) of 5% or more of the Company's Capital Stock; (iii) make
any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of the Company that is subordinated in right of payment
to the Notes; or (iv) make any Investment, other than a Permitted Investment,
in any Person (such payments or any other actions described in clauses (i)
through (iv) being
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collectively "Restricted Payments") if, at the time of, and after giving effect
to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Company could not Incur at least $1.00 of
Indebtedness under paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments declared
or made from and after the Closing Date would exceed the sum of:
(1) Cumulative Consolidated Cash Flow minus 200% of
Cumulative Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the
issue or sale to a Person, which is not a Subsidiary of the
Company, of Capital Stock of the Company (other than
Redeemable Stock) or of debt securities of the Company which
have been converted into or exchanged for such Capital Stock
(except to the extent such Net Cash Proceeds are used to
Incur new Indebtedness outstanding pursuant to clause (viii)
of paragraph (b) of Section 1011); and
(3) to the extent any Permitted Investment that was
made after the Closing Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash
return of capital with respect to such Permitted Investment
(less the cost of disposition, if any) and (ii) the initial
amount of such Permitted Investment.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the Notes including a premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, with the net proceeds of, or in
exchange for, Indebtedness Incurred under clause (viii) of paragraph (b) of
Section 1011; (iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company in exchange for, or out of the Net Cash Proceeds of a
substantially concurrent (A) capital contribution to the Company or (B)
offering of, shares of Capital Stock (other than Redeemable Stock) of the
Company (except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (viii) of paragraph (b) of Section 1011); (iv)
the acquisition of Indebtedness of the Company which is subordinated in right
of payment to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent (A) capital contribution to the Company or (B)
offering of, shares of the Capital Stock of the Company (other than Redeemable
Stock) (except to the extent such proceeds are used to incur new Indebtedness
outstanding pursuant to clause (viii) of paragraph (b) of Section 1011); (v)
payments or distributions to dissenting stockholders in accordance with
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with
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Article Eight; and (vi) other Restricted Payments not to exceed $2 million;
provided that, except in the case of clause (i), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
Each Restricted Payment permitted pursuant to the immediately
preceding paragraph (other than the Restricted Payment referred to in clause
(ii) thereof) and the Net Cash Proceeds from any capital contributions to the
Company or issuance of Capital Stock referred to in clauses (iii) and (iv) of
the immediately preceding paragraph, shall be included in calculating whether
the conditions of clause (C) of the first paragraph of this Section 1012 have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this Section 1012 only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of the Notes.
SECTION 1013. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company
shall not, and shall not permit any Restricted Subsidiary to, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to do any one of the following:
(i) pay dividends or make any other distributions permitted
by applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(iii) make loans or advances to the Company or any other
Restricted Subsidiary; or
(iv) transfer any of its property or assets to the Company
or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances
or restrictions:
(i) existing on the Closing Date in this Indenture or any
other agreements or instruments in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are
being extended, refinanced, renewed or replaced;
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72
(ii) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if the
encumbrance or restriction applies only in the event of a default with
respect to a financial covenant contained in such Indebtedness or
agreement and such encumbrance or restriction is not materially, more
disadvantageous to the Holders than is customary in comparable
financing (as determined by the Company) and the Company determines
that any such encumbrance or restriction will not materially affect
the Company's ability to make principal or interest payments on the
Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred
in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of
this Section 1013, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is,
or is subject to, a lease, purchase mortgage obligation, license,
conveyance or contract or similar property or asset, (B) existing by
virtue of any transfer of, agreement to transfer, option or right with
respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C)
arising or agreed to in the ordinary course of business, not relating
to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company
or any Restricted Subsidiary in any manner material to the Company or
any Restricted Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary. Nothing contained
in this Section 1013 shall prevent the Company or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 1016 or (2) restricting
the sale or other disposition of property or assets of the Company or
any of its Restricted Subsidiaries that secure Indebtedness of the
Company or any of its Restricted Subsidiaries.
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue, transfer, convey, sell, lease or
otherwise dispose of any shares of Capital Stock (including options, warrants
or other rights to purchase shares of such Capital Stock) of such or any other
Restricted Subsidiary (other than to the Company or a wholly owned Restricted
Subsidiary or in respect of any director's qualifying shares or sales of shares
of Capital Stock to foreign nationals mandated by applicable law) to any Person
unless (A) the Net Cash Proceeds
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from such issuance, transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 1017, (B) immediately after giving effect to
such issuance, transfer, conveyance, sale, lease or other disposition, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and
(C) any Investment in such Person remaining after giving effect to such
issuance, transfer, conveyance, sale, lease or other disposition would have been
permitted to be made under Section 1012 if made on the date of such issuance,
transfer, conveyance, sale, lease or other disposition (valued as provided in
the definition of "Investment" contained in Section 101).
SECTION 1015. Limitation on Transactions with Stockholders and Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of Capital
Stock of the Company or any Restricted Subsidiary or with any Affiliate of the
Company or any Restricted Subsidiary, unless the following conditions have been
met:
(i) such transaction or series of transactions is on terms
no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained in a comparable arm's-length transaction
with a Person that is not such a holder or an Affiliate;
(ii) if such transaction or series of transactions involves
aggregate consideration in excess of $2 million, then such transaction
or series of transactions is approved by a majority of the Board of
Directors of the Company and is evidenced by a resolution therein; and
(iii) if such transaction or series of transactions involves
aggregate consideration in excess of $10 million, then the Company or
such Restricted Subsidiary shall deliver to the Trustee a written
opinion as to the fairness to the Company or such Restricted
Subsidiary of such transaction from a financial point of view from a
nationally recognized investment banking firm (or, if an investment
banking firm is generally not qualified to give such an opinion, by a
nationally recognized appraisal firm or accounting firm).
The foregoing limitation does not limit, and will not apply
to (i) any transaction between the Company and any of its Restricted
Subsidiaries or between Restricted Subsidiaries; (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; (iii) any Restricted Payments not prohibited by Section 1012; (iv)
loans and advances to officers or employees of the Company and its Subsidiaries
not exceeding at any one time outstanding $1.5 million in the aggregate, made
in the ordinary course of business; and (v) arrangements with TMG, Armstrong
and/or its subsidiaries existing on the date of this Indenture and listed on
Schedule A attached thereto as such arrangements may be extended or renewed;
provided that the terms of any arrangement altered by any such extension or
renewal may not be altered in a manner adverse to the Company or the Holders of
the Notes.
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SECTION 1016. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) on any of its assets or properties of any
character (including, without limitation, licenses and trademarks), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, whether
owned at the date of this Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereof, without making effective provision for all of the Notes
and all other amounts ranking pari passu with the Notes to be directly secured
equally and ratably with the obligation or liability secured by such Lien or,
if such obligation or liability is subordinated to the Notes and other amounts
ranking pari passu with the Notes, without making provision for the Notes and
such other amounts to be directly secured prior to the obligation or liability
secured by such Lien.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value of the assets sold
or disposed of as determined by the good faith judgment of the Board of
Directors evidenced by a Board Resolution and (ii) at least 80% of the
consideration received for such sale or other disposition consists of cash or
cash equivalents or the assumption of unsubordinated Indebtedness.
The Company shall, or shall cause the relevant Restricted
Subsidiary to, within 270 days after the date of receipt of the Net Cash
Proceeds from an Asset Sale, (i) (A) apply an amount equal to such Net Cash
Proceeds to permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries or (B) invest an equal
amount, or the amount not so applied pursuant to clause (A), in property or
assets of a nature or type or that are used in a business (or in a company
having property and assets of a nature or type, or engaged in a business)
similar or related to the nature or type of the property and assets of, or the
business of, the Company and its Restricted Subsidiaries existing on the date
of such investment (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
and (ii) apply (no later than the end of the 270-day period referred to above)
such excess Net Cash Proceeds (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of this Section 1017. The amount
of such Net Cash Proceeds required to be applied (or to be committed to be
applied) during such 270-day period referred to above in the preceding sentence
and not applied as so required by the end of such period shall constitute
"Excess Proceeds".
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10 million, the Company must, not later
than the 30th Business Day thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate
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principal amount of Notes equal to the Excess Proceeds on such date, at a
purchase price equal to 100% of the principal amount of the Notes, plus, in
each case, accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by
mailing a notice to the Trustee and each Holder stating: (i) that the Excess
Proceeds Offer is being made pursuant to this Section 1017 and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Excess Proceeds Payment Date"); (iii) that any Note not tendered
will continue to accrue interest pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the Excess Proceeds Payment, any Note
accepted for payment pursuant to the Excess Proceeds Offer shall cease to
accrue interest and Liquidated Damages, if any, on and after the Excess
Proceeds Payment Date; (v) that Holders electing to have a Note purchased
pursuant to the Excess Proceeds Offer will be required to surrender the Note,
together with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Excess Proceeds Payment Date; (vi) that Holders shall
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the third Business Day immediately preceding the
Excess Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes delivered
for purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased; and (vii) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i)
accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officer's Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price, and the Trustee shall upon
Company Order promptly authenticate and mail to such Holders a new Note equal
in principal amount to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. To the extent that
the aggregate principal amount of Notes tendered is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. The Company shall publicly announce the results of the
Excess Proceeds Offer as soon as practicable after the Excess Proceeds Payment
Date. For purposes of this Section 1017, the Trustee shall act as the Paying
Agent.
The Company shall comply with Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are
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applicable, in the event that such Excess Proceeds are received by the Company
under this Section 1017 and the Company is required to repurchase Notes as
described above.
SECTION 1018. Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company, other than Indebtedness
under Credit Facilities incurred under clause (iii) of paragraph (b) in Section
1011, unless (i) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a Guarantee
of the Notes on terms substantially similar to the Guarantee of such
Indebtedness, except that if such Indebtedness is by its express terms
subordinated in right of payment to the Notes, any such assumption, Guarantee
or other liability of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in right of payment to such Restricted
Subsidiary's assumption, Guarantee or other liability with respect to the Notes
substantially to the same extent as such Indebtedness is subordinated to the
Notes and (ii) such Restricted Subsidiary waives, and shall not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee.
Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release
or discharge of the guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such
Guarantee.
SECTION 1019. Business of the Company; Restriction on Transfers of Existing
Business.
The Company shall not, and shall not permit any Restricted
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary
shall not be permitted to, directly or indirectly, transfer to any Unrestricted
Subsidiary (i) any of the licenses, material agreements or instruments, permits
or authorizations used in the Permitted Business of the Company and any
Restricted Subsidiary on the Closing Date or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Restricted Subsidiary used in the
licensed service areas of the Company and any Restricted Subsidiary as they
exist on the Closing Date.
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries.
The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries
if, at the time thereof, the
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aggregate amount of such Investments together with any other Restricted
Payments made after the Closing Date would exceed the amount of Restricted
Payments then permitted to be made pursuant to Section 1012. Any Investments in
Unrestricted Subsidiaries permitted to be made pursuant to this covenant (i)
shall be treated as the making of a Restricted Payment in calculating the
amount of Restricted Payments made by the Company or a Subsidiary and (ii) may
be made in cash or property (if made in property, the Fair Market Value thereof
as determined by the Board of Directors of the Company (whose determination
shall be conclusive and evidenced by a Board Resolution) shall be deemed to be
the amount of such Investment for the purpose of clause (i) of this Section
1020).
SECTION 1021. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any Sale-Leaseback Transaction with
respect to any property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may enter into
Sale-Leaseback Transactions; provided, however, that (a) the Attributable Value
of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of the
Company and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), the Company would be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 1011.
SECTION 1022. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply
with any term, provision or condition set forth in Section 803 or Sections 1007
through 1021, inclusive, if before or after the time for such compliance the
Holders of at least a majority in aggregate principal amount of the Outstanding
Notes, by Act of such Holders, waive such compliance in such instance with such
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and
the duties of the Trustee in respect of any such term, provision or condition
shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1011. Right of Redemption.
(a) The Notes may be redeemed, at the election of the Company, as a
whole or in part, at any time or from time to time, on or after January 15,
2003, subject to the conditions and at the Redemption Prices specified in the
form of Note, together with accrued and unpaid interest and Liquidated Damages,
if any, thereon to the Redemption Date.
<PAGE> 84
78
(b) Notwithstanding the foregoing, prior to January 15, 2001,
the Company may redeem up to 35% of the originally issued aggregate principal
amount of the Notes on one or more occasions with the Net Cash Proceeds of one
or more Public Equity Offerings at a redemption price equal to 110.5% of the
aggregate principal amount thereof, plus accrued interest, if any, and
Liquidated Damages, if any, thereon to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date); provided that, immediately after
giving effect to such redemption, at least 65% of the originally issued
aggregate principal amount of the Notes remains Outstanding; and provided
further that notice of such redemptions shall be given within 60 days of the
date of closing of any such Public Equity Offering.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the Redemption Price and of the principal amount of Notes to be
redeemed and shall deliver to the Trustee such documentation and records as
shall enable the Trustee to select the Notes to be redeemed pursuant to Section
1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis, by
lot or by such other method as the Trustee in its sole discretion shall deem
fair and appropriate and which may provide for the selection for redemption of
portions of the principal of Notes; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Note not
redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall
relate, in the case of any Note redeemed or to be
<PAGE> 85
79
redeemed only in part, to the portion of the principal amount of such Note
which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided
for in Section 106 not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest
to the Redemption Date payable as provided in Section 1107, if any;
(3) if less than all Outstanding Notes are to be redeemed,
the identification (and, in the case of a partial redemption, the
principal amounts) of the particular Notes to be redeemed;
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the Holder shall
receive, without charge, a new Note or Notes of authorized
denominations for the principal amount thereof remaining unredeemed;
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided
in Section 1107) will become due and payable upon each such Note, or
the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date; and
(6) the place or places where such Notes are to be
surrendered for payment of the Redemption Price and accrued interest,
if any.
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and Liquidated
Damages, if any, and accrued interest on, all the Notes which are to be
redeemed on that date.
<PAGE> 86
80
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Notes so to be redeemed shall, on the Redemption Date, become due and payable
at the Redemption Price therein specified (together with Liquidated Damages and
accrued interest, if any, to the Redemption Date), and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Notes shall cease to bear interest. Upon surrender of
any such Note for redemption in accordance with said notice, such Note shall be
paid by the Company at the Redemption Price, together with Liquidated Damages
and accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Notes, or one or more Predecessor
Notes, registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to
the provisions of this Article Eleven) shall be surrendered at the office or
agency of the Company maintained for such purpose pursuant to Section 1002
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
upon Company Order authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so
surrendered.
ARTICLE TWELVE
SECURITY
SECTION 1201. Security.
(a) On the Closing Date, the Company shall purchase, and, at
all times, subject to the Pledge Agreement, shall maintain Pledged Securities
pledged to the Trustee as security for the benefit of the Holders in such
amount as will be sufficient upon receipt of scheduled interest and/or
principal payments of such Pledged Securities, in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, to
provide for payment in full of the first six scheduled interest payments due on
the outstanding Notes. The Pledged Securities shall be pledged by the Company
to the Trustee for the benefit of the Holders and shall be held by the Trustee
in the Pledge Account pending disposition pursuant to the Pledge Agreement.
<PAGE> 87
81
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance
with its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to
the Trustee the security interest in the Pledged Securities contemplated
hereby, by the Pledge Agreement or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Notes secured hereby, according to the intent and
purposes herein expressed. The Company shall take, or shall cause to be taken,
any and all actions reasonably required (and any action reasonably requested by
the Trustee) to cause the Pledge Agreement to create and maintain, as security
for the obligations of the Company under this Indenture and the Notes, valid
and enforceable first priority liens in and on all the Pledged Securities, in
favor of the Trustee, superior to and prior to the rights of third Persons and
subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the
Pledge Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d) relating to
the release of property or securities from the Lien and security interest of
the Pledge Agreement (other than pursuant to Sections 7(e) and 7(g) thereof)
and relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company.
(d) The Trustee, in its sole discretion and without the
consent of the Holders, may, and at the request of the Holders of at least 25%
in aggregate principal amount of Notes then outstanding shall, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of the Pledge Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
thereunder. The Trustee shall have power to institute and to maintain such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Pledged Securities
(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 or of the Trustee).
<PAGE> 88
82
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either Section 1302 or Section
1303 be applied to all Outstanding Notes upon compliance with the conditions
set forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes on the
date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by
the Outstanding Notes, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Notes to receive payments, (solely from monies deposited
in trust) in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on such Notes when such payments are due, (B) the
Company's obligations with respect to such Notes under Sections 304, 305, 306,
1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Thirteen. Subject to compliance with
this Article Thirteen, the Company may exercise its option under this Section
1302 notwithstanding the prior exercise of its option under Section 1303 with
respect to the Notes.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801(3) and (4) and Section
803 and in Sections 1007 through 1022 with respect to the Outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of
<PAGE> 89
83
Default under Section 501(6), but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of
either Section 1302 or Section 1303 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Notes, (A) cash in United States
dollars, or (B) U.S. Government Obligation or (C) a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, (i) the principal of (and
premium, if any), interest and Liquidated Damages, if any, on the
Outstanding Notes on the Stated Maturity (or Redemption Date, if
applicable) of such principal (and premium, if any) or installment of
interest and Liquidated Damages, if any, and (ii) any mandatory
sinking fund payments or analogous payments applicable to the
Outstanding Notes on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Notes; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Notes. Before such a
deposit, the Company may give to the Trustee, in accordance with
Section 1103 hereof, a notice of its election to redeem all of the
Outstanding Notes at a future date in accordance with Article Eleven
hereof, which notice shall be irrevocable. Such irrevocable redemption
notice, if given, shall be given effect in applying the foregoing. For
this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
<PAGE> 90
84
(2) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraph (9) or (10) of Section 501 hereof is concerned,
at any time during the period ending on the 123rd day after the date
of such deposit.
(3) [Reserved]
(4) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under any
material agreement or instrument (other than this Indenture) to which
the Company is a party or by which it is bound.
(5) In the case of an election under Section 1302, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since
January 15, 1998, there has been a change in the applicable federal
income tax law, in either case to the effect, and based thereon such
opinion shall confirm, that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance had not occurred.
(6) In the case of an election under Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred.
(7) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
<PAGE> 91
85
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1304 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any) or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
FACILICOM INTERNATIONAL, INC.
By: /s/ Christopher S. King
---------------------------
Name: Christopher S. King
Title: Chief Financial Officer
<PAGE> 92
86
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By: /s/ Robert J. Dunn
-------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 93
Exhibit A
FORM OF FACE OF NOTE
FACILICOM INTERNATIONAL, INC.
10 1/2% Senior Note due 2008
[CUSIP] [CINS]
No. ____________ $_________________
FACILICOM INTERNATIONAL, INC., a Delaware corporation (herein
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ____________________ or registered assigns, the principal sum of ___ United
States dollars on January 15, 2008, at the office or agency of the Company
referred to below, and to pay interest thereon on July 15, 1998 and semi-
annually thereafter, on January 15 and July 15 in each year, from January 28,
1998 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 10 1/2% per annum, until the
principal hereof is paid or duly provided for, and (to the extent lawful) to
pay on demand interest on any overdue interest at the rate borne by the Notes
from the date on which such overdue interest becomes payable to the date
payment of such interest has been made or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of business
on the Regular Record Date for such interest, which shall be the January 1 or
July 1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and such Defaulted Interest, and (to the extent lawful) interest
on such defaulted interest at the rate borne by the Notes, may be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Notes not less than 10 days prior to such Special Record Date, or
may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of January 28, 1998 (the "Registration
Rights Agreement"), between the Company and the Initial Purchasers named
therein. In the event that either (i) the Company fails to file with the
Commission any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified therein for such filing, (ii)
any of such Registration Statements is not declared effective by the Commission
on or prior to the date
<PAGE> 94
specified for such effectiveness in the Registration Rights Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been consummated
within 30 days after the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (iv) any Registration Statement required by the
Registration Rights Agreement is filed and declared effective but thereafter
ceases to be effective or fails to be usable for its intended purpose without
being succeeded within five business days by a post-effective amendment to such
Registration Statement that cures such failure and that is declared effective
within such five business day period (each such event referred to in clauses
(i) through (iv) above, a "Registration Default"), additional cash interest
("Liquidated Damages") shall accrue to each Holder of the Notes commencing upon
the occurrence of such Registration Default in an amount equal to .50% per
annum of the principal amount of Notes held by such Holder. The amount of
Liquidated Damages will increase by an additional .50% per annum of the
principal amount of Notes with respect to each subsequent 90-day period (or
portion thereof) until all Registration Defaults have been cured, up to a
maximum rate of Liquidated Damages of 1.50% per annum of the principal amount
of Notes. All accrued Liquidated Damages will be paid to Holders by the Company
in the same manner as interest is paid pursuant to the Indenture. Following the
cur of all Registration Defaults relating to any particular Transfer Restricted
Securities (as defined in the Registration Rights Agreement), the accrual of
Liquidated Damages with respect to such Transfer Restricted Securities will
cease.](1)
The principal of (and premium and Liquidated Damages, if any)
and interest on the Notes shall be payable at the office or agency of the
Company maintained for such purpose (which shall initially be the Office of the
Trustee located at 61 Broadway, New York, New York 10006, unless the Company
shall designate and maintain some other office or agency for such purpose),
and, at the option of the Company, interest may be paid by check mailed to
addresses of the holders as such address appears in the Register; provided that
all payments with respect to the Global Notes and Certificated Notes, the
Holders of which have given wire transfer instructions to the Company, will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
- -------------------------
(1) To be included in Initial Notes.
A-2
<PAGE> 95
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
FACILICOM INTERNATIONAL, INC.
By:
------------------------------------
Name: Christopher S. King
Title: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated:
---------------------------
This is one of the 10 1/2% Senior Notes due 2008 referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, Trustee
By:
------------------------------------
Authorized Signatory
A-3
<PAGE> 96
FORM OF REVERSE SIDE OF NOTE
FACILICOM INTERNATIONAL, INC.
10 1/2% Senior Note due 2008
This Note is one of a duly authorized issue of securities of
the Company designated as its 10 1/2% Senior Notes due 2008 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $300,000,000, which may be issued under
an indenture (herein called the "Indenture") dated as of January 28, 1998
between the Company and State Street Bank and Trust Company, trustee (herein
called the "Trustee", which term includes an successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, the
Trustee and the Holders of the Notes, and of the terms upon which the Notes
are, and are to be, authenticated and delivered.
The Notes are subject to redemption upon not less than 30 nor
more than 60 days' prior notice, in whole or in part, at any time or from time
to time on or after January 15, 2003, at the election of the Company, at
Redemption Prices (expressed in percentages of principal amount thereof), plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on an Interest Payment Date that is on or
prior to the Redemption Date), if redeemed during the 12-month period
commencing on January 15, of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2003....................................................... 105.25%
2004....................................................... 103.50
2005....................................................... 101.75
2006 (and thereafter)...................................... 100.00%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2001, the
Company may on any one or more occasions redeem up to 35% of the originally
issued aggregate principal amount of Notes at a redemption price of 110.5% of
the aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the Redemption Date, with the Net Cash
Proceeds of one or more Public Equity Offerings; provided that at least 65% of
the originally issued principal amount of the Notes remains outstanding
immediately after the occurrence of such redemption; and provided further that
notice of such redemptions shall be given within 60 days of the closing of any
such Public Equity Offering.
Upon the occurrence of a Change of Control, the Holder of
this Note may require the Company, subject to certain limitations provided in
the Indenture, to repurchase all or any
A-4
<PAGE> 97
part of this Note at a purchase price in cash in an amount equal to 101% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from an Asset Sale, which proceeds are not
used to (i) (A) apply an amount equal to such Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or Indebtedness of any
Restricted Subsidiary, in each case owing to a Person other than the Company or
any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount
not so applied pursuant to clause (A), in property or assets of a nature or
type or that are used in a business (or in a company having property and assets
of a nature or type, or engaged in a business) similar or related to the nature
or type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment (as determined
in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) and (ii) apply (no later than
the end of the 270-day period immediately following the date of receipt of the
Net Cash Proceeds from an Asset Sale) such excess Net Cash Proceeds (to the
extent not applied pursuant to clause (i)) in accordance with the Indenture,
and which proceeds equal or exceed a specified amount, the Company shall be
required to make an offer to all Holders to purchase the maximum principal
amount of Notes, in an integral multiple of $1,000, that may be purchased out
of such amount at a purchase price in cash equal to 100% of the principal
amount thereof, plus accrued, unpaid interest and Liquidated Damages, if any,
to the date of purchase, in accordance with the Indenture. Holders of Notes
that are subject to any offer to purchase shall receive an Excess Proceeds
Offer from the Company prior to any related Excess Proceeds Payment Date.
In the case of any redemption or repurchase of Notes,
interest and Liquidated Damages installments, if any, whose Stated Maturity is
on or prior to the Redemption Date or Excess Proceeds Payment Date will be
payable to the Holders of such Notes, or one or more Predecessor Notes, of
record at the close of business on the relevant Record Date referred to on the
face hereof. Notes (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date or Excess Proceeds Payment Date, as the case
may be.
In the event of redemption or repurchase of this Note in part
only, a new Note or Notes for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the
A-5
<PAGE> 98
rights of the Holders under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggregate principal
amount of the Notes at the time Outstanding. Additionally, the Indenture
permits that, without notice to or consent of any Holder, the Company and the
Trustee together may amend or supplement the Indenture or this Note to: (i)
evidence the succession of another Person to the Company and the assumption by
any such successor of the covenants of the Company contained herein and in the
Notes; (ii) add to the covenants of the Company for the benefit of the Holders
or to surrender any right or power herein conferred upon the Company; (iii) add
any additional Events of Default; (iv) evidence and provide for the acceptance
of appointment hereunder by a successor Trustee; (v) cure any ambiguity,
correct or supplement any provision herein which may be inconsistent with any
other provision herein, or make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action shall not
adversely affect the interests of the Holders in any material respect; or (vi)
secure the Notes. The Indenture also contains provisions permitting the Holders
of specified percentages in aggregate principal amount of the Notes at the time
Outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herewith or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
interest and Liquidated Damages, if any, on this Note at the times, place, and
rate, and in the coin or currency, herein prescribed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Notes.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable on the
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York or at the Corporate Trust Office of the Trustee, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar duly executed by the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain
A-6
<PAGE> 99
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered on
the Register as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any agent shall be affected
by notice to the contrary.
THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-day months. All capitalized terms used in this Note
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
A-7
<PAGE> 100
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
---------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- -------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney to transfer such Note on the books of the Company with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN
EXCHANGE NOTES, REGULATION S PERMANENT GLOBAL NOTES AND
REGULATIONS PERMANENT CERTIFICATED NOTES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of the date of an effective Registration
Statement or the end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[_] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
[_] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Trustee or
other Registrar shall not be obligated to register this Note in the name of any
Person other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 312 of the Indenture
shall have been satisfied.
Date:
---------------------- -------------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
A-8
<PAGE> 101
Signature Guarantee /1/
------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
---------------------- ----------------------------------------------
NOTICE: To be executed by an executive officer
/1/ The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar which
requirements include membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Registrar in addition
to or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-9
<PAGE> 102
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1010 or Section 1017 of the Indenture, check the Box: [_]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1010 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$
--------------------------.
Date:
-------------------
Your Signature:
--------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee /1/
------------------------
/1/ The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar which
requirements include membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Registrar in addition
to or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-10
<PAGE> 103
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
[DATE]
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Facilicom International, Inc. (the "Company")
10 1/2% Senior Notes due 2008 (the "Notes")
Ladies and Gentlemen:
This letter relates to $__________ principal amount of Notes
represented by the offshore global note certificate (the "Regulation S Global
Note"). Pursuant to Section 201 of the Indenture dated as of January 28, 1998
relating to the Notes (the "Indenture"), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the
Regulation S Global Note and (2) we are a Non-U.S. Person to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the Securities Act of 1933, as amended ("Regulation S"). Accordingly, you
are hereby requested to issue a Regulation S Permanent Global Note representing
the undersigned's interest in the principal amount of Notes represented by the
Global Note, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
--------------------------------
Authorized Signature
B-9
<PAGE> 104
Exhibit C
Form of Regulation S Certificate
[DATE]
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Facilicom International, Inc. (the "Company")
10 1/2% Senior Notes due 2008 (the "Notes")
Ladies and Gentlemen:
This Certificate relates to our proposed transfer of $____
principal amount of Notes issued under the Indenture dated as of January 28,
1998 relating to the Notes. Terms are used in this Certificate as defined in
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"). We hereby certify as follows:
1. The offer of the Notes was not made to a person in the
United States (unless such person or the account held by it for which
it is acting is excluded from the definition of "U.S. person" pursuant
to Rule 902(o) of Regulation S under the circumstances described in
Rule 902(i)(3) of Regulation S) or specifically targeted at an
identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market, and neither we
nor any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting
on our or their behalf, has made any directed selling efforts in the
United States.
4. The proposed transfer of Notes is not part of a plan or
scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Notes, and
the proposed transfer takes place before the
<PAGE> 105
Regulation S Note Exchange Date referred to in the Indenture, or we
are an officer or director of the Company or a distributor, we certify
that the proposed transfer is being made in accordance with the
provisions of Rule 904(c) of Regulation S.
You and the Company are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or a
copy hereof to any interested party in any administrative or legal proceeding
or official inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER]
By:
------------------------------------
Authorized Signature
C-2
<PAGE> 106
Schedule A
SCHEDULE A
I. Arrangements with Armstrong and its subsidiaries
A. FaciliCom International, L.L.C. First Amended and Restated
Limited Liability Company Agreement dated as of September 30,
1997 between Armstrong International Telecommunications, Inc.
and FCI Management Group
B. FCI (GP) LLC Limited Liability Company Agreement dated as of
September 30, 1997 between Armstrong International
Telecommunications, Inc. and FCI Management Group
C. FaciliCom International, Inc. Tax Sharing Agreement dated as
of December 22, 1997 between Armstrong Holdings, Inc. and
FaciliCom International, Inc.
D. Services Agreement dated as of July 1, 1997 between Armstrong
Holdings, Inc. and FaciliCom International, L.L.C.
E. Billing and MIS Services Agreement dated as of July 1, 1997
between Armstrong Holdings, Inc. and FaciliCom International,
L.L.C.
II. Arrangements with TMG -- There are no written arrangements between TMG
and the Company or any Restricted Subsidiary; however, TMG provides,
and expects to continue to provide, consulting services to the Company
and its Restricted Subsidiaries. See "Certain Relationships and
Related Transactions" in the Offering Memorandum dated January 23,
1998.
<PAGE> 1
EXHIBIT 4.4
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as
of April 26, 1999, by and between FACILICOM INTERNATIONAL, INC., a Delaware
corporation (the "COMPANY"), as issuer, and STATE STREET BANK AND TRUST COMPANY,
as trustee (the "TRUSTEE"), to the Indenture (the "INDENTURE"), dated as of
January 28, 1998, between the Company and the Trustee, under which the Company's
10 1/2% Senior Notes due 2008 and 10 1/2% Series B Senior Notes due 2008
(collectively, the "NOTES") are outstanding. Capitalized terms utilized and not
otherwise defined herein shall have the respective meanings assigned to those
terms in the Indenture.
WHEREAS, the Indenture contains an incorrect reference at subpart (xxi) of
the definition of "Permitted Liens" in that it refers to "Liens securing
Indebtedness under Credit Facilities incurred in compliance with clause (iv) of
paragraph (b) of Section 1011 whereas "Liens securing Indebtedness under Credit
Facilities" are described in clause (iii) of paragraph (b) of said Section 10ll;
and
WHEREAS, clause (iv) of paragraph (b) of Section 1011 references
"Telecommunications Assets;" and
WHEREAS, it was the intention of the Board of Directors of the Company, as
confirmed by Lehman Brothers Inc., the Representative for the Initial Purchasers
of the Notes secured by the Indenture, that the reference in said subpart (xxi)
should be both to clause (iii) and to clause (iv) of paragraph (b) of Section
1011 and it is the desire of the Board of Directors to correct the incorrect
reference accordingly; and
WHEREAS, in accordance with the terms of Section 901 of Article Nine of the
Indenture, the Company, when authorized by a Board Resolution, and the Trustee
may, without the consent of any Holders, enter into a supplemental indenture to
cure any ambiguity, provided that such action does not adversely affect the
interests of the Holders of the Notes in any material respect; and
WHEREAS, the Board of Directors of the Company has determined that this
Supplemental Indenture shall not adversely affect the interests of the Holders
of the Notes in any material respect; and
WHEREAS, the execution and delivery of this Supplemental Indenture has been
authorized by a resolution of the Board of Directors of the Company; and
WHEREAS, concurrent with the execution hereof, Lehman Brothers Inc. and
Shearman & Sterling have each delivered a certificate, and the Company has
delivered an Officers' Certificate and has caused its special counsel, Swidler
Berlin Shereff Friedman, LLP, to deliver to the Trustee an Opinion of Counsel,
each to the effect that this Supplemental Indenture complies with Section 901 of
Article Nine of the Indenture and that all conditions precedent provided for in
the Indenture relating to this Supplemental Indenture have been complied with.
<PAGE> 2
NOW, THEREFORE, in consideration of the above premises, each party agrees,
for the benefit of the other and for the equal and ratable benefit of the
Holders of the Notes, as follows:
1. Subpart (xxi) of the definition of "Permitted Liens" in Section 101
of Article One of the Indenture is hereby amended by deleting Subpart (xxi) in
its entirety and inserting in place thereof the following:
"(xxi) Liens securing Indebtedness under Credit Facilities incurred
in compliance with clause (iii), or securing Indebtedness to finance
the cost of Telecommunication Assets under clause (iv) of paragraph
(b) of Section 1011."
2. Except as expressly set forth herein, this Supplemental Indenture
shall not be deemed to waive, amend or modify any term or condition of the
Indenture, each of which is hereby ratified and reaffirmed, and the Indenture,
as amended and supplemented hereby, shall remain in full force and effect.
3. All conditions and requirements of the Indenture necessary to make
this Supplemental Indenture a valid, binding and legal instrument in accordance
with its terms have been performed and fulfilled by the parties hereto and the
execution and delivery thereof have been in all respects duly authorized by the
parties hereto.
4. This Supplemental Indenture may be executed in one or more
counterparts, each one of which shall be deemed an original, and all of which,
taken together, shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be executed as of the day and year first above written.
FACILICOM INTERNATIONAL, INC.
By: /s/ Walter Burmeister
--------------------------
Name: Walter Burmeister
Title: CEO
STATE STREET BANK AND TRUST
COMPANY
By:
--------------------------
Name:
Title:
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be executed as of the day and year first above written.
FACILICOM INTERNATIONAL, INC.
By:
--------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Alison Deila Bella
-------------------------
Name: Alison Deila Bella
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.5
SECOND SUPPLEMENTAL INDENTURE
- -------------------------------------------------------------------------------
FACILICOM INTERNATIONAL, INC.,
AS ISSUER
AND
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE
------------------
SECOND SUPPLEMENTAL INDENTURE
EXECUTED AS OF --, 1999
EFFECTIVE IMMEDIATELY PRIOR TO THE CLOSING
OF THE MERGER OF THE ISSUER WITH
AND INTO WORLD ACCESS, INC.
------------------
$300,000,000
10 1/2% SENIOR NOTES DUE 2008
SUPPLEMENTING THE INDENTURE DATED AS OF JANUARY 28, 1998 BETWEEN
FACILICOM INTERNATIONAL, INC., AS ISSUER, AND
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE, AS
SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE,
DATED AS OF APRIL 26, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
2
SECOND SUPPLEMENTAL INDENTURE (the "Second Supplemental
Indenture"), executed --, 1999, and effective immediately prior to the closing
of the Merger (as defined herein) between FACILICOM INTERNATIONAL, INC., a
corporation duly authorized and existing under the laws of the State of
Delaware, as issuer (the "Company"), and STATE STREET BANK AND TRUST COMPANY, a
trust duly authorized and existing under the laws of the Commonwealth of
Massachusetts, as trustee (the "Trustee"), under the Indenture, dated as of
January 28, 1998, as amended and supplemented by the First Supplemental
Indenture, dated as of April 26, 1999 (the "Indenture").
WITNESSETH:
WHEREAS, the Company has issued $300,000,000 aggregate
principal amount of 10 1/2% Senior Notes due 2008 (the "Notes") pursuant to the
Indenture;
WHEREAS, the Company has entered into an agreement and plan of
merger, dated August 17, 1999 (the "Merger Agreement"), with World Access, Inc.,
a Delaware corporation ("World Access"), pursuant to which, subject to the terms
and conditions thereof, the Company will merge with and into World Access (the
"Merger");
WHEREAS, in connection with the Merger, World Access has
launched an exchange offer and consent solicitation (the "Exchange Offer and
Consent Solicitation") in which it requested, among other things, that the
holders of the Notes consent to the amendments to the Indenture set forth below
(the "Proposed Amendments");
WHEREAS, the Issuer wishes to adopt immediately prior to the
Effective Time (as defined in the Merger Agreement) of the Merger such Proposed
Amendments pursuant to a Second Supplemental Indenture, as permitted by Section
902 of the Indenture; and
WHEREAS, the Trustee has received evidence satisfactory to it
of the consent of the holders of a majority of the aggregate principal amount of
the Notes outstanding to the Proposed Amendments set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, the
parties agree as follows. Capitalized terms utilized and not otherwise defined
herein shall have the respective meanings assigned to those terms in the
Indenture.
<PAGE> 3
3
ARTICLE I
AMENDMENTS
All holders and every subsequent holder of the Notes shall be
bound by the following amendments to the Indenture:
Section 1.1. The definition of "Change of Control Offer" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.2. The definition of "Change of Control Payment" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.3. The definition of "Change of Control Payment
Date" in Section 101 is deleted in its entirety.
Section 1.4. The definition of "Excess Proceeds" in Section
101 of the Indenture is deleted in its entirety.
Section 1.5. The definition of "Excess Proceeds Offer" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.6. The definition of "Excess Proceeds Payment" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.7. The definition of "Excess Proceeds Payment Date"
in Section 101 of the Indenture is deleted in its entirety.
Section 1.8. The phrases "and Sections 1012 and 1014" and "in
accordance with Section 1014" in the second sentence of the definition of
"Investment" in Section 101 of the Indenture are deleted in their entirety.
Section 1.9. The definition of "Permitted Indebtedness" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.10. The phrase "to the extent permitted under
Section 1017" in clause (vi) of the definition of "Permitted Investment" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.11. The phrase "in compliance with Section 1011(1)"
in clause (vi)(a) of the definition of "Permitted Liens" in Section 101 of the
Indenture is deleted in its entirety.
<PAGE> 4
4
Section 1.12. The phrase "which is permitted to be Incurred
under clause (viii) of paragraph (b) of Section 1011" in clause (xx) of the
definition of "Permitted Liens" in Section 101 of the Indenture is deleted in
its entirety.
Section 1.13. Clause (xxi) of the definition of "Permitted
Liens" in Section 101 of the Indenture is deleted in its entirety and replaced
with the following: "(xxi) Liens securing Indebtedness under Credit Facilities
incurred in compliance with clause (iii)."
Section 1.14. The definition of "Purchase Price" in Section
101 of the Indenture is deleted in its entirety.
Section 1.15. The definition of "Redeemable Stock" in Section
101 of the Indenture is deleted in its entirety and replaced with the following:
"'Redeemable Stock' means any class or series of Capital Stock of any person
that by its terms (or by the terms of any security into which it is
exchangeable) or otherwise is (i) required to be redeemed on or prior to the
date that is 123 days after the date of the Stated Maturity of the Notes, (ii)
redeemable at the option of the holder of such class or series of Capital Stock
at any time on or prior to the date that is 123 days after the date of the
Stated Maturity of the Notes or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity on or prior to the date that is 123 days after the date of
the Stated Maturity of the Notes.
Section 1.16. The definition of "Restricted Payments" in
Section 101 of the Indenture is deleted in its entirety.
Section 1.17. The second and third sentences in the definition
of "Unrestricted Subsidiary" in Section 101 of the Indenture are deleted in
their entirety and replaced with the following: "The Board of Directors may
designate any Restricted Subsidiary of the Company (including any newly acquired
or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any Restricted Subsidiary. 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 no Default or Event of Default shall have occurred and be
continuing."
Section 1.18. The last sentence of the definition of "United
States Dollar Equivalent" in Section 101 of the Indenture is deleted in its
entirety and replaced with the following: "For purposes of determining whether
any Indebtedness can be incurred (including Permitted Indebtedness), any
Investment can be made (a "Tested Transaction"), the United States Dollar
Equivalent of such Indebtedness or Investment will be determined on the date
Incurred, made or undertaken and no subsequent change in the United States
Dollar Equivalent shall cause such Tested Transaction to have been Incurred,
made or undertaken in violation of this Indenture."
<PAGE> 5
5
Section 1.19. The phrase "(other than pursuant to Section
1008(a))" in the second paragraph of Section 102 of the Indenture is deleted in
its entirety.
Section 1.20. The first paragraph of Section 301 of the
Indenture is deleted in its entirety and replaced with the following: "The
aggregate principal amount of Notes which may be authenticated and delivered
under this Indenture is limited to $300,000,000, except for Notes authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Notes pursuant to Section 303, 304, 305, 306, 906 or 1108."
Section 1.21. The sixth paragraph of Section 305 of the
Indenture is deleted in its entirety and replaced with the following: "No
service charge shall be made for any registration of transfer or exchange or
redemption of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Section 304, 906 or 1108 not involving any transfer."
Section 1.22. Subclause (A) of clause (i) of Section 401 of
the Indenture is deleted in its entirety and replaced with the following: "(A)
All Notes theretofore authenticated and delivered (other than Notes which have
been destroyed, lost or stolen and which have been replaced or paid as provided
in Section 306) have been delivered to the Trustee for cancellation;".
Section 1.23. The final paragraph of Section 401 of the
Indenture is deleted in its entirety and replaced with the following:
"Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (i) of
this Section, the obligations of the Trustee under Section 402 shall survive."
Section 1.24. The phrase "Subject to the provisions of the
last paragraph of Section 1003," in the second sentence of Section 402 of the
Indenture is deleted in its entirety.
Section 1.25. Clauses (4) and (5) of the definition of "Event
of Default" in Section 501 of the Indenture are deleted in their entirety.
Section 1.26. The final paragraph of Section 602 of the
Indenture is deleted in its entirety.
Section 1.27. Section 801 of the Indenture is deleted in its
entirety.
Section 1.28. The phrases "in accordance with Section 801" and
"which shall theretofore become such in the manner described in Section 801" in
Section 802 of the Indenture are deleted in their entirety.
Section 1.29. The phrase "pursuant to Section 1016" in Section
803 of the Indenture is deleted in its entirety.
<PAGE> 6
6
Section 1.30. Clause (6) of Section 901 is deleted in its
entirety and replaced with the following: "(6) to secure the Notes pursuant to
the requirements of Section 803 or otherwise."
Section 1.31. Section 1003 of the Indenture is deleted in its
entirety.
Section 1.32. Section 1004 of the Indenture is deleted in its
entirety.
Section 1.33. Section 1005 of the Indenture is deleted in its
entirety.
Section 1.34. Section 1006 of the Indenture is deleted in its
entirety.
Section 1.35. Section 1007 of the Indenture is deleted in its
entirety.
Section 1.36. Section 1008 of the Indenture is deleted in its
entirety.
Section 1.37. Section 1009 of the Indenture is deleted in its
entirety.
Section 1.38. Section 1010 of the Indenture is deleted in its
entirety.
Section 1.39. Section 1011 of the Indenture is deleted in its
entirety.
Section 1.40. Section 1012 of the Indenture is deleted in its
entirety.
Section 1.41. Section 1013 of the Indenture is deleted in its
entirety.
Section 1.42. Section 1014 of the Indenture is deleted in its
entirety.
Section 1.43. Section 1015 of the Indenture is deleted in its
entirety.
Section 1.44. Section 1016 of the Indenture is deleted in its
entirety.
Section 1.45. Section 1017 of the Indenture is deleted in its
entirety.
Section 1.46. Section 1018 of the Indenture is deleted in its
entirety.
Section 1.47. Section 1019 of the Indenture is deleted in its
entirety.
Section 1.48. Section 1020 of the Indenture is deleted in its
entirety.
Section 1.49. Section 1021 of the Indenture is deleted in its
entirety.
<PAGE> 7
7
Section 1.50. The phrase "(or, if the Company is acting as its
own paying Agent, segregate and hold in trust as provided in Section 1003)" in
Section 1106 of the Indenture is deleted in its entirety.
Section 1.51. Clause (B) of Section 1302 of the Indenture is
deleted in its entirety and replaced with the following: "(B) the Company's
obligations with respect to such Notes under Section 304, 305, 306 and 1002,".
Section 1.52. The phrase "Subject to the provisions of the
first paragraph of Section 1003," in Section 1305 of the Indenture is deleted in
its entirety.
Section 1.53. The phrases "Section 801(3) and (4) and" and
"and in Sections 1007 through 1022" in Section 1303 of the Indenture shall be
deleted in their entirety.
ARTICLE II
MISCELLANEOUS
Section 2.1. Except as amended hereby, all of the terms of the
Indenture shall remain and continue in full force and effect and are hereby
confirmed in all respects.
Section 2.2. This Second Supplemental Indenture and each and
every provision hereof shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance with
the laws of such State.
Section 2.3. This Second Supplemental Indenture may be
executed in any number of counterparts, each of which shall be an original; but
such counterparts shall constitute but one and the same instrument.
Section 2.4. In entering this Second Supplemental Indenture,
the Trustee shall be entitled to the benefit of every provision of the Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee, whether or not elsewhere herein so provided.
Section 2.5. Notwithstanding the execution and delivery of
this Second Supplemental Indenture by the parties hereto, this Second
Supplemental Indenture shall become effective only immediately prior to the
Effective Time of the Merger pursuant to the Merger Agreement and the
continuation of such effectiveness shall be conditioned upon the subsequent
occurrence of the Effective Time of the Merger. Upon the effectiveness of this
Second Supplemental Indenture, the Indenture shall be supplemented in accordance
herewith, and this Second Supplemental Indenture shall form a part of the
Indenture for all purposes, and every holder of Notes heretofore or hereafter
authenticated and delivered under the Indenture shall be bound thereby.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be executed as of the day and year first above
written.
FACILICOM INTERNATIONAL, INC.,
as Issuer
By:
---------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
---------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.6
================================================================================
WORLD ACCESS, INC.,
Issuer
TO
FIRST UNION NATIONAL BANK,
Trustee
----------------------
Indenture
Dated as of -, 1999
----------------------
$300,000,000
13.25% Senior Notes due 2008
================================================================================
<PAGE> 2
WORLD ACCESS, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of -, 1999
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
(ss) 310(a)(1).......................................................... 607
(a)(2).......................................................... 607
(b)............................................................. 608
(ss) 312(c)............................................................. 701
(ss) 313(a)............................................................. 702
(ss 313(c).............................................................. 703
(ss) 314(a)............................................................. 703
(a)(4).......................................................... 1008(a)
(c)(1).......................................................... 102
(c)(2).......................................................... 102
(e)............................................................. 102
(ss) 315(b)............................................................. 601
(ss) 316(a)(last sentence).............................................. 101 ("Outstanding")
(a)(1)(A)....................................................... 502, 512
(a)(1)(B)....................................................... 513
(b)............................................................. 508
(c)............................................................. 104(d)
(ss) 317(a)(1).......................................................... 503
(a)(2).......................................................... 504
(b)............................................................. 1003
(ss) 318(a)............................................................. 111
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
B-10
<PAGE> 3
11
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
PARTIES ..........................................................................................................1
RECITALS OF THE COMPANY...........................................................................................1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions................................................................................2
SECTION 102. Compliance Certificates and Opinions......................................................21
SECTION 103. Form of Documents Delivered to Trustee....................................................22
SECTION 104. Acts of Holders...........................................................................22
SECTION 105. Notices, Etc., to Trustee, Company........................................................23
SECTION 106. Notice to Holders; Waiver.................................................................24
SECTION 107. Effect of Headings and Table of Contents..................................................24
SECTION 108. Successors and Assigns....................................................................24
SECTION 109. Separability Clause.......................................................................24
SECTION 110. Benefits of Indenture.....................................................................24
SECTION 111. Governing Law.............................................................................25
SECTION 112. Legal Holidays............................................................................25
ARTICLE TWO NOTE FORMS
SECTION 201. Forms Generally...........................................................................25
SECTION 202. Restrictive Legends.......................................................................26
ARTICLE THREE THE NOTES
SECTION 301. Title and Terms...........................................................................26
SECTION 302. Denominations.............................................................................27
SECTION 303. Execution, Authentication, Delivery and Dating............................................27
SECTION 304. Temporary Notes...........................................................................28
SECTION 305. Registration, Registration of Transfer and Exchange.......................................28
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes...............................................29
SECTION 307. Payment of Interest; Interest Rights Preserved............................................30
SECTION 308. Persons Deemed Owners.....................................................................31
SECTION 309. Cancellation..............................................................................32
SECTION 310. Computation of Interest...................................................................32
SECTION 311. Book-Entry Provisions for Global Notes....................................................32
ARTICLE FOUR SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture...................................................33
SECTION 402. Application of Trust Money................................................................34
</TABLE>
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<TABLE>
<S> <C>
ARTICLE FIVE REMEDIES
SECTION 501. Events of Default.........................................................................35
SECTION 502. Acceleration of Maturity; Rescission and Annulment........................................36
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee...........................37
SECTION 504. Trustee May File Proofs of Claim..........................................................38
SECTION 505. Trustee May Enforce Claims Without Possession of Notes....................................38
SECTION 506. Application of Money Collected............................................................39
SECTION 507. Limitation on Suits.......................................................................39
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest..................................................................................40
SECTION 509. Restoration of Rights and Remedies........................................................40
SECTION 510. Rights and Remedies Cumulative............................................................40
SECTION 511. Delay or Omission Not Waiver..............................................................40
SECTION 512. Control by Holders........................................................................41
SECTION 513. Waiver of Past Defaults...................................................................41
SECTION 514. Waiver of Stay or Extension Laws..........................................................41
ARTICLE SIX THE TRUSTEE
SECTION 601. Notice of Defaults........................................................................42
SECTION 602. Certain Rights of Trustee.................................................................42
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes.................................44
SECTION 604. May Hold Notes............................................................................44
SECTION 605. Money Held in Trust.......................................................................44
SECTION 606. Compensation and Reimbursement............................................................44
SECTION 607. Corporate Trustee Required; Eligibility...................................................45
SECTION 608. Resignation and Removal; Appointment of Successor.........................................45
SECTION 609. Acceptance of Appointment by Successor....................................................46
SECTION 610. Merger, Conversion, Consolidation or Succession to Business...............................47
ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders..............................................47
SECTION 702. Reports by Trustee........................................................................47
SECTION 703. Reports by Company........................................................................48
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms......................................48
SECTION 802. Successor Substituted.....................................................................49
SECTION 803. Notes to Be Secured in Certain Events.....................................................50
</TABLE>
-ii-
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<TABLE>
<S> <C>
ARTICLE NINE SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders........................................50
SECTION 902. Supplemental Indentures with Consent of Holders...........................................51
SECTION 903. Execution of Supplemental Indentures......................................................52
SECTION 904. Effect of Supplemental Indentures.........................................................52
SECTION 905. Conformity with Trust Indenture Act.......................................................52
SECTION 906. Reference in Notes to Supplemental Indentures.............................................52
SECTION 907. Notice of Supplemental Indentures.........................................................52
ARTICLE TEN COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest......................................53
SECTION 1002. Maintenance of Office or Agency..........................................................53
SECTION 1003. Money for Note Payments to Be Held in Trust..............................................53
SECTION 1004. Corporate Existence......................................................................54
SECTION 1005. Payment of Taxes and Other Claims........................................................55
SECTION 1006. Maintenance of Properties................................................................55
SECTION 1007. Insurance................................................................................55
SECTION 1008. Statement by Officers as to Default......................................................55
SECTION 1009. Provision of Financial Statements and Reports............................................56
SECTION 1010. Repurchase of Notes upon Change of Control...............................................56
SECTION 1011. Limitation on Indebtedness...............................................................58
SECTION 1012. Limitation on Restricted Payments........................................................61
SECTION 1013. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries. 63
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of Restricted Subsidiaries...64
SECTION 1015. Limitation on Transactions with Stockholders and Affiliates..............................65
SECTION 1016. Limitation on Liens......................................................................66
SECTION 1017. Limitation on Asset Sales................................................................66
SECTION 1018. Limitation on Issuances of Guarantees of Indebtedness by Restricted Subsidiaries.. 68
SECTION 1019. Business of the Company; Restriction on Transfers of
Existing Business.............................................. 69
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries...................................69
SECTION 1021. Limitation on Sale-Leaseback Transactions............................................... 70
SECTION 1022. Waiver of Certain Covenants..............................................................70
ARTICLE ELEVEN REDEMPTION OF NOTES
SECTION 1101. Right of Redemption......................................................................70
SECTION 1102. Applicability of Article.................................................................71
SECTION 1103. Election to Redeem; Notice to Trustee....................................................71
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.............................................71
SECTION 1105. Notice of Redemption.....................................................................71
SECTION 1106. Deposit of Redemption Price..............................................................72
SECTION 1107. Notes Payable on Redemption Date.........................................................72
SECTION 1108. Notes Redeemed in Part.................................................................. 73
</TABLE>
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<TABLE>
<S> <C>
ARTICLE TWELVE SECURITY
SECTION 1201. Security.................................................................................73
ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.............................74
SECTION 1302. Defeasance and Discharge.................................................................74
SECTION 1303. Covenant Defeasance......................................................................75
SECTION 1304. Conditions to Defeasance or Covenant Defeasance..........................................75
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions.......................................................... 77
SECTION 1306. Reinstatement............................................................................77
</TABLE>
TESTIMONIUM
SIGNATURES AND SEALS
Schedule A World Access Charitable Trust Arrangements
EXHIBIT A Form of Note
<PAGE> 7
INDENTURE, dated as of , 1999, between WORLD ACCESS,
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 945 East
Paces Ferry Road, Suite 2200, Atlanta, Georgia 30326, as issuer, and FIRST UNION
NATIONAL BANK, a national banking association, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company and FaciliCom International, Inc., a
Delaware corporation ("FaciliCom") and certain shareholders of FaciliCom have
entered into an Agreement and Plan of Merger, dated as of August 17, 1999, with
respect to the Merger (the "Merger") of FaciliCom with and into the Company and
in connection with the Merger the Company has offered to exchange its 13.25%
Senior Notes due 2008 (the "Notes") and certain other consideration for
FaciliCom's outstanding 10 1/2% Senior Notes due 2008 (the "FaciliCom Notes");
WHEREAS, the Company has duly authorized the creation of an
issue of the Notes, of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
WHEREAS, this Indenture is subject to the provisions of the
Trust Indenture Act that are required to be part of this Indenture and shall, to
the extent applicable, be governed by such provisions.
WHEREAS, all things necessary have been done to make the
Notes, when executed by the Company and authenticated and delivered hereunder
and duly issued by the Company, the valid obligations of the Company and to make
this Indenture a valid agreement of the Company, in accordance with their and
its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE> 8
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a 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 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 such Asset Acquisition shall not be
considered as Indebtedness.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Armstrong" means Armstrong Holdings, Inc.
<PAGE> 9
3
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person (other than the Company or any of its
Restricted Subsidiaries) that constitute substantially all of a division or line
of business of such Person.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute a division or line of business
of the Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Capital Stock of any
Restricted Subsidiary (other than in respect of any director's qualifying shares
or investments by foreign nationals mandated by applicable law), (ii) all or
substantially all of the property and assets of an operating unit or business of
the Company or any of its Restricted Subsidiaries or (iii) any other property
and assets of the Company or any of its Restricted Subsidiaries outside the
ordinary course of business of the Company or such Restricted Subsidiary and, in
each case, that is not governed by Article Eight and which, in the case of any
of clause (i), (ii) or (iii) above, whether in one transaction or a series of
related transactions, (a) have a Fair Market Value in excess of $1 million or
(b) are for net proceeds in excess of $1 million; provided that sales or other
dispositions of inventory, receivables and other current assets in the ordinary
course of business shall not be included within the meaning of "Asset Sale".
"Attributable Value" means, as to any particular lease under
which any Person is at the time liable other than a Capitalized Lease
Obligation, and at any date as of which the amount thereof is to be determined,
the total net amount of rent required to be paid by such person under such lease
during the remaining term thereof (whether or not such lease is terminable at
the option of the lessee prior to the end of such term), including any period
for which such lease has been, or may, at the option of the lessor, be extended,
discounted from the last date of such term to the date of determination at a
rate per annum equal to the discount rate which would be applicable to a
Capitalized Lease Obligation with like term in accordance with GAAP. The net
amount of rent required to be paid under any lease for any such period shall be
the aggregate amount of rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of insurance, taxes,
assessments, utility, operating and labor costs and similar charges.
"Attributable Value" means, as to a Capitalized Lease Obligation under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the capitalized amount thereof that would appear on the face
of a balance sheet of such Person in accordance with GAAP.
"Average Life" means, with respect to any Indebtedness, as at
any date of determination, the quotient obtained by dividing (i) the sum of the
products of (a) the number of
<PAGE> 10
4
years from such date to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of such
Indebtedness and (b) the amount of each such principal payment by (ii) the sum
of all such principal payments.
"Board of Directors" means the board of directors of the
Company or its equivalent, including managers of a limited liability company,
general partners of a partnership or trustees of a business trust, or any duly
authorized committee thereof.
"Board Resolution" means a copy of a resolution certified by
the secretary or any assistant secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York or The City of Atlanta are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the purpose of this Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of the then outstanding
Voting Stock of the Company on a fully diluted basis; (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 transaction or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole to any such "person" or "group" (other than to the Company or a
Restricted Subsidiary); (iv) the merger or consolidation of the Company, with or
into another corporation or the merger of another corporation with or into the
Company in one or a series of related transactions with the effect that
immediately after such transaction any such "person" or "group" of persons or
entities shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of the total
voting power of the then outstanding Voting Stock of the surviving corporation;
or (v) the adoption of a plan relating to the liquidation or dissolution of the
Company.
<PAGE> 11
5
"Change of Control Offer" has the meaning specified in Section
1010.
"Change of Control Payment" has the meaning specified in
Section 1010.
"Change of Control Payment Date" has the meaning specified in
Section 1010.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) of such Person's common stock, whether
now outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person and references to the "Company" shall
include FaciliCom after giving effect to the Merger.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its chairman, its president, any
Vice President, its treasurer or any assistant treasurer, and delivered to the
Trustee.
"Consolidated Cash Flow" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Consolidated Net Income (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iv) depreciation expense, to the extent such amount was
deducted in calculating Consolidated Net Income, (v) amortization expense, to
the extent such amount was deducted in calculating Consolidated Net Income, and
(vi) all other non-cash items reducing Consolidated Net Income (excluding any
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period), less all non-cash items increasing
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charges" means, for any period,
Consolidated Interest Expense plus dividends declared and payable on Preferred
Stock.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including capitalized
interest, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with any Interest Rate
Agreements; and
<PAGE> 12
6
interest on Indebtedness that is Guaranteed or secured by the Company or any of
its Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period.
"Consolidated Net Income" means, with respect to any Person,
for any period, the consolidated net income (or loss) of such Person and its
Restricted Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income, by excluding,
without duplication, (i) all extraordinary gains or losses, (ii) net income (or
loss) of any Person combined in such Person or one of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iii) gains or losses (on an after-tax basis) in
respect of any Asset Sales by such Person or one of its Restricted Subsidiaries,
(iv) the net income of any Restricted Subsidiary of such Person to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its stockholders, (v) any gain or loss realized as a
result of the cumulative effect of a change in accounting principles, (vi) any
amount paid or accrued as dividends on Preferred Stock of the Company or
Preferred Stock of any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries and (vii) the net income (or
loss) of any Person (other than net income (or loss) attributable to a
Restricted Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or any
of its Restricted Subsidiaries by such other Person during such period.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of the Capital Stock of the Company or any of its Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the corporate trust operations
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office at the date of execution of this
Indenture is located at First Union National Bank, Corporate Trust Department,
1525 West W.T. Harris Boulevard, 3C3 NC-1153, Charlotte, North Carolina 28262.
"corporation" includes corporations, associations, companies
and business trusts.
"covenant defeasance" has the meaning specified in Section
1303.
"Credit Facilities" means one or more debt facilities or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to
<PAGE> 13
7
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 Exchange Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP.
"Cumulative Consolidated Fixed Charges" means the Consolidated
Fixed Charges of the Company and its Restricted Subsidiaries for the period
beginning on the Exchange Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, determined on a consolidated basis in accordance with GAAP.
"Cumulative Consolidated Interest Expense" means, for the
period beginning on the Exchange Date through and including the end of the last
fiscal quarter (taken as one accounting period) preceding the date of any
proposed Restricted Payment, Consolidated Interest Expense of the Company and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement and any other arrangement and agreement designed to
provide protection against fluctuations in currency (or currency unit) values.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"defeasance" has the meaning specified in Section 1302.
"Depositary" means The Depository Trust Company, its nominees
and successors or any replacement thereof.
"Eligible Accounts Receivable" means the accounts receivable
(net of any reserves and allowances for doubtful accounts in accordance with
GAAP) of any Person 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 GAAP.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, and has outstanding debt with a rating of "A-3"
or higher according to Moody's Investors Service, Inc., or "A-" or higher
according to Standard & Poor's Ratings Services (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)), at the time as of which any
investment or rollover therein is made.
<PAGE> 14
8
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1017.
"Excess Proceeds Offer" has the meaning specified in Section
1017.
"Excess Proceeds Payment" has the meaning specified in Section
1017.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Date" means the date of issuance of the Notes upon
the consummation of the registered exchange offer pursuant to which holders of
the FaciliCom Notes tendered such notes in exchange for the Notes issued by the
Company pursuant to this Indenture.
"Existing Indebtedness" means Indebtedness outstanding on the
date hereof.
"FaciliCom" has the meaning specified in the recitals to this
Indenture.
"FaciliCom Notes" has the meaning specified in the recitals to
this Indenture.
"FaciliCom Pledge Account" means an account established with
the FaciliCom Trustee in its name as trustee under the Original Indenture
pursuant to the terms of the FaciliCom Pledge Agreement.
"FaciliCom Pledge Agreement" means the Collateral Pledge and
Security Agreement, dated as of January 28, 1998, from FaciliCom to the
FaciliCom Trustee governing the FaciliCom Pledge Account and the disbursements
of funds therefrom.
"FaciliCom Pledged Securities" means the securities purchased
by FaciliCom with the portion of the net proceeds from the original offering of
the FaciliCom Notes consisting of U.S. Government Obligations and which were
deposited in the FaciliCom Pledge Account pursuant to the FaciliCom Pledge
Agreement.
"FaciliCom Trustee" means State Street Bank and Trust Company,
as trustee under the Original Indenture.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession of the United States.
<PAGE> 15
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"Global Notes" has the meaning specified in Section 201.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" means a Person in whose name a Note is registered in
the Register.
"Incur" or "Incurrence" means, with respect to any
Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become
liable for or with respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness, including an Incurrence of
Indebtedness by reason of the acquisition of more than 50% of the Capital Stock
of any Person; provided that neither the accrual of interest nor the accretion
of original issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Lease Obligations and the Attributable Value under any
Sale-Leaseback Transaction of such Person, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at
such date of determination or (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (viii) the maximum fixed redemption
or repurchase price of Redeemable Stock of such Person at the time of
determination and (ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided (x) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as
<PAGE> 16
10
determined in conformity with GAAP and (y) that Indebtedness shall not include
any liability for federal, state, local or other taxes.
"Indenture" means this instrument and the Pledge Agreement as
originally executed and as they may from time to time be supplemented or amended
by one or more indentures supplemental hereto and pledge agreements supplemental
thereto entered into pursuant to the applicable provisions hereof.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreements" means any interest rate swap
agreements, interest rate cap agreements, interest rate insurance, and other
arrangements and agreements designed to provide protection against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person. For
purposes of the definition of "Unrestricted Subsidiary" and Sections 1012 and
1014, (i) "Investment" shall include (a) the Fair Market Value of the assets
(net of liabilities) of any Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary of the Company is designated an Unrestricted
Subsidiary and shall exclude the Fair Market Value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (b) the Fair
Market Value, in the case of a sale of Capital Stock in accordance with Section
1014 such that a Person no longer constitutes a Restricted Subsidiary, of the
remaining assets (net of liabilities) of such Person after such sale, and shall
exclude the Fair Market Value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Investment Grade Company" means a Person whose debt
securities are rated BBB- or higher by Standard & Poor's Ratings Service, Inc.
or Baa3 or higher by Moody's Investor Service, Inc. (or an equivalent rating by
another nationally recognized rating agency).
"IRU" means Indefeasible Right of Use, which is the right to
use a telecommunications system with most of the rights and duties of ownership,
but without the right to control or manage such facility and, depending upon the
particular agreement, without any right to salvage or duty to dispose of such
system's cable at the end of its useful life.
<PAGE> 17
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"Junior Preferred Stock" has the meaning specified in Section
1012.
"Lien" means any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance upon or with respect to
any property of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"MAOU" means Minimum Assignable Ownership Units which is
capacity on a telecommunications system that has been acquired on an ownership
basis.
"Market Price" means the average closing price of the shares
of the Company's Common Stock on the principal trading market of such Common
Stock over the five consecutive trading days up to and including the trading day
prior to the last full trading day before the closing of the Merger.
"Market Value" means the average of the closing price of the
applicable security on such security's principal trading market over the five
consecutive trading days up to and including the trading day prior to the last
full trading day before the initiation of any Offer to Purchase described in
clause (i) (B) of the second paragraph of Section 1017 or the time any
commitment to effect an Asset Sale is entered into as described in the first
paragraph of Section 1017.
"Marketable Securities" means: (i) U.S. Government Obligations
which have a remaining weighted average life to maturity of not more than one
year from the date of Investment therein; (ii) any time deposit account, money
market deposit and certificate of deposit maturing not more than 180 days after
the date of acquisition issued by, or time deposit of, an Eligible Institution;
(iii) certificates of deposit, Eurodollar time deposits and bankers' acceptances
with maturity of 90 days or less and overnight bank deposits of any financial
institution that is organized under the laws of the United States of America or
any state hereof, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $300 million (or, to the extent
non-United States dollar denominated, the United States Dollar Equivalent of
such amount) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act); (iv)
commercial paper maturing not more than 180 days after the date of acquisition
issued by a corporation (other than an Affiliate of the Company) with a rating,
at the time as of which any investment therein is made, of "P-1" or higher
according to Moody's Investors Service, Inc., or "A-1" or higher according to
Standard & Poor's Ratings Services (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)); (v) auction rate preferred securities whose
rates are reset based on market level for a par security not more than 90 days
after the date of acquisition with a rating, at the time as of which any
investment therein is made, of "A-3" or higher according to Moody's Investors
Service, Inc., or "A-" or higher according to Standard & Poor's Ratings Services
(or such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)) and issued by a corporation that is not an Affiliate of the Company; (vi)
any banker's acceptance or money market deposit accounts issued or offered by an
Eligible Institution; (vii) repurchase obligations with a term of not more than
seven days for U.S. Government Obligations entered
<PAGE> 18
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into with an Eligible Institution; (viii) any obligations of the Trustee to the
extent such obligations qualify as such under clauses (i) through (vii) above
and (ix) any fund investing exclusively in investments of the types described in
clauses (i) through (viii) above.
"Maturity", when used with respect to any Notes, means the
date on which the principal of such Notes or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption or otherwise.
"Maturity Date" means January 15, 2008.
"Merger" means the merger of FaciliCom with and into the
Company pursuant to the Agreement and Plan of Merger dated August 17, 1999
between the Company and FaciliCom.
"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) provisions for all
taxes payable as a result of such Asset Sale without regard to the consolidated
results of operations of the Company and its Restricted Subsidiaries, taken as a
whole (after taking into account any available offsetting tax credits or
deductions and any tax sharing arrangements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with GAAP, and (b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"Notes" means any of the Notes as defined in the first recital
of this Indenture and more particularly means any Notes authenticated and
delivered under this Indenture.
"Offer Payment Date" has the meaning specified in Section
1017.
<PAGE> 19
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"Offer to Purchase" has the meaning specified in Section 1017.
"Offer to Purchase Payment" has the meaning specified in
Section 1017.
"Officer's Certificate" means a certificate signed by the
chairman, the president, a Vice President, the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Original Indenture" means the Indenture, dated as of January
28, 1998, among FaciliCom and the FaciliCom Trustee, as supplemented by the
First Supplemental Indenture thereto, pursuant to which FaciliCom issued the
FaciliCom Notes.
"Original Issue Date" means January 28, 1998, the date
FaciliCom issued the FaciliCom Notes.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Notes;
provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Notes, except to the extent provided in Sections 1302
and 1303, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Thirteen; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands the Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by Section 313 of the TIA, Notes
owned by the Company or any other obligor upon the Notes or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in
<PAGE> 20
14
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Notes which the Trustee actually knows to be so owned shall be
so disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or such other obligor.
"Participant" means, with respect to the Depositary or its
nominee, an institution that has an account therewith.
"Paying Agent" means any Person (including the Company acting
as Paying Agent) authorized by the Company to pay the principal of (and premium,
if any) or interest on any Notes on behalf of the Company. The initial Paying
Agent shall be the Trustee.
"Payment Account" has the meaning specified in Section 402.
"Permitted Business" means any business involving voice, data
and other telecommunications services or equipment.
"Permitted Indebtedness" has the meaning specified in Section
1011(b).
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into, or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) any Investment in Marketable Securities or Pledged Securities;
(iii) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses in accordance
with GAAP; (iv) loans or advances to officers and employees made in the ordinary
course of business that do not in the aggregate exceed $1 million at any time
outstanding; (v) stock, obligations or securities received in satisfaction of
judgments; (vi) Investments in any Person received as consideration for Asset
Sales to the extent permitted under Section 1017; (vii) Investments in any
Person at any one time outstanding (measured on the date each such Investment
was made without giving effect to subsequent changes in value) in an aggregate
amount not to exceed the greater of (A) $15 million or (B) 5% of the Company's
total consolidated assets; (viii) Investments in deposits with respect to leases
or utilities provided to third parties in the ordinary course of business; (ix)
Investments in Currency Agreements and Interest Rate Agreements on commercially
reasonable terms entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in connection with the operation
of the business of the Company or its Restricted Subsidiaries; provided that
such agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder; (x) repurchases or redemptions by the Company of Capital
Stock from officers and other employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such individuals, in an aggregate amount not
exceeding $1 million in any calendar year and $3 million from the date of this
Indenture; and (xi) Investments in evidences of Indebtedness, securities or
other property received from another Person by the Company or any of its
Restricted Subsidiaries in connection with any bankruptcy proceeding or by
reason of a composition or readjustment of debt or a reorganization of such
<PAGE> 21
15
Person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Indebtedness, securities or other property of such
Person held by the Company or any of its Subsidiaries, or for other liabilities
or obligations of such Person to the Company or any of its Subsidiaries that
were created, in accordance with the terms of this Indenture.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property purchased or leased after the Original Issue
Date; provided that (a) such Lien is created solely for the purpose of securing
Indebtedness Incurred in compliance with Section 1011 (1) to finance the cost
(including the cost of design, development, construction, acquisition,
installation or integration) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property or (2) to refinance any Indebtedness previously
so secured, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such cost and (c) any such Lien shall not extend to or
cover any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation or operating lease; (x) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xi) Liens on
property of, or on shares of stock or Indebtedness of, any corporation existing
at the time such corporation becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens do not extend to or cover any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets acquired and were not created in contemplation of such transaction; (xii)
Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens arising
from the rendering of a final judgment or order against the Company or any
Restricted Subsidiary of the Company that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities
<PAGE> 22
16
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xvi) Liens encumbering customary initial
deposits and margin deposits and other Liens that are either within the general
parameters customary in the industry or incurred in the ordinary course of
business, in each case, securing Indebtedness under Interest Rate Agreements and
Currency Agreements; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of the Company and its
Restricted Subsidiaries prior to the Exchange Date; (xviii) Liens existing on
the Original Issue Date or securing the Notes or the FaciliCom Notes or any
Guarantee of the Notes or the FaciliCom Notes; (xix) Liens granted after the
Exchange Date on any assets or Capital Stock of the Company or its Restricted
Subsidiaries created in favor of the Holders; (xx) Liens securing Indebtedness
which is incurred to refinance secured Indebtedness which is permitted to be
Incurred under clause (viii) of paragraph (b) of Section 1011; provided that
such Liens do not extend to or cover any property or assets of the Company or
any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; and (xxi) Liens securing Indebtedness under
Credit Facilities incurred in compliance with clause (iii), or securing
Indebtedness to finance the cost of Telecommunication Assets under clause (iv)
of paragraph (b) of Section 1011.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge Account" means an account established with the Trustee
in its name as Trustee hereunder pursuant to the terms of the Pledge Agreement
for the deposit of the Pledged Securities.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the date of this Indenture, from the Company to the
Trustee, governing the Pledge Account and the disbursement of funds therefrom.
"Pledged Securities" means the FaciliCom Pledged Securities or
portion thereof which are to be transferred from the FaciliCom Pledge Account
to, and deposited in, the Pledge Account pursuant to the Pledge Agreement. The
Pledged Securities may be held in book-entry form through the Trustee acting as
securities intermediary.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations, rights or other equivalents (however
designated, whether voting or non-voting) of such Person's preferred or
preference stock, whether now outstanding or issued after the date of the
Indenture, including, without limitation, all series and classes of such
preferred or preference stock.
<PAGE> 23
17
"Pro Forma Consolidated Cash Flow" means, for any period, the
Consolidated Cash Flow of the Company for such period calculated on a pro forma
basis to give effect to any Asset Disposition or Asset Acquisition not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during such period as if such Asset
Disposition or Asset Acquisition had taken place on the first day of such
period.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Money Indebtedness" means the principal of, premium,
if any, and interest on, and any other payment obligations in respect of, any
Indebtedness of the Company incurred to finance the purchase of plant, property,
equipment, machinery or similar assets (including, without limitation,
indebtedness for money borrowed for such purpose and indebtedness in respect of
installment payment arrangements).
"Purchase Price" has the meaning set forth in Section 1010.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms (or by the terms of any security into which it
is exchangeable) or otherwise is (i) required to be redeemed on or prior to the
date that is 123 days after the date of the Stated Maturity of the Notes, (ii)
redeemable at the option of the holder of such class or series of Capital Stock
at any time on or prior to the date that is 123 days after the date of the
Stated Maturity of the Notes or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity on or prior to the date that is 123 days after the date of
the Stated Maturity of the Notes; provided that any Capital Stock that would not
constitute Redeemable Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring on or prior
to the date that is 123 days after the date of the Stated Maturity of the Notes
shall not constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 1010 and 1017
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provisions, on or prior to
the date that is 123 days after the date of the Company's repurchase of such
Notes as are required to be repurchased pursuant to Sections 1010 and 1017.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Register" and "Registrar" have the respective meanings
specified in Section 305.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 1 or July 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
<PAGE> 24
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"Responsible Officer", when used with respect to the Trustee,
means any officer of its corporate trust department or similar group having
direct responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section
1012.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Sale-Leaseback Transaction" of any person means an
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by such person of any property or asset of such
person which has been or is being sold or transferred by such person after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangements may be terminated by the lessee
without payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Preferred Stock" has the meaning specified in Section
1012.
"Significant Subsidiary" means a Restricted Subsidiary that is
a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" means (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity including, without limitation,
partnerships and limited liability companies, of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Telecommunications Assets" means, with respect to any Person,
equipment used in the telecommunications business or ownership rights with
respect to IRUs, MAOUs or minimum investment units (or similar ownership
interests) in fiber optic cable and international or domestic telecommunications
switches or other transmission facilities (or Common Stock of a
<PAGE> 25
19
Person that becomes a Restricted Subsidiary, the assets of which consist
primarily of any such Telecommunications Assets), in each case purchased or
acquired through Incurring Indebtedness, provided that such Indebtedness does
not exceed the Fair Market Value of such assets, by the Company or a Restricted
Subsidiary after the Original Issue Date.
"Tested Transaction" has the meaning stated in the definition
of "United States Dollar Equivalent".
"The 1818 Fund" has the meaning specified in Section 1012.
"TMG" means Telecommunications Management Group, Inc.
"Total Equity Market Capitalization" of any Person means, as
of any date of determination, the product of (i) the aggregate number of
outstanding shares of Common Stock of such Person on such date on a
fully-diluted basis and (ii) the average closing price of such Common Stock over
the five consecutive trading days immediately preceding such date. If no closing
price exists with respect to shares of any such class, the value of such shares
shall be determined by the Board of Directors in good faith and evidenced by a
resolution of the Board of Directors filed with the Trustee.
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed, except
as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect in New York State.
"United States Dollar Equivalent" means, with respect to any
monetary amount in a currency other than the United States dollar, at any time
for the determination thereof, the amount of United States dollars obtained by
converting such foreign currency involved in such computation into United States
dollars at the spot rate for the purchase of United States dollars with the
applicable foreign currency as quoted by Reuters at approximately 11:00 a.m.
(New York City time) on the date not more than two business days prior to such
determination. For purposes of determining whether any Indebtedness can be
incurred (including Permitted Indebtedness), any Investment can be made and any
transaction described in Section 1015 can be undertaken (a "Tested
Transaction"), the United States Dollar Equivalent of such Indebtedness,
<PAGE> 26
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Investment or transaction described in Section 1015 will be determined on the
date Incurred, made or undertaken and no subsequent change in the United States
Dollar Equivalent shall cause such Tested Transaction to have been Incurred,
made or undertaken in violation of this Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided (A) that the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such Subsidiary
has assets greater than $1,000, that such designation would be permitted under
Section 1012, and such Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Unrestricted Subsidiary Indebtedness. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
the first paragraph of Section 1011 and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"U.S. Government Obligations" has the meaning specified in
Section 1304.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned", with respect to any Subsidiary, means a
Subsidiary of the Company if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by the Company or one or
more Wholly Owned Subsidiaries of the Company.
"World Access Charitable Trust" means that certain World
Access Charitable Trust dated August 19, 1999, by and between World Access
Investment Corp., a Delaware
<PAGE> 27
21
corporation, and Clay C. Long, Esq., as trustee, in favor of World Access
Foundation, Inc., a Georgia nonprofit corporation.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or
<PAGE> 28
22
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or
<PAGE> 29
23
other Act, and for that purpose the Outstanding Notes shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 105. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture, or at any
other address previously furnished in writing to the Trustee by the
Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
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SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and "agreements" in this Indenture by the
Company shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Notes Registrar and their successors hereunder, and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York. This Indenture
is subject to the provisions of the Trust Indenture Act that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions. Each of the parties hereto submits to the jurisdiction of the U.S.
federal and any New York state court located in the Borough of Manhattan, The
City and State of New York with respect to any actions brought against it as
defendant in any suit, action or proceeding arising out of or relative to this
Indenture or the Notes and waives any rights to which it may be entitled on
account of place of residence or domicile.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
sinking fund payment date or Stated Maturity or Maturity of any Note shall not
be a Business Day, then (notwithstanding any other provision of this Indenture
or of the Notes) payment of principal (or premium, if any) or interest need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on such Interest Payment Date, Redemption
Date or sinking fund payment date, or at the Stated Maturity or Maturity;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date, sinking fund payment date, Stated
Maturity or Maturity, as the case may be.
<PAGE> 31
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ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange agreements to which the Company
is subject or usage. The Company shall approve the form of the Notes and any
notation, legend or endorsement on the Notes.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Notes shall be issued initially in the form of one or more
permanent global Notes in registered form, substantially in the form set forth
in Exhibit A (the "Global Notes"), registered in the name of the Depositary or
the nominee of the Depositary, deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Ownership of beneficial interests in Global Notes will be
limited to Participants or Indirect Participants.
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 202. Restrictive Legends.
Each Global Note shall bear the following legend on the face
thereof:
UNLESS THIS CERTIFICATE IS PRESENTED, BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
<PAGE> 32
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TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 311 OF THE INDENTURE.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $300,000,000,
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304,
305, 306, 906, 1010, 1017 or 1108.
The Notes shall be known and designated as the "13.25% Senior
Notes due 2008" of the Company. The Stated Maturity of the principal of the
Notes shall be January 15, 2008 and they shall bear interest at the rate of
13.25% per annum, payable on January 15 and July 15 of each year, commencing on
January 15, 2000 (or July 15, 2000, if the Exchange Date does not occur prior
to January 1, 2000), until the principal thereof is paid or duly provided for.
Interest on the Notes will accrue from the most recent Interest Payment Date
for which interest has been paid or, if no interest has been paid, from the
Exchange Date.
The principal of (and premium, if any) and interest on the
Notes shall be payable at the office or agency of the Company maintained for
such purpose pursuant to Section 1002, or, at the option of the Company,
interest may be paid by check mailed to addresses of the Persons entitled
thereto as such addresses shall appear on the Register; provided that all
payments with respect to the Global Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
chairman, its president, chief financial officer or any Vice President. The
signature of any of these officers on
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the Notes may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes directing the Trustee to
authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Notes. The Trustee shall be entitled to receive an Officer's Certificate
and an Opinion of Counsel of the Company that it may reasonably request in
connection with such authentication of Notes. Such order shall specify the
amount of Notes to be authenticated and the date on which the original issue of
Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication, substantially in the form provided for in
Exhibit A, duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety in a transaction or a series of transactions to any Person, and the
successor Person resulting from such consolidation, or surviving such merger,
or into which the Company shall have been merged, or the Person which shall
have received a conveyance, transfer, lease or other disposition as aforesaid,
shall have executed an indenture supplemental hereto with the Trustee pursuant
to Article Eight, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like principal amount;
and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Notes as specified in such request for the purpose of
such exchange. If Notes shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Notes, such successor
Person, at the option of the Holders but without expense to them, shall provide
for the exchange of all Notes at the time Outstanding for Notes authenticated
and delivered in such new name.
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SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002 without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Notes of authorized denominations. Until so exchanged, the temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Register shall be in written form or
any other form capable of being converted into written form within a reasonable
time. At all reasonable times, the Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar (the
"Registrar") for the purpose of registering Notes and transfers of Notes as
herein provided.
Upon surrender for registration of transfer of any Note at
the office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Notes which the Holder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange
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shall be duly endorsed and be accompanied by a written instrument of transfer,
in form satisfactory to the Company and the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 304, 906, 1010, 1017 or 1108
not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Note or in lieu of any such
destroyed, lost or stolen Note, a new Note of like tenor and principal amount,
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section 306, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 306 in lieu of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section 306 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
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SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name such Note (or Predecessor Notes) is registered at the close of
business on the Regular Record Date (or if a Predecessor Note is outstanding on
such Regular Record Date, such Predecessor Note) for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
1002 or, at the option of the Company, interest may be paid by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Register; provided that all payments with respect to Global Notes 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.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by
virtue of having been such Holder, and such defaulted interest and (to the
extent lawful) interest on such defaulted interest at the rate borne by the
Notes (such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a
special record date ("Special Record Date") for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Note and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given in the manner provided for in Section
106 not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
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Subject to the foregoing provisions of this Section 307, each
Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, redemption, registration
of transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to, and promptly cancelled by, the Trustee. The Company
may at any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and may deliver to the Trustee (or to any other Person
for delivery to the Trustee) for cancellation any Notes previously
authenticated hereunder which the Company has not issued and sold, and all
Notes so delivered shall be promptly cancelled by the Trustee. If the Company
shall so acquire any of the Notes, however, such acquisition shall not operate
as a redemption or satisfaction of the Indebtedness represented by such Notes
unless and until the same are surrendered to the Trustee for cancellation. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this Indenture.
All cancelled Notes held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures and certification of their disposal
delivered to the Company unless by Company Order the Company shall direct that
cancelled Notes be returned to it after being appropriately designated as
cancelled.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii)
bear legends as set forth in Section 202.
Except as provided in Section 311(b), owners of beneficial
interests in the Global Notes will not have Notes registered in their names,
will not receive physical delivery of Notes in
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certificated form and will not be considered the registered owner or Holder
thereof under this Indenture for any purpose.
Members of, or Participants in, the Depositary shall have no
rights under this Indenture with respect to any Global Note, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Note. The registered Holder of a Global Note may grant proxies and
otherwise authorize any person, including Participants and persons that may
hold interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary. Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, a nominee of the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in the Global Notes may be transferred in accordance with the
rules and procedures of the Depositary. Notes in certificated form shall be
transferred to beneficial owners in exchange for their beneficial interests in
the Global Note, as the case may be, if (i) the Depositary (A) notifies the
Company that it is unwilling or unable to continue as depository for the Global
Notes and the Company thereupon fails to appoint a successor depository or (B)
has ceased to be a clearing agency registered under the Exchange Act; (ii)
there shall have occurred and be continuing an Event of Default with respect to
the Notes; or (iii) the Company, at its option, notifies the Trustee in writing
that it elects to cause issuance of the Notes in certificated form. In
connection with a transfer of an entire Global Note to beneficial owners
pursuant to clause (i), (ii) or (iii) of this paragraph (b), the applicable
Global Note shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and deliver,
to each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the applicable Global Note, an equal aggregate principal
amount of certificated notes of authorized denominations.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Notes as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(1) either
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(A) All Notes theretofore authenticated and
delivered (other than (i) Notes which have been destroyed,
lost or stolen and which have been replaced or paid as
provided in Section 306 and (ii) Notes for whose payment
money has theretofore been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust
by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the
Trustee for cancellation (other than Notes which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306)
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption
within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose in an amount
sufficient to pay and discharge the entire Indebtedness on
such Notes not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Notes
which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be, together with
irrevocable instructions from the Company directing the
Trustee to apply such funds to the payment thereof at Stated
Maturity or redemption, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (B)
of clause (1) of this Section, the obligations of the Trustee under Section 402
and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money
On or prior to the effective date of this Indenture, the
Trustee shall establish a
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segregated, non-interest bearing corporate trust account (the "Payment
Account") maintained by the Trustee for the benefit of the Holders in which all
amounts paid to the Trustee for the benefit of the Holders in respect of the
Notes will be held (except for amount designated to be deposited into the
Pledge Account) and from which the Trustee (if the Trustee is the Paying Agent)
shall make payments to the Holders in accordance with this Indenture and the
Notes. Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 and otherwise pursuant
to this Indenture shall be held in trust and applied by it, in accordance with
the provisions of the Notes and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money has
been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Note when
due and payable as to any Interest Payment Date falling on or prior to
January 15, 2001; or
(2) default in the payment of interest on any Note when due
and payable as to any Interest Payment Date following after January
15, 2001, and any such failure continued for a period of 30 days; or
(3) default in the payment of the principal of (or premium,
if any, on) any Note at its Stated Maturity, upon acceleration,
redemption or otherwise; or
(4) default in the payment of principal or interest on any
Note required to be purchased pursuant to an Offer to Purchase or an
Excess Proceeds Offer as described in Section 1017 or pursuant to a
Change of Control Offer as described in Section 1010; or
(5) failure to perform or comply with the provisions of
Section 801; or
(6) default in the performance or breach of any covenant or
agreement of the Company in this Indenture or under the Notes (other
than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with elsewhere in this Section),
and continuance of such default or breach for a period of 30
consecutive days after there has been given to the Company by the
Trustee or the Holders of at least 25% or more in aggregate principal
amount of the Notes then Outstanding a written notice specifying such
default or breach; or
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(7) (A) there shall have occurred with respect to any issue
or issues of Indebtedness of the Company or any Restricted Subsidiary
having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (B) an event of
default that has caused the Holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and
such Indebtedness has not been discharged in full or such acceleration
has not been rescinded or annulled by the expiration of any applicable
grace period and/or (C) the failure to make a principal payment at
the final (but not any interim) fixed Maturity Date thereon and such
defaulted payment shall not have been made, waived or extended by the
expiration of any applicable grace period; or
(8) any final judgment or order (not covered by insurance)
for the payment of money in excess of $5 million in the aggregate for
all such final judgments or orders against all such Persons (treating
any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Restricted Subsidiary and shall
not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(9) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or
any of its Significant Subsidiaries or for all or substantially all of
the property and assets of the Company or any of its Significant
Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case,
such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or
(10) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such
law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries
or for all or substantially all of the property and assets of the
Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors; or
(11) the Company asserts in writing that the Pledge Agreement
ceases to be in full force and effect before payment in full of the
obligations thereunder.
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SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(9) or 501(10)) occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes Outstanding by a notice in writing to the Company
(and to the Trustee if such notice given by such Holders), may, and the Trustee
at the request of such Holders shall, declare the principal of, premium, if
any, and accrued but unpaid interest on all the Notes to be immediately due and
payable. Upon any such declaration of acceleration, such principal of, premium,
if any, and accrued interest shall become immediately due and payable. If an
Event of Default specified in Section 501(9) or 501(10) occurs, then the
principal of, premium, if any, and accrued interest shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
At any time after a declaration of acceleration has been
made, the Holders of at least a majority in aggregate principal amount of the
Notes Outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) all existing Events of Default, other than the nonpayment
of amounts of principal of, premium, if any, and accrued and unpaid
interest on the Notes which have become due solely by such declaration
of acceleration, have been cured or waived subject to the limitations
set forth in Section 513; and
(2) the rescission, in the opinion of counsel, would not
conflict with any judgment or decrees of a court of competent
jurisdiction.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because an Event of Default
specified in Section 501(7) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the Holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned
by the Holders of such Indebtedness or a trustee, fiduciary or agent for such
Holders, within 60 days after such declaration of acceleration in respect of
the Notes, and no other Event of Default has occurred during such 60-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(a) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
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(b) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
the Company shall pay to the Trustee for the benefit of the Holders of such
Notes, the whole amount then due and payable on such Notes for principal (and
premium, if any) and interest, and interest on any overdue principal (and
premium, if any) and, to the extent that payment of such interest shall be
legally enforceable, upon any overdue installment of interest at the rate borne
by the Notes, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, fees expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Notes and to file such other papers or documents and
take other actions as the Trustee may deem necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly
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to the Holders, to pay the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal
(and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
Except to enforce the right to receive payment of principal
or premium, if any, or interest when due, no Holder of any Notes shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless the following conditions have been met:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the
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39
Outstanding Notes shall have made written request to the Trustee to
pursue the remedy in respect of such Event of Default in its own name
as trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to the Trustee against any costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee has failed to institute any such proceeding
for 60 days after its receipt of such notice, request and offer of
indemnity; and
(5) during such 60-day period, no direction inconsistent with
such written request has been given to the Trustee by the Holders of a
majority or more in aggregate principal amount of the Outstanding
Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment, as provided herein (including, if applicable, Article
Thirteen) and in such Note of the principal of (and premium, if any) and
(subject to Section 307) interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment
on or after such Stated Maturities, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
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SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee,
provided that
(1) the Trustee need not take any action that conflicts with
law or this Indenture, which might involve the Trustee in personal
liability or which, in the good faith determination of the Trustee,
may be unduly prejudicial to rights Holders not joining in the giving
of such direction, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes may on behalf of the Holders of all
the Notes waive any past default hereunder and its consequences, except a
default
(1) in respect of the payment of the principal of (or
premium, if any) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
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Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder,
the Trustee shall transmit in the manner and to the extent provided in TIA
Section 313(c), notice of such Default hereunder of the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default of the character
specified in Section 501(7), no such notice to Holders shall be given until at
least 30 days after the occurrence thereof.
In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by
<PAGE> 48
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the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, may require and rely upon an
Officer's Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(9) any permissive right or power available to the Trustee
under this Indenture or any supplement hereto shall not be construed
to be a mandatory duty or obligation;
(10) the Trustee shall not be charged with knowledge of any
matter (including any default, other than as described in Section
501(1), (2) or (3)) unless and except to the extent actually known to
a Responsible Officer of the Trustee or to the extent written notice
thereof is received by the Trustee at the Corporate Trust Office; and
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(11) the Trustee shall have no liability for any inaccuracy
in the books or records of, or for any actions or omissions of the
Depositary.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
The Trustee shall not be required to examine any of the
reports and documents filed with it pursuant to Sections 703 or 1009 to
determine whether or not the Company is in compliance with the covenants set
forth at Sections 1010 through 1021.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes.
The recitals contained in this Indenture and in the Notes,
except for the Trustees certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Notes and perform its obligations hereunder and that the
statements made by it in a Statement of Eligibility on Form T-1 supplied to the
Company are true and accurate, subject to the qualifications set forth therein.
The Trustee shall not be accountable for the use or application by the Company
of Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Paying Agent, any Registrar or any other
agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder shall be
segregated from other funds. The Trustee shall be under no liability for
interest on any money received by it hereunder.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder and under the
Pledge Agreement (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by
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the Trustee in accordance with any provision of this Indenture and
under the Pledge Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection
with the acceptance and administration of its duties under the Pledge
Agreement or the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(8) or (9), the
expenses (including the reasonable charges and expenses of its counsel) of and
the compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law; provided, however, that if any such amounts are not paid as
expenses of administration, they may be collected by the Trustee as amounts
payable to it pursuant to Section 506.
The provisions of this Section 606 shall survive the
termination of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall
be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50 million. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 607, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
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(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the
provisions of TIA Section 310(b) after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 607 and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least six months, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Note for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to the
Holders in the manner provided for in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust
Office.
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SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder (provided such corporation shall be otherwise qualified and eligible
under this Article), without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
In case at that time any of the Notes shall not have been authenticated, any
successor Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such
cases such certificates shall have the full force and effect which this
Indenture provides for the certificate of authentication of the Trustee shall
have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY
TRUSTEE AND COMPANY
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and
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addresses of the Holders in accordance with TIA Section 312, regardless of the
source from which such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a request
made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after February 15 of each year commencing with
the first February 15 after the first issuance of Notes, the Trustee shall
transmit to the Holders, in the manner and to the extent provided in TIA
Section 313(c), a brief report dated as of such February 15 if required by TIA
Section 313(a).
SECTION 703. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required
to file information, documents or reports pursuant to either of said
Sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by
the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of
the Exchange Act in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time in
such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to all Holders, in the manner and to the
extent provided in TIA Section 313(c), within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
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The Company shall not consolidate with, or merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to, any
Person or permit any Person to merge with or into the Company and the Company
shall not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other Person or Persons, unless:
(1) either (A) the Company shall be the continuing Person,
(B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or
leased such property and assets of the Company (i) shall be a
corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and (ii) shall
expressly assume, by an indenture supplemental hereto, duly executed
and delivered to the Trustee, all of the obligations of the Company
with respect to all the Notes and under this Indenture or (C) in the
case of any such transaction or series of transactions entered into by
any Restricted Subsidiary, the Person into which the Restricted
Subsidiary is merged is another Restricted Subsidiary;
(2) immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default shall have occurred
and be continuing;
(3) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(4) immediately after giving effect to such transaction on a
pro forma basis, the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00
of Indebtedness under paragraph (a) of Section 1011; and
(5) the Company delivers to the Trustee an Officer's
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (3) and (4) above) and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such
supplemental indenture complies with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
provided, however, that clauses (3) and (4) above shall not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose
of such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with or merger of the
Company with or into any other Person or any conveyance, transfer or lease of
the properties and assets of the
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Company substantially as an entirety to any Person in accordance with Section
801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and in the event of any such
conveyance or transfer, the Company (which term shall for this purpose mean the
Person named as the "Company" in the first paragraph of this Indenture or any
successor Person which shall theretofore become such in the manner described in
Section 801), except in the case of a lease, shall be discharged of all
obligations and covenants under this Indenture and the Notes and may be
dissolved and liquidated.
SECTION 803. Notes to Be Secured in Certain Events.
If, upon any such consolidation of the Company with, or
merger of the Company into, any other corporation, or upon any conveyance,
lease or transfer of the property of the Company substantially as an entirety
to any other Person, any property or assets of the Company would thereupon
become subject to any Lien, then unless such Lien could be created pursuant to
Section 1016 without equally and ratably securing the Notes, the Company, prior
to or simultaneously with such consolidation, merger, conveyance, lease or
transfer, will, as to such property or assets, secure the Notes Outstanding
(together with, if the Company shall so determine any other Indebtedness of the
Company now existing or hereinafter created which is not subordinate in right
of payment to the Notes) equally and ratably with (or prior to) the
Indebtedness which upon such consolidation, merger, conveyance, lease or
transfer is to become secured as to such property or assets by such Lien, or
shall cause such Notes to be so secured.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company contained herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of
Section 609; or
<PAGE> 56
50
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided that such action
shall not adversely affect the interests of the Holders in any
material respect; or
(6) to secure the Notes pursuant to the requirements of
Section 803 or Section 1016 or otherwise.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Notes, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, or premium, if any, or
interest on any Note or extend the time for payment of interest on, or
alter the redemption provisions of, any Note;
(iii) change the place or currency of payment of principal
of, or premium, if any, or interest on any Note;
(iv) impair the right of any Holder to receive payment of,
principal of and interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment
on or after the Stated Maturity (or, in the case of a redemption, on
or after the Redemption Date) of any Note;
(v) reduce the percentage of Outstanding Notes the consent of
whose Holders is necessary to modify, amend, waive, supplement or
consent to take any action under this Indenture or the Notes;
(vi) waive a default in the payment of principal of, premium,
if any, or accrued and unpaid interest on the Notes;
(vii) reduce or change the rate or time for payment of
interest on the Notes;
(viii) [Reserved]
(ix) modify any provisions of any Guarantees in a manner
adverse to the Holders; or
<PAGE> 57
51
(x) modify any provisions of this Section 902 or Sections 513
and 1022, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Note
affected thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustees own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and upon Company Order authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Note affected
thereby, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture.
<PAGE> 58
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.
The Company covenants and agrees for the benefit of the Holders
that it shall duly and punctually pay the principal of (and premium, if any)
and interest on the Notes in accordance with the terms of the Notes and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in The City of New York, an office or
agency where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the Notes
and this Indenture may be served. The office of the Trustee located at 40 Broad
Street, Suite 550, New York, New York 10004 shall be such office or agency of
the Company, unless the Company shall designate and maintain some other office
or agency for one or more of such purposes. In addition, the Company shall
maintain an office or agency where the Notes may be presented or surrendered
for payment (which shall be the Corporate Trust Office of the Trustee, unless
the Company shall designate and maintain some other office or agency for one or
more such purposes). The Company shall give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind any such designation;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in The
City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and any change in
the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and shall promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it
<PAGE> 59
shall, on or before each due date of the principal of (or premium, if any) or
interest on any Notes, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
shall promptly notify the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 1003,
that such Paying Agent shall:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest on the Notes; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same terms as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (or premium,
if any) or interest on any Note and remaining unclaimed for two years after
such principal, premium or interest has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then
remaining shall be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the
corporate existence (or in the case of
<PAGE> 60
its Subsidiaries, existence under the applicable statutes for non-corporate
business entities such as partnerships and limited liability companies), rights
(charter and statutory) and franchises of the Company and each Subsidiary;
provided, however, that the Company shall not be required to preserve any such
right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary
or upon the income, profits or property of the Company or any Subsidiary and
(b) all lawful claims for labor, materials and supplies, which, if unpaid,
might by law become a lien (other than a Permitted Lien) upon the property of
the Company or any Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its
Subsidiaries properties which are of an insurable nature insured with insurers,
believed by the Company to be responsible, against loss or damage to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officer's Certificate from the principal
executive officer, principal financial officer or principal accounting officer
to the effect that a review has been conducted of the activities of the Company
and the Company's performance under this Indenture, and that the Company has
fulfilled its obligations thereunder or, if there has been a default in the
fulfillment of any such obligation, specifying each such default and the nature
and status thereof. For purposes of this Section 1008(a), such compliance shall
be determined without regard to any
<PAGE> 61
period of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the Holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $1,000,000) shall deliver to
the Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officer's Certificate specifying such event, notice or other
action within five Business Days of its occurrence.
SECTION 1009. Provision of Financial Statements and Reports.
(a) The Company shall file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission and whether or not
the Company has a class of securities registered under the Exchange Act, the
annual reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act.
All such annual reports shall include the geographic segment financial
information contemplated by Item 101(d) of Regulation S-K under the Securities
Act, and all such quarterly reports shall provide the same type of interim
financial information that, as of the date of this Indenture, is the Company"s
practice to provide.
(b) The Company shall also be required (i) to file with the
Trustee, and provide to each Holder, without cost to such Holder, copies of
such reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which the
Company would be required to file such reports and documents if the Company
were so required and (ii) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder promptly upon request.
SECTION 1010. Repurchase of Notes upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require the Company to repurchase such Holder's Notes in
whole or in part (the "Change of Control Offer"), at a purchase price (the
"Purchase Price") in cash in an amount equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, to the date of purchase (subject to
the right of Holders of record to receive interest on the relevant Interest
Payment Date) (the "Change of Control Payment") in accordance with the
procedures set forth in paragraphs (c) and (d) of this Section.
(b) [Reserved]
(c) Within 30 days following any Change of Control, the Company
shall give to each Holder and the Trustee in the manner provided in Section 106
a notice stating:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this Section 1010 and that all Notes
validly tendered will be accepted for payment;
<PAGE> 62
(ii) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro forma
historical income, cash flow and capitalization after giving effect to such
Change of Control);
(iii) the Purchase Price and date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Change of Control Payment Date");
(iv) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(v) that, unless the Company defaults in the payment of the Change
of Control Payment, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest on and after the Change of Control
Payment Date;
(vi) that Holders electing to have any Note or portion thereof
purchased pursuant to the Change of Control Offer will be required to surrender
such Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of such Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date;
(vii) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes purchased; and
(viii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples thereof.
(d) [Reserved].
(e) On the Change of Control Payment Date, the Company shall:
(i) accept for payment Notes or portions thereof tendered pursuant
to the Change of Control Offer;
(ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Notes
or portions thereof so accepted together with an Officer's Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail, to the
<PAGE> 63
Holders so accepted, payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 1010, the Trustee shall act as Paying Agent.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes a Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in the event that a Change of Control
occurs and the Company is required to repurchase the Notes under this Section
1010.
SECTION 1011. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company may Incur Indebtedness if immediately thereafter the ratio of (i) the
aggregate principal amount (or accreted value, as the case may be) of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the Pro Forma Consolidated
Cash Flow for the preceding two full fiscal quarters multiplied by two,
determined on a pro forma basis as if any such Indebtedness had been Incurred
and the proceeds thereof had been applied at the beginning of such two fiscal
quarters, would be greater than zero and less than 5 to 1.
(b) The foregoing limitations of paragraph (a) of this covenant
will not apply to any of the following Indebtedness ("Permitted Indebtedness"),
each of which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the Notes or the
FaciliCom Notes;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Exchange Date;
(iii) Indebtedness of the Company or any Restricted Subsidiary
under one or more Credit Facilities, in an aggregate principal amount at any
one time outstanding not to exceed the greater of (x) $135.0 million and (y)
80% of Eligible Accounts Receivable at any one time outstanding, subject to any
permanent reductions required by any other terms of this Indenture;
(iv) Indebtedness of the Company or any Restricted Subsidiary
Incurred in connection with or to finance the cost (including the cost of
design, development, construction, acquisition, installation or integration) of
Telecommunications Assets;
<PAGE> 64
(v) Indebtedness of a Restricted Subsidiary owed to and held by
the Company or another Restricted Subsidiary, except that (A) any transfer of
such Indebtedness by the Company or a Restricted Subsidiary (other than to the
Company or another Restricted Subsidiary) or (B) the sale, transfer or other
disposition by the Company or any Restricted Subsidiary of Capital Stock of a
Restricted Subsidiary which is owed Indebtedness of another Restricted
Subsidiary shall, in each case, be an Incurrence of Indebtedness by such
Restricted Subsidiary, subject to the other provisions of this Indenture;
(vi) Indebtedness of the Company owed to and held by a Restricted
Subsidiary which is unsecured and subordinated in right to the payment and
performance to the obligations of the Company under this Indenture and the
Notes, except that the limitations of paragraph (a) of this Section 1011 shall
apply to such Indebtedness at such time as (A) any transfer of such
Indebtedness by a Restricted Subsidiary (other than to another Restricted
Subsidiary) and (B) the sale, transfer or other disposition by the Company or
any Restricted Subsidiary of Capital Stock of a Restricted Subsidiary which is
owed such Indebtedness, subject to other provisions of this Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary
issued in exchange for, or the net proceeds of which are used to refinance
(whether by amendment, renewal, extension or refunding), then outstanding
Indebtedness of the Company or a Restricted Subsidiary, other than Indebtedness
Incurred under clauses (iii), (v), (vi), (viii), (ix), (xi) and (xii) of this
paragraph, and any refinancings thereof in an amount not to exceed the amount
so refinanced or refunded (plus premiums, accrued interest, and reasonable fees
and expenses); provided that such new Indebtedness shall only be permitted
under this clause (vii) if: (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made pari passu with, or subordinate in right of payment to, the
remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated
in right of payment to the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made subordinate in right of
payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the Notes and (C) such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does not
mature prior to the Stated Maturity of the Indebtedness to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least equal to
the remaining Average Life of the Indebtedness to be refinanced or refunded;
and provided further that in no event may Indebtedness of the Company be
refinanced by means of any Indebtedness of any Restricted Subsidiary pursuant
to this clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any one
time outstanding, 2.00 times the Net Cash Proceeds from the issuance and sale,
other than to a Subsidiary, of Common Stock (other than Redeemable Stock) of
the Company (less the amount of such proceeds used to make Restricted Payments
as provided in clause (iii) or (iv) of the second paragraph of Section 1012)
and (y) the Company or Acquired Indebtedness of a Restricted Subsidiary not to
exceed, at one time outstanding, the Fair
<PAGE> 65
Market Value of any Telecommunications Assets acquired by the Company in
exchange for Common Stock of the Company issued after the Exchange Date;
provided, however, that in determining the Fair Market Value of any such
Telecommunications Assets so acquired, if the estimated Fair Market Value of
such Telecommunications Assets exceeds (A) $2 million (as estimated in good
faith by the Board of Directors), then the Fair Market Value of such
Telecommunications Assets will be determined by a majority of the Board of
Directors of the Company, which determination will be evidenced by a resolution
thereof, and (B) $10 million (as estimated in good faith by the Board of
Directors), then the Company shall deliver the Trustee a written appraisal as
to the Fair Market Value of such Telecommunications Assets prepared by a
nationally recognized investment banking or public accounting firm (or, if no
such investment banking or public accounting firm is qualified to prepare such
an appraisal, by a nationally recognized appraisal firm); and provided further
that such Indebtedness does not mature prior to the Stated Maturity of the
Notes and the Average Life of such Indebtedness is longer than that of the
Notes;
(ix) Indebtedness of the Company or any Restricted Subsidiary (A)
in respect of performance, surety or appeal bonds or letters of credit
supporting trade payables, in each case provided in the ordinary course of
business, (B) under Currency Agreements and Interest Rate Agreements covering
Indebtedness of the Company; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder, and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations including, without limitation, the Company"s
indemnification obligations pursuant to that certain Indemnification Agreement
dated August 19, 1999, by and between the Company and Clay C. Long, Esq.,
trustee of the World Access Charitable Trust, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition), in a
principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such disposition;
(x) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly (A) used to repurchase Notes tendered in a Change
of Control Offer or (B) deposited to defease all of the Notes pursuant to
Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by a
Guarantee of the Notes permitted by and made in accordance with Section 1018;
(xii) Indebtedness of the Company and its Subsidiaries existing
upon the consummation of the Merger; and
(xiii) Indebtedness of the Company or any Restricted Subsidiary in
addition to that permitted to be incurred pursuant to clauses (i) through (xi)
above in an aggregate
<PAGE> 66
principal amount not in excess of $10 million (or, to the extent not
denominated in United States dollars, the United States Dollar Equivalent
thereof) at any one time outstanding.
(c) For purposes of determining any particular amount of
indebtedness under this Section 1011, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included; provided,
however, that the foregoing shall not in any way be deemed to limit the
provisions of Section 1018. For purposes of determining compliance with this
Section 1011, in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion may, at the time of such Incurrence, (i)
classify such item of Indebtedness under and comply with either of paragraph
(a) or (b) of this covenant (or any of such definitions), as applicable, (ii)
classify and divide such item of Indebtedness into more than one of such
paragraphs (or definitions), as applicable, and (iii) elect to comply with such
paragraphs (or definitions), as applicable in any order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, (i) (A) declare or pay any dividend or
make any distribution in respect of the Company's Capital Stock to the holders
thereof (other than dividends or distributions payable solely in shares of
Capital Stock (other than Redeemable Stock) of the Company or in options,
warrants or other rights to acquire such shares of Capital Stock) or (B)
declare or pay any dividend or make any distribution in respect of the Capital
Stock of any Restricted Subsidiary to any Person other than dividends and
distributions, including a distribution payable solely in shares of Capital
Stock (other than Redeemable Stock), payable to the Company or any Restricted
Subsidiary or to all holders of Capital Stock of such Restricted Subsidiary on
a pro rata basis; (ii) purchase, redeem, retire or otherwise acquire for value
any shares of Capital Stock of the Company (including options, warrants or
other rights to acquire such shares of Capital Stock) held by any Person or any
shares of Capital Stock of any Restricted Subsidiary (including options,
warrants and other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or
any holder (or any Affiliate thereof) of 5% or more of the Company's Capital
Stock; (iii) make any voluntary or optional principal payment, or voluntary or
optional redemption, repurchase, defeasance, or other acquisition or retirement
for value, of Indebtedness of the Company that is subordinated in right of
payment to the Notes; or (iv) make any Investment, other than a Permitted
Investment, in any Person (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Company could not Incur at least $1.00 of Indebtedness
under paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments declared or
made from and after the Exchange Date would exceed the sum of:
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(1) Cumulative Consolidated Cash Flow minus 200% of Cumulative
Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the issue or sale
to a Person, which is not a Subsidiary of the Company, of Capital Stock
of the Company (other than Redeemable Stock) or of debt securities of the
Company which have been converted into or exchanged for such Capital
Stock (except to the extent such Net Cash Proceeds are used to Incur new
Indebtedness outstanding pursuant to clause (viii) of paragraph (b) of
Section 1011); and
(3) to the extent any Permitted Investment that was made after the
Exchange Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (i) the cash return of capital with respect to such
Permitted Investment (less the cost of disposition, if any) and (ii) the
initial amount of such Permitted Investment.
The foregoing provision shall not be violated by reason of: (i)
the payment of any dividend within 60 days after the date of declaration
thereof if, at said date of declaration, such payment would comply with the
foregoing paragraph; (ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is subordinated in
right of payment to the Notes including a premium, if any, and accrued and
unpaid interest with the net proceeds of, or in exchange for, Indebtedness
Incurred under clause (viii) of paragraph (b) of Section 1011; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company in
exchange for, or out of the Net Cash Proceeds of a substantially concurrent (A)
capital contribution to the Company or (B) offering of, shares of Capital Stock
(other than Redeemable Stock) of the Company (except to the extent such
proceeds are used to incur new Indebtedness outstanding pursuant to clause
(viii) of paragraph (b) of Section 1011); (iv) the acquisition of Indebtedness
of the Company which is subordinated in right of payment to the Notes in
exchange for, or out of the proceeds of, a substantially concurrent (A) capital
contribution to the Company or (B) offering of, shares of the Capital Stock of
the Company (other than Redeemable Stock) (except to the extent such proceeds
are used to incur new Indebtedness outstanding pursuant to clause (viii) of
paragraph (b) of Section 1011); (v) payments or distributions to dissenting
stockholders in accordance with applicable law, pursuant to or in connection
with a consolidation, merger or transfer of assets that complies with Article
Eight; (vi) the declaration or payment of any dividend or distribution in
respect of, and in accordance with the terms of, the Company's (A) 50,000
outstanding shares of 4.25% Cumulative Senior Perpetual Convertible Preferred
Stock, Series A, par value $0.01 per share (the "Senior Preferred Stock"), and,
in the event that The 1818 Fund III, L.P. ("The 1818 Fund") exercises its
option to purchase up to 20,000 additional shares of Senior Preferred Stock,
then such additional shares as well and (B) 23,174 outstanding shares of 4.25%
Cumulative Junior Convertible Preferred Stock, Series B, par value $0.01 per
share (the "Junior Preferred Stock"); (vii) the conversion of the Senior
Preferred Stock, the Junior Preferred Stock or the Company"s Convertible
Preferred Stock, Series C, par value $0.01 per share, into Capital Stock of the
Company in accordance with the terms of such preferred stock; (viii) the
exercise of employee or non-employee options to purchase the Capital Stock of
the Company; and (ix) other Restricted Payments not to exceed $2 million;
provided that, except in the case of clause (i), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
<PAGE> 68
Each Restricted Payment permitted pursuant to the immediately
preceding paragraph (other than the Restricted Payment referred to in clause
(ii) thereof) and the Net Cash Proceeds from any capital contributions to the
Company or issuance of Capital Stock referred to in clauses (iii) and (iv) of
the immediately preceding paragraph, shall be included in calculating whether
the conditions of clause (C) of the first paragraph of this Section 1012 have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this Section 1012 only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of the Notes.
SECTION 1013. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company shall
not, and shall not permit any Restricted Subsidiary to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Restricted Subsidiary to do any
one of the following:
(i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned
by the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(iii) make loans or advances to the Company or any other
Restricted Subsidiary; or
(iv) transfer any of its property or assets (including the Capital
Stock of any Restricted Subsidiary) to the Company or any other
Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Exchange Date in this Indenture or any other
agreements or instruments in effect on the Exchange Date, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed
or replaced;
(ii) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if the encumbrance or
restriction applies only in the event of a default with respect to a
financial covenant contained in such Indebtedness or agreement and such
encumbrance or restriction is not materially, more disadvantageous to the
Holders than is customary in comparable financing (as determined by the
Company) and the Company determines that any such encumbrance or
restriction will not
<PAGE> 69
materially affect the Company's ability to make principal or interest
payments on the Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or assets
of such Person acquired by the Company or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of this
Section 1013, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject
to, a lease, purchase mortgage obligation, license, conveyance or
contract or similar property or asset, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture or (C) arising or
agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract
from the value of property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or any Restricted
Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition of
all or substantially all of the Capital Stock of, or property and assets
of, such Restricted Subsidiary. Nothing contained in this Section 1013
shall prevent the Company or any Restricted Subsidiary from (1) creating,
incurring, assuming or suffering to exist any Liens otherwise permitted
in Section 1016 or (2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries
that secure Indebtedness of the Company or any of its Restricted
Subsidiaries.
SECTION 1014. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue, transfer, distribute, 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 or any other Restricted Subsidiary (other than to the Company or a Wholly
Owned Restricted Subsidiary or in respect of any director's qualifying shares
or sales of shares of Capital Stock to foreign nationals mandated by applicable
law or pursuant to the exercise of employee or non-employee options to purchase
the Capital Stock of the Company) to any Person unless (A) the Net Cash
Proceeds from such issuance, transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 1017, (B) immediately after
giving effect to such issuance, transfer, conveyance, sale, lease or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and (C) any Investment in such Person remaining after giving effect
to such issuance, transfer, conveyance, sale, lease or other disposition would
have been permitted to be made under Section 1012 if made on the date of such
issuance, transfer, conveyance, sale, lease or other disposition (valued as
provided in the
<PAGE> 70
definition of "Investment" contained in Section 101).
SECTION 1015. Limitation on Transactions with Stockholders and Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of Capital
Stock of the Company or any Restricted Subsidiary or with any Affiliate of the
Company or any Restricted Subsidiary, unless the following conditions have been
met:
(i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with a Person
that is not such a holder or an Affiliate;
(ii) if such transaction or series of transactions involves
aggregate consideration in excess of $2 million, then such transaction or
series of transactions is approved by a majority of the Board of
Directors of the Company and is evidenced by a resolution therein; and
(iii) if such transaction or series of transactions involves
aggregate consideration in excess of $10 million, then the Company or
such Restricted Subsidiary shall deliver to the Trustee a written opinion
as to the fairness to the Company or such Restricted Subsidiary of such
transaction from a financial point of view from a nationally recognized
investment banking firm (or, if an investment banking firm is generally
not qualified to give such an opinion, by a nationally recognized
appraisal firm or accounting firm).
The foregoing limitation does not limit, and will not apply to (i)
any transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) any Restricted Payments not prohibited by Section 1012; (iv) loans and
advances to officers or employees of the Company and its Subsidiaries not
exceeding at any one time outstanding $1.5 million in the aggregate, made in the
ordinary course of business; (v) arrangements with TMG, Armstrong and/or its
subsidiaries existing on the date of the Original Indenture and listed on
Schedule A attached thereto as such arrangements may be extended or renewed;
provided that the terms of any arrangement altered by any such extension or
renewal may not be altered in a manner adverse to the Company or the Holders of
the Notes; (vi) the issuance of up to 20,000 additional shares of Senior
Preferred Stock to The 1818 Fund pursuant to an option agreement existing on the
date of this Indenture; (vii) the sale to and purchase by the Company from MCI
WorldCom, Inc. and its Affiliates of telecommunications services and equipment
in the ordinary course of business; (viii) the issuance and sale by the Company
of Common Stock whether pursuant to the conversion of the Senior Preferred
Stock, the Junior Preferred Stock, the Company"s Convertible Preferred Stock,
Series C, par value $0.01 per share, or any other class or series of Preferred
Stock into Capital Stock of the Company, the exercise of any employee or
non-employee options to purchase the Capital Stock of the Company; and (ix) the
Company"s and any of its Restricted Subsidiaries" arrangements with the World
Access Charitable Trust listed on
<PAGE> 71
Schedule A attached hereto as such arrangements exist on the Exchange Date and
as such arrangements may be amended; provided that the terms of any such
amendments are not materially adverse to the Company, any Restricted Subsidiary
or the Holders of the Notes.
SECTION 1016. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) on any of its assets or properties of any
character (including, without limitation, licenses and trademarks), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, whether
owned at the date of this Indenture or thereafter acquired, or any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income thereof, without making effective provision for all of the Notes
and all other amounts ranking pari passu with the Notes to be directly secured
equally and ratably with the obligation or liability secured by such Lien or,
if such obligation or liability is subordinated to the Notes and other amounts
ranking pari passu with the Notes, without making provision for the Notes and
such other amounts to be directly secured prior to the obligation or liability
secured by such Lien.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or the Restricted
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the Fair Market Value of the assets sold
or disposed of as determined by the good faith judgment of the Board of
Directors evidenced by a Board Resolution and (ii) at least 80% of the
consideration received for such sale or other disposition consists of cash or
cash equivalents or the assumption of unsubordinated Indebtedness; provided
that any securities, notes or other obligations issued by an Investment Grade
Company with a Total Equity Market Capitalization in excess of $25 billion
determined at the time any commitment to effect any such Asset Sale is entered
into which are received by the Company or the Restricted Subsidiary, as the
case may be, and are converted within 180 days thereof into cash or cash
equivalents shall be deemed to be cash or cash equivalents; provided further
that the amount of cash or cash equivalents realized upon the sale of any such
securities, notes or other obligations must be included within the amount of
Net Cash Proceeds for purposes of clause (i)(B) of the next paragraph.
The Company shall, or shall cause the relevant Restricted
Subsidiary to, within 270 days after the date of receipt of the Net Cash
Proceeds from an Asset Sale, (i) (A) apply an amount equal to such Net Cash
Proceeds to permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries, or (B) if the Net Cash
Proceeds from such Asset Sale exceed $15 million, apply an amount equal to such
Net Cash Proceeds to make an offer to purchase (an "Offer to Purchase") from
the Holders on a pro rata basis an aggregate principal amount of Notes equal to
such Net Cash Proceeds, at a purchase price equal to 100% of the principal
amount of the Notes, plus, in each case, accrued and unpaid interest to the
date of purchase and less the product of (a) the Market Value per share of the
Common Stock of the Company and (b) the number of shares (including any portion
of a share) of such Common Stock determined by dividing $50 by the Market Price
of the Common Stock for each $1,000 in principal amount of Notes accepted for
purchase by the Company (the "Offer to Purchase
<PAGE> 72
Payment"), provided that the Company shall not be obligated to make any Offer
to Purchase after it has made one or more Offers to Purchase, which Offer or
Offers to Purchase, in the aggregate, were for an aggregate principal amount of
Notes equal to the aggregate principal amount of Notes issued on the Exchange
Date (regardless of the actual aggregate principal amount of Notes actually
tendered in such Offer or Offers to Purchase), or (C) if the Company has made
sufficient Offers to Purchase such that it has satisfied its obligation as
described in the final proviso to clause (B), invest an equal amount, or the
amount not so applied pursuant to clause (A), in property or assets of a nature
or type or that are used in a business (or in a company having property and
assets of a nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the Company
and its Restricted Subsidiaries existing on the date of such investment (as
determined in good faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a Board Resolution) and (ii) apply (no later
than the end of the 270-day period referred to above) such excess Net Cash
Proceeds (to the extent not applied pursuant to clause (i)) as provided in the
following paragraphs of this Section 1017. The amount of such Net Cash Proceeds
required to be applied (or to be committed to be applied) during such 270-day
period referred to above in the preceding sentence and not applied as so
required by the end of such period shall constitute "Excess Proceeds".
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10 million, the Company must, not later
than the 30th Business Day thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds on such date, at a purchase price
equal to 100% of the principal amount of the Notes, plus, in each case, accrued
and unpaid interest to the date of purchase less the product of (a) the Market
Value per share of the Common Stock of the Company and (b) the number of shares
(including any portion of a share) of such Common Stock determined by dividing
$50 by the Market Price of the Common Stock for each $1,000 in principal amount
of Notes accepted for purchase by the Company (the "Excess Proceeds Payment").
The Company shall commence an Offer to Purchase or an Excess
Proceeds Offer by mailing a notice to the Trustee and each Holder stating: (i)
that the Offer to Purchase or Excess Proceeds Offer, as applicable, is being
made pursuant to this Section 1017 and that all Notes validly tendered will be
accepted for payment on a pro rata basis; (ii) the purchase price and the date
of purchase (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed) (the "Offer Payment Date");
(iii) that any Note not tendered will continue to accrue interest pursuant to
its terms; (iv) that, unless the Company defaults in the payment of the Offer
to Purchase Payment or the Excess Proceeds Payment, as applicable, any Note
accepted for payment pursuant to the Offer to Purchase or the Excess Proceeds
Offer, as applicable, shall cease to accrue interest on and after the
applicable Offer Payment Date; (v) that Holders electing to have a Note
purchased pursuant to the Offer to Purchase or the Excess Proceeds Offer, as
applicable, will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
applicable Offer Payment Date; (vi) that Holders shall be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the applicable Offer
Payment Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder,
<PAGE> 73
the principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof.
On the applicable Offer Payment Date, the Company shall (i) accept
for payment on a pro rata basis Notes or portions thereof tendered pursuant to
the Offer to Purchase or the Excess Proceeds Offer, as applicable; (ii) deposit
with the Paying Agent money sufficient to pay the purchase price of all Notes
or portions thereof so accepted; and (iii) deliver, or cause to be delivered,
to the Trustee all Notes or portions thereof so accepted together with an
Officer's Certificate specifying the Notes or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail to the Holders of
Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall upon Company Order promptly authenticate and mail to such Holders
a new Note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note issued shall
be in a principal amount of $1,000 or integral multiples thereof. With respect
to any Excess Proceeds Offer, to the extent that the aggregate principal amount
of Notes tendered is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Offer Payment Date. For purposes of this Section 1017,
the Trustee shall act as the Paying Agent.
The Company shall comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that the Company undertakes
an Offer to Purchase or Excess Proceeds Offer under this Section 1017.
SECTION 1018. Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to Guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company, other than Indebtedness under
Credit Facilities incurred under clause (iii) of paragraph (b) in Section 1011,
unless (i) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a Guarantee of the Notes
on terms substantially similar to the Guarantee of such Indebtedness, except
that if such Indebtedness is by its express terms subordinated in right of
payment to the Notes, any such assumption, Guarantee or other liability of such
Restricted Subsidiary with respect to such Indebtedness shall be subordinated
in right of payment to such Restricted Subsidiary's assumption, Guarantee or
other liability with respect to the Notes substantially to the same extent as
such Indebtedness is subordinated to the Notes and (ii) such Restricted
Subsidiary waives, and shall not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Guarantee.
Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary may provide by its terms that it will be automatically and
unconditionally released and discharged
<PAGE> 74
upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's and each Restricted Subsidiary's Capital Stock
in, or all or substantially all of the assets of, such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by this Indenture) or (ii)
the release or discharge of the guarantee which resulted in the creation of
such Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
SECTION 1019. Business of the Company; Restriction on Transfers of Existing
Business.
The Company shall not, and shall not permit any Restricted
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary
shall not be permitted to, directly or indirectly, transfer to any Unrestricted
Subsidiary (i) any of the licenses, material agreements or instruments, permits
or authorizations used in the Permitted Business of the Company and any
Restricted Subsidiary on the Exchange Date or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Restricted Subsidiary used in the
licensed service areas of the Company and any Restricted Subsidiary as they
exist on the Exchange Date.
SECTION 1020. Limitation on Investments in Unrestricted Subsidiaries.
The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to make, any Investments in Unrestricted Subsidiaries
if, at the time thereof, the aggregate amount of such Investments together with
any other Restricted Payments made after the Exchange Date would exceed the
amount of Restricted Payments then permitted to be made pursuant to Section
1012. Any Investments in Unrestricted Subsidiaries permitted to be made
pursuant to this covenant (i) shall be treated as the making of a Restricted
Payment in calculating the amount of Restricted Payments made by the Company or
a Subsidiary and (ii) may be made in cash or property (if made in property, the
Fair Market Value thereof as determined by the Board of Directors of the
Company (whose determination shall be conclusive and evidenced by a Board
Resolution) shall be deemed to be the amount of such Investment for the purpose
of clause (i) of this Section 1020).
SECTION 1021. Limitation on Sale-Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any Sale-Leaseback Transaction with respect to any
property of the Company or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, the Company may enter into
Sale-Leaseback Transactions; provided, however, that (a) the Attributable Value
of such Sale-Leaseback Transaction shall be deemed to be Indebtedness of the
Company and (b) after giving pro forma effect to any such Sale-Leaseback
Transaction and the foregoing clause (a), other than any Sale-Leaseback
Transaction involving NACT Telecommunications, Inc."s facility in Provo, Utah,
the Company would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 1011.
SECTION 1022. Waiver of Certain Covenants.
<PAGE> 75
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 803 or Sections 1007 through
1021, inclusive, if before or after the time for such compliance the Holders of
at least a majority in aggregate principal amount of the Outstanding Notes, by
Act of such Holders, waive such compliance in such instance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
(a) The Notes may be redeemed, at the election of the Company, as
a whole or in part, at any time or from time to time, on or after January 15,
2003, subject to the conditions and at the Redemption Prices specified in the
form of Note, together with accrued and unpaid interest thereon to the
Redemption Date.
(b) Notwithstanding the foregoing, prior to January 15, 2001, the
Company may redeem up to 35% of the originally issued aggregate principal
amount of the Notes on one or more occasions with the Net Cash Proceeds of one
or more Public Equity Offerings at a redemption price equal to 110.5% of the
aggregate principal amount thereof, plus accrued interest, if any, thereon to
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date);
provided that, immediately after giving effect to such redemption, at least 65%
of the originally issued aggregate principal amount of the Notes remains
Outstanding; and provided further that notice of such redemptions shall be
given within 60 days of the date of closing of any such Public Equity Offering.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the Redemption Price and of the principal amount of Notes to be
redeemed and shall deliver to the Trustee such documentation and records as
shall enable the Trustee to select the Notes to be redeemed pursuant to Section
1104.
<PAGE> 76
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis;
provided, however, that no such partial redemption shall reduce the portion of
the principal amount of a Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any;
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Notes to be redeemed;
(4) in case any Note is to be redeemed in part only, the notice
which relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the Holder shall receive, without
charge, a new Note or Notes of authorized denominations for the principal
amount thereof remaining unredeemed;
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Note, or the portion
thereof, to be redeemed, and that interest thereon will cease to accrue
on and after said date; and
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any.
<PAGE> 77
Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Regular Record Dates according to their terms and the
provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article Eleven) shall be surrendered at the office or agency
of the Company maintained for such purpose pursuant to Section 1002 (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall upon Company
Order authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
<PAGE> 78
72
ARTICLE TWELVE
SECURITY
SECTION 1201. Security.
(a) On the Exchange Date, the pro rata portion of the total
amount of the FaciliCom Pledged Securities based on the percentage of the
aggregate principal amount of the FaciliCom Notes exchanged for Notes shall be
released from the FaciliCom Pledge Account and deposited in the Pledge Account
by the Company to be held pursuant to the Pledge Agreement. The Pledged
Securities shall be pledged by the Company to the Trustee for the benefit of
the Holders and shall be held by the Trustee in the Pledge Account pending
disposition pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance
with its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to
the Trustee the security interest in the Pledged Securities contemplated
hereby, by the Pledge Agreement or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Notes secured hereby, according to the intent and
purposes herein expressed. The Company shall take, or shall cause to be taken,
any and all actions reasonably required (and any action reasonably requested by
the Trustee) to cause the Pledge Agreement to create and maintain, as security
for the obligations of the Company under this Indenture and the Notes, valid
and enforceable first priority liens in and on all the Pledged Securities, in
favor of the Trustee, superior to and prior to the rights of third Persons and
subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the
Pledge Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d) relating to
the release of property or securities from the Lien and security interest of
the Pledge Agreement (other than pursuant to Sections 7(e) and 7(g) thereof)
and relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected by the Company.
(d) The Trustee, in its sole discretion and without the
consent of the Holders, may, and at the request of the Holders of at least 25%
in aggregate principal amount of Notes then Outstanding shall, on behalf of the
Holders, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of the Pledge Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
thereunder.
<PAGE> 79
73
The Trustee shall have power to institute and to maintain such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Pledged Securities (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 or of the Trustee).
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance
The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either Section 1302 or Section
1303 be applied to all Outstanding Notes upon compliance with the conditions
set forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge
Upon the Company"s exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes on the
date the conditions set forth in Section 1304 are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by
the Outstanding Notes, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1305 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Notes to receive payments, (solely from monies deposited
in trust) in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (B) the Company's obligations with respect to
such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article
Thirteen. Subject to compliance with this Article Thirteen, the Company may
exercise its option under this Section 1302 notwithstanding the prior exercise
of its option under Section 1303 with respect to the Notes.
SECTION 1303. Covenant Defeasance
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801(3) and (4) and Section
803 and in Sections 1007 through 1022 with respect to the Outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the
<PAGE> 80
74
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 501(6),
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance
The following shall be the conditions to application of
either Section 1302 or Section 1303 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Notes, (A) cash in United States
dollars, or (B) U.S. Government Obligations or (C) a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, (i) the principal of (and
premium, if any), and interest on, the Outstanding Notes on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and
premium, if any) or installment of interest and (ii) any mandatory
sinking fund payments or analogous payments applicable to the
Outstanding Notes on the day on which such payments are due and
payable in accordance with the terms of this Indenture and of such
Notes; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Notes. Before such a
deposit, the Company may give to the Trustee, in accordance with
Section 1103 hereof, a notice of its election to redeem all of the
Outstanding Notes at a future date in accordance with Article Eleven
hereof, which notice shall be irrevocable. Such irrevocable redemption
notice, if given, shall be given effect in applying the foregoing. For
this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of
such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt
<PAGE> 81
75
from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt.
(2) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraph (9) or (10) of Section 501 hereof is concerned,
at any time during the period ending on the 123rd day after the date
of such deposit.
(3) [Reserved]
(4) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under any
material agreement or instrument (other than this Indenture) to which
the Company is a party or by which it is bound.
(5) In the case of an election under Section 1302, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since
January 15, 1998, there has been a change in the applicable federal
income tax law, in either case to the effect, and based thereon such
opinion shall confirm, that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance had not occurred.
(6) In the case of an election under Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred.
(7) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 1302 or the covenant defeasance under Section 1303 (as
the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money
<PAGE> 82
76
need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1304 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any) or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
<PAGE> 83
77
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
WORLD ACCESS, INC.
By:
--------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 84
Schedule A
WORLD ACCESS CHARITABLE TRUST ARRANGEMENTS
1. World Access Charitable Trust dated August 19, 1999, by and between
World Access Investment Corp., a Delaware corporation, and Clay C.
Long, Esq., as trustee, in favor of World Access Foundation, Inc., a
Georgia nonprofit corporation.
2. Indemnification Agreement dated August 19, 1999, by and between the
Issuer and Clay C. Long, Esq., as trustee of the World Access
Charitable Trust.
3. Letter Agreement dated October 8, 1999, by and between World Access
Investment Corp. and World Access Foundation, Inc.
<PAGE> 85
Exhibit A
FORM OF FACE OF NOTE
WORLD ACCESS, INC.
13.25% Senior Note due 2008
[CUSIP] [CINS]
No. ____________ $_________________
WORLD ACCESS, INC., a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of ___________ United States
dollars on January 15, 2008, at the office or agency of the Company referred to
below, and to pay interest thereon on January 15, 2000 (or July 15, 2000 if the
Exchange Date (as defined in the Indenture) has not occurred on or prior to
January 1, 2000) and semi-annually thereafter, on January 15 and July 15 in each
year, from ____________, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for under the Indenture (as defined on
the reverse of this Note), at the rate of 13.25% per annum, until the principal
hereof is paid or duly provided for, and (to the extent lawful) to pay on demand
interest on any overdue interest at the rate borne by the Notes from the date on
which such overdue interest becomes payable to the date payment of such interest
has been made or duly provided for. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest, which shall be the January 1 or July 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and such
Defaulted Interest, and (to the extent lawful) interest on such defaulted
interest at the rate borne by the Notes, may be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
The principal of (and premium, if any), and interest on, the
Notes shall be payable at the office or agency of the Company maintained for
such purpose (which shall initially be the Office of the Trustee located at
First Union National Bank, Corporate Trust Department, 999 Peachtree Street,
Suite 1100, Atlanta, Georgia 30309, unless the Company shall designate and
A-1
<PAGE> 86
maintain some other office or agency for such purpose), and, at the option of
the Company, interest may be paid by check mailed to addresses of the holders
as such address appears in the Register; provided that all payments with
respect to the Global Notes, the Holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
A-2
<PAGE> 87
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
WORLD ACCESS, INC.
By:
--------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Dated: _____________________
This is one of the 13.25% Senior Notes due 2008 referred to
in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK, Trustee
By:
--------------------------------------
Authorized Signatory
A-3
<PAGE> 88
FORM OF REVERSE SIDE OF NOTE
WORLD ACCESS, INC.
13.25% Senior Note due 2008
This Note is one of a duly authorized issue of securities of
the Company designated as its 13.25% Senior Notes due 2008 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $300,000,000, which may be issued under
an indenture (herein called the "Indenture") dated as of __________, between the
Company and First Union National Bank, as trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, the Trustee and the Holders of the
Notes, and of the terms upon which the Notes are, and are to be, authenticated
and delivered.
The Notes are subject to redemption upon not less than 30 nor
more than 60 days' prior notice, in whole or in part, at any time or from time
to time on or after January 15, 2003, at the election of the Company, at
Redemption Prices (expressed in percentages of principal amount thereof), plus
accrued and unpaid interest thereon to the Redemption Date (subject to the
right of Holders of record on the relevant Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date), if
redeemed during the 12-month period commencing on January 15, of the years set
forth below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2003 106.625%
2004 104.417%
2005 102.208%
2006 (and thereafter) 100.00%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2001, the
Company may on any one or more occasions redeem up to 35% of the originally
issued aggregate principal amount of Notes at a redemption price of 110.5% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, to the Redemption Date, with the Net Cash Proceeds of one or more
Public Equity Offerings; provided that at least 65% of the originally issued
principal amount of the Notes remains outstanding immediately after the
occurrence of such redemption; and provided further that notice of such
redemptions shall be given within 60 days of the closing of any such Public
Equity Offering.
Upon the occurrence of a Change of Control, the Holder of
this Note may require the Company, subject to certain limitations provided in
the Indenture, to repurchase all or any
A-4
<PAGE> 89
5
part of this Note at a purchase price in cash in an amount equal to 101% of the
principal amount thereof plus accrued and unpaid interest.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from an Asset Sale, which proceeds are not
used to (i) (A) apply an amount equal to such Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or Indebtedness of any
Restricted Subsidiary, in each case owing to a Person other than the Company or
any of its Restricted Subsidiaries, or (B) if the Net Cash Proceeds from such
Asset Sale exceed $15 million, apply an amount equal to such Net Cash Proceeds
to make an offer to purchase from the Holders on a pro rata basis an aggregate
principal amount of Notes equal to such Net Cash Proceeds, at a purchase price
equal to 100% of the principal amount of the Notes, plus, in each case, accrued
and unpaid interest to the date of purchase and less the product of (a) the
Market Value per share of the Common Stock of the Company and (b) the number of
shares (including any portion of a share) of such Common Stock determined by
dividing $50 by the Market Price of the Common Stock for each $1,000 in
principal amount of Notes accepted for purchase by the Company, provided that
the Company shall not be obligated to make any Offer to Purchase after it has
made one or more Offers to Purchase, which Offer or Offers to Purchase, in the
aggregate, were for an aggregate principal amount of Notes equal to the
aggregate principal amount of Notes issued on the Exchange Date (regardless of
the actual aggregate principal amount of Notes actually tendered in such Offer
or Offers to Purchase), or (C) if the Company has made sufficient Offers to
Purchase such that it has satisfied its obligation as described in the final
proviso to clause (B), invest an equal amount, or the amount not so applied
pursuant to clause (A), in property or assets of a nature or type or that are
used in a business (or in a company having property and assets of a nature or
type, or engaged in a business) similar or related to the nature or type of the
property and assets of, or the business of, the Company and its Restricted
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) apply (no later than the end of the
270-day period immediately following the date of receipt of the Net Cash
Proceeds from an Asset Sale) such excess Net Cash Proceeds (to the extent not
applied pursuant to clause (i)) in accordance with the Indenture, and which
proceeds equal or exceed a specified amount, the Company shall be required to
make an offer to all Holders to purchase the maximum principal amount of Notes,
in an integral multiple of $1,000, that may be purchased out of such amount at
a purchase price in cash equal to 100% of the principal amount thereof, plus
accrued, unpaid interest to the date of purchase less the product of (a) the
Market Value per share of the Common Stock of the Company and (b) the number of
shares (including any portion of a share) of such Common Stock determined by
dividing $50 by the Market Price of the Common Stock for each $1,000 in
principal amount of Notes accepted for purchase by the Company, in accordance
with the Indenture. Holders of Notes that are subject to any offer to purchase
shall receive an Offer to Purchase or an Excess Proceeds Offer, as applicable,
from the Company prior to any related applicable Offer Payment Date.
In the case of any redemption or repurchase of Notes,
interest installments, if any, whose Stated Maturity is on or prior to the
Redemption Date or Offer Payment Date will be payable to the Holders of such
Notes, or one or more Predecessor Notes, of record at the close of business on
the relevant Record Date referred to on the face hereof. Notes (or portions
thereof)
A-5
<PAGE> 90
6
for whose redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the Redemption Date or
Offer Payment Date, as the case may be.
In the event of redemption or repurchase of this Note in part
only, a new Note or Notes for the unredeemed portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding.
Additionally, the Indenture permits that, without notice to or consent of any
Holder, the Company and the Trustee together may amend or supplement the
Indenture or this Note to: (i) evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the
Company contained herein and in the Notes; (ii) add to the covenants of the
Company for the benefit of the Holders or to surrender any right or power
herein conferred upon the Company; (iii) add any additional Events of Default;
(iv) evidence and provide for the acceptance of appointment hereunder by a
successor Trustee; (v) cure any ambiguity, correct or supplement any provision
herein which may be inconsistent with any other provision herein, or make any
other provisions with respect to matters or questions arising under this
Indenture; provided that such action shall not adversely affect the interests
of the Holders in any material respect; or (vi) secure the Notes. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes at the time Outstanding, on behalf of
the Holders of all the Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange herewith or in lieu hereof whether or not notation of
such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed
A-6
<PAGE> 91
7
shall be selected not more than 60 days prior to the Redemption Date in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, which may provide for the
selection for redemption of portions of the principal of Notes.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable on the
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York or at the Corporate Trust Office of the Trustee, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Notes are exchangeable for a like aggregate principal amount of Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Note is registered on
the Register as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any agent shall be affected
by notice to the contrary.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-day months. All capitalized terms used in this Note
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
A-7
<PAGE> 92
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1010 or Section 1017 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1010 or Section 1017 of the Indenture, state the
amount (in original principal amount) below:
$_________________________.
Date:________________
Your Signature:
-----------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee/1/
-------------------------------------------
/1/ The Holder's signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar which
requirements include membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the Registrar in addition
to or in substitution for STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-8
<PAGE> 1
- -------------------------------------------------------------------------------
Exhibit 4.7
COLLATERAL PLEDGE AND
SECURITY AGREEMENT
Dated as of _______ __,_____
from
WORLD ACCESS, INC.,
Pledgor
to
FIRST UNION NATIONAL BANK,
Trustee
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Definitions, Appointment; Deposit and Investment................................................................. 2
1.1 Definitions...................................................................................................... 2
1.2 Appointment of the Trustee....................................................................................... 5
1.3 Pledge and Grant of Security Interest............................................................................ 5
SECTION 2. Delivery of Collateral; Establishment of Collateral Accounts..................................................... 6
SECTION 3. Delivery of the Pledged Securities............................................................................... 7
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations.................................................... 8
SECTION 5. Investing of Amounts in the Collateral Accounts.................................................................. 9
SECTION 6. Disbursements.................................................................................................... 9
SECTION 7. Representations and Warranties................................................................................... 11
SECTION 8. Further Assurances............................................................................................... 13
SECTION 9. Covenants........................................................................................................ 13
SECTION 10. Power of Attorney............................................................................................... 14
SECTION 11. No Assumption of Duties; Reasonable Care........................................................................ 14
SECTION 12. Indemnity....................................................................................................... 15
SECTION 13. Remedies upon Event of Default.................................................................................. 15
SECTION 14. Expenses........................................................................................................ 16
SECTION 15. Security Interest Absolute...................................................................................... 16
SECTION 16. WAXS Securities Intermediary's Representations, Warranties and Covenants........................................ 17
SECTION 17. Miscellaneous Provisions........................................................................................ 18
17.1 Notices........................................................................................................... 18
17.2 No Adverse Interpretation of Other Agreements..................................................................... 19
17.3 Severability...................................................................................................... 19
17.4 Headings.......................................................................................................... 19
17.5 Counterpart Originals............................................................................................. 19
17.6 Benefits of Pledge Agreement...................................................................................... 19
17.7 Amendments, Waivers and Consents.................................................................................. 19
17.8 Interpretation of Agreement....................................................................................... 20
17.9 Continuing Security Interest; Termination......................................................................... 20
17.10 Survival Provisions.............................................................................................. 20
17.11 Waivers.......................................................................................................... 20
17.12 Authority of the Trustee......................................................................................... 20
17.13 Final Expression................................................................................................. 21
17.14 Rights of Holders of the Notes................................................................................... 21
17.15 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES............................... 21
17.16 Effectiveness.................................................................................................... 23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SCHEDULE I: Pledged Securities....................................................................................... I-1
SCHEDULE II: Pledged Securities....................................................................................... II-1
EXHIBIT A: Officer's Certificate.................................................................................... A-1
EXHIBIT B: Independent Public Accountant's Report .................................................................. B-1
</TABLE>
ii
<PAGE> 4
This Collateral Pledge and Security Agreement (this "Pledge
Agreement") is made and entered into as of_______ __, 1999 by World Access,
Inc., a Delaware corporation (the "Pledgor"), having its principal offices at
945 East Paces Ferry Road, Suite 220, Atlanta, Georgia 30326, in favor of First
Union National Bank, a national banking association having a corporate trust
office at 999 Peachtree Street, N.E., Suite 1100, Atlanta, Georgia 30309,
Attention: Corporate Trust Department, as trustee (the "Trustee") for the
holders (the "Holders") of the Notes (as defined herein) issued by the Pledgor
under the Indenture referred to below.
W I T N E S S E T H:
WHEREAS, Pledgor and FaciliCom International, Inc., a
Delaware Corporation ("FaciliCom") and certain shareholders of FaciliCom have
entered into an Agreement and Plan of Merger, dated as of August 17, 1999, with
respect to the merger (the "Merger") of FaciliCom with and into the Pledgor and
in connection with the Merger the Pledgor has offered to exchange its 13.25%
Senior Notes due 2008 (the "Notes") and certain other consideration for
FaciliCom's outstanding 10.5% Senior Notes due 2008 (the "FaciliCom Notes").
WHEREAS, the Pledgor and the Trustee (as defined herein),
have entered into that certain indenture dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing the Notes on the date
hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required
to deposit Collateral and pledge to the Trustee for the benefit of the Holders
of the Notes, on the Exchange Date (as defined in the Indenture) Pledged
Securities (as defined in the Indenture), in an amount that will be sufficient
upon receipt of scheduled interest and principal payments of such securities,
in the opinion of a nationally recognized firm of independent public
accountants selected by the Pledgor and delivered to the Trustee, to provide
for payment of scheduled interest due on the Notes in an amount (the "Pledge
Amount") equal to the aggregate amount of scheduled interest payments that
would be due on the Notes on or prior to January 15, 2001 assuming an interest
rate of 10.5% instead of 13.25%, to secure the Pledgor's obligation to provide
for payment of the scheduled interest payments due on the Notes on or prior to
January 15, 2001 (such obligation, together with the obligation to repay the
principal, premium and interest on the Notes in the event that the Notes become
due and payable prior to such time as the scheduled interest payments thereon
shall have been paid in full, being collectively referred to herein as the
"Obligations");
WHEREAS, the Pledgor has opened a securities account (the
"Pledge Account") with First Union National Bank, as Securities Intermediary
(the "WAXS Securities Intermediary"), at its office at 999 Peachtree Street,
N.E., Suite 1100, Atlanta, Georgia 30309, Account No.__ (designated "Pledge
Account pledged by World Access, Inc. to First Union
<PAGE> 5
National Bank as Trustee and Sole Entitlement Holder"), in the name of the
Pledgor but under the sole dominion and control of the Trustee and subject to
the terms of this Pledge Agreement;
WHEREAS, the Pledgor has opened a non-interest bearing cash
collateral account (the "Cash Collateral Account") with the WAXS Securities
Intermediary, at its office at 999 Peachtree Street, N.E., Atlanta, Georgia
30309, Account No. [l] (designated "Cash Collateral Account pledged by World
Access, Inc. to First Union National Bank, as Trustee"), in the name of the
Pledgor but under the sole dominion and control of the Trustee and subject to
the terms of this Pledge Agreement;
WHEREAS, to secure the Obligations of the Pledgor, the
Pledgor has agreed as part of the exchange of the Notes for the FaciliCom Notes
to execute and deliver this Pledge Agreement and pledge to the Trustee, for its
benefit and the ratable benefit of the Holders of the Notes, the Pledged
Securities and the related Collateral in order to secure the payment by the
Pledgor of all the Obligations.
NOW, THEREFORE, in consideration of the premises herein
contained, and in order to induce the Holders of the Notes to accept the Notes
in exchange for the FaciliCom Notes, the Pledgor and the Trustee hereby agree,
for the benefit of the Trustee and for the ratable benefit of the Holders of
the Notes, as follows:
SECTION 1. Definitions, Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement,
terms defined or referenced in the Indenture are used in this Pledge Agreement
as such terms are defined or referenced therein.
(b) Unless otherwise defined in the Indenture or in this
Pledge Agreement, terms defined in Article 8 or 9 of the Uniform Commercial
Code in effect in the State of New York from time to time and/or in Section
357.2 of the Treasury Regulations (as defined in Section 1.1(c)) are used in
this Pledge Agreement as such terms are defined in such Article 8 or 9 and/or
such Section 357.2. Such terms shall include, but not be limited to,
"book-entry security," "certificated security", "entitlement holder", "CUBES",
"entitlement order", "financial asset", "instrument", "participant's securities
account", "proceeds", "securities account", "securities intermediary",
"security", "security entitlement" and "STRIPS".
(c) In this Pledge Agreement the following terms have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Adverse Claim" has the meaning specified in UCC ss. 8-102(a)
(1).
<PAGE> 6
"Cash Collateral Account" has the meaning specified in
Preliminary Statements hereof.
"Cash Equivalents" means any of the following, to the extent
owned by the Pledgor free and clear of all liens other than liens created
hereunder: (a) U.S. Government Obligations, (b) insured certificates of deposit
of, or time deposits with, any commercial bank that (i) is a member of the
Federal Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c), (iii) is organized under the laws of
the United States of America or any State thereof and (iv) has combined capital
and surplus of at least $500 million, (c) commercial paper in an aggregate
amount of no more than $5 million per issuer outstanding at any time, issued by
any corporation organized under the laws of any State of the United States of
America and rated at least "Prime-1" (or the then equivalent grade) by Moody's
Investors Service, Inc. or "A-l" (or the then equivalent grade) by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies or (d) overnight
repurchase agreements (including overnight repurchase agreements between the
Trustee and the WAXS Securities Intermediary) secured by U.S. Government
Obligations.
"Certificated Security" has the meaning specified in Section
8-103(a)(4) of the UCC.
"CFR" means U.S. Code of Federal Regulations.
"Collateral" has the meaning specified in Section 1.3.
"Collateral Accounts" means the Pledge Account and the Cash
Collateral Account.
"Deposit Account" has the meaning specified in Section 9-105
(e) of the UCC.
"Entitlement Holder" has the meaning specified in UCC ss.
8-102(a)(7).
"Entitlement Order" has the meaning specified in UCC ss.
8-102(a)(8).
"Financial Asset" has the meaning specified in UCC ss.
8-102(a)(9).
"FRBB" means Federal Reserve Bank of Richmond.
"FRBB Account" means the participant's securities account
maintained in the name of the WAXS Securities Intermediary by the FRBB.
3
<PAGE> 7
"FRBB Member": any Person that is eligible to maintain (and
that maintains) with the FRBB one or more FRBB Member Securities Accounts in
such Person's name.
"FRBB Member Securities Account": in respect of any Person,
an account in the name of such Person at the FRBB, to which account U.S.
Government Obligations held for such Person are or may be credited.
"General Intangibles" has the meaning specified in Section
9-106 of the UCC.
"Instruments" has the meaning specified in Section 9-105 of
the UCC.
"Investment Property" has the meaning specified in UCC ss.
9-115(l)(f).
"Lien": any lien, mortgage, security interest, charge,
Adverse Claim or encumbrance of any kind, including the rights of a vendor,
lessor, or similar party under any conditional sale agreement or other title
retention agreement or lease substantially equivalent thereto.
"Money" has the meaning specified in Section 1-201(24) of the
UCC.
"Pledgor" has the meaning specified in the recital of the
parties hereto.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include without limitation, all
interest, dividends or other earnings, income or distributions from or in
respect of, or from or in respect of investments or reinvestments of, the cash
and Cash Equivalents and Investment Property from time to time on deposit in
the Collateral Accounts, all collections and distributions with respect to the
U.S. Government Obligations and all other proceeds of Collateral.
"Securities Account" has the meaning specified in UCC ss.
8-501(a).
"Securities Control": shall mean "control" as defined in UCC
ss. 9-115(l)(e).
"Securities Intermediary": a Person that is a "securities
intermediary" (as defined in UCC ss. 8-102(a)(14)) and, in respect of any
book-entry security, a "securities intermediary" (as defined in 31 C.F.R. ss.
357.2 or, as applicable to such Book-Entry Security, the corresponding Federal
Book-Entry Regulations).
"Security" has the meaning specified in Section 8-102(a)(15)
of the UCC.
"Security Certificate" has the meaning specified in Section
8-102(a)(16) of the UCC.
4
<PAGE> 8
"Security Entitlement": as defined in UCC ss. 8-102(a)(17)
or, in respect of any book-entry security, as defined in 31 C.F.R. ss. 357.2
(or, as applicable to such book-entry security, the corresponding Federal
Book-Entry Regulations).
"Settlement Date" means, as to any U.S. Government
Obligations, the date on which the purchase of such U.S. Government Obligations
shall have been settled.
"Termination Date" means the earlier of (a) January 15, 2001
and (b) the date of the payment in full of all obligations due and owing under
this Pledge Agreement, the Indenture and the Notes, in the event such
obligations become due and payable prior to January 15, 2001.
"Treasury Regulations" means (a) the federal regulations
contained in 31 CFR Part 357 (including, without limitation, Section 357.2,
Section 357.10 through Section 357.14 and Section 357.41 through Section 357.44
of 31 CFR) and (b) to the extent substantially identical to the federal
regulations referred to in clause (a) above (as in effect from time to time)
the federal regulations governing other U.S. Government Obligations.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this Pledge Agreement until a successor Trustee shall have
become such, and thereafter "Trustee" shall mean the Person who is then the
Trustee hereunder.
"UCC" means, unless otherwise specified herein, the Uniform
Commercial as in effect in New York State.
"Uncertificated Security" has the meaning specified in
Section 8-102(a)(18) of the UCC.
"U.S. Government Obligations" means Securities (including,
without limitation, United States Treasury Securities, including Treasury
bills, Treasury notes, Treasury bonds, STRIPS and CUBES) and the Security
Entitlements in, and Financial Assets based on such Securities maintained in
the form of entries in the commercial book-entry system of the FRBB and held
for the related Entitlement Holder by a FRBB Member pursuant to the Treasury
Regulations.
"WAXS Securities Intermediary" has the meaning specified in
the preliminary statements.
1.2 Appointment of the Trustee. The Pledgor hereby appoints
the Trustee as Trustee in accordance with the terms and conditions set forth
herein and the Trustee hereby accepts such appointment.
5
<PAGE> 9
1.3 Pledge and Grant of Security Interest. As security for
the prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
grants to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, a lien on and security interest in all of the Pledgor's
right, title and interest in, to and under the following property, (whether
characterized as Certificated Securities or Uncertificated Securities,
Financial Assets, Security Entitlements, Deposit Accounts, bank accounts,
Securities Accounts, Money, Proceeds, Investment Property, General Intangibles
or otherwise): (a) the U.S. Government Obligations identified by CUSIP No. in
Schedule I [and Schedule II] to this Pledge Agreement (the "Pledged
Securities"), the scheduled payments of principal and interest of which will be
sufficient to provide for payment of scheduled interest due on the Notes in an
amount equal to the Pledge Amount, (b) any and all applicable Security
Entitlements to the Pledged Securities, (c) the Pledge Account, all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Pledge Account, (d) all Collateral Investments
(as hereinafter defined) and all certificates and instruments, if any,
representing or evidencing the Collateral Investments, and any and all Security
Entitlements to the Collateral Investments, and any and all related Securities
Accounts in which any Security Entitlements to the Collateral Investments is
carried, (e) the Cash Collateral Account, (f) all notes, certificates of
deposit, Deposit Accounts, checks and other instruments, if any, from time to
time hereafter delivered to or otherwise possessed by the Trustee for or on
behalf of the Pledgor in substitution for or in addition to any or all of the
then existing Collateral, (g) all interest, dividends, cash, instruments and
other property, if any, from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then existing
Collateral and (h) except as otherwise provided herein, all proceeds of any and
all of the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (g) of this Section
1.3) (such property being collectively referred to herein as the "Collateral").
SECTION 2. Delivery of Collateral; Establishment of
Collateral Accounts.
(a) The Trustee has established with the WAXS Securities
Intermediary, and at all times until the Termination Date, the Pledgor shall
maintain with the WAXS Securities Intermediary, each of the Cash Collateral
Account and the Pledge Account. The following provisions shall apply to the
establishment and maintenance of each such Collateral Account:
(i) The Trustee shall cause each Collateral Account to be,
and each Collateral Account shall be, separate from all other accounts
maintained by the Trustee.
(ii) The Trustee shall, in accordance with all applicable
laws, have sole dominion and control (including, without limitation,
Securities Control) over each Collateral Account, and it shall be a
term and condition of each Collateral Account and
6
<PAGE> 10
the Pledgor irrevocably instructs the Trustee, notwithstanding any
other term or condition to the contrary in any other agreement, that
no Collateral shall be released to or for the account of, or withdrawn
by or for the account of, the Pledgor or any other Person except as
expressly provided in this Pledge Agreement.
(iii) The Trustee shall, in accordance with and subject to
all applicable laws, be the sole Entitlement Holder of, and have the
power to originate Entitlement Orders with respect to, the Pledge
Account and all U.S. Government Obligations, Securities, Security
Entitlements and other Financial Assets held therein, and it shall be
a term and condition of the Pledge Account that the Trustee shall have
the right to issue such Entitlement Orders with respect to the Pledge
Account and such Securities, Security Entitlements and other Financial
Assets without further consent of the Pledgor, and that no Collateral
shall be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(b) On the Exchange Date, the Pledgor shall [(i) transfer,
or cause to be transferred, to the Trustee an amount equal to $[__] by
depositing all such proceeds into the Cash Collateral Account and (ii)]
transfer, or cause to be transferred, to the Trustee the U.S. Government
Obligation (in the name of the Trustee) listed on Schedule I hereto.
(c) [As soon as possible after receipt of the amount
referred to in Section 2(b)(i), (i) the Trustee shall apply such amount to
purchase the U.S. Government Obligations (in the name of the Trustee) listed on
Schedule II hereto,] and cause the WAXS Securities Intermediary to credit such
U.S. Government Obligations, together with the U.S. Government Obligations
listed on Schedule I hereto, to the Pledge Account as Collateral hereunder; and
(ii) the Trustee shall ensure that, on the Settlement Date, the FRBB credits in
the FRBB Account those U.S. Government Obligations being settled on such date.
(d) The Trustee will, from time to time, reinvest the
proceeds of Collateral that may mature or be sold in such Collateral
Investments (in the name of the Trustee) as it may be directed in writing by
the Pledgor, and cause such Collateral Investments to be credited to the Pledge
Account as Collateral hereunder. Such proceeds that are not so reinvested in
Collateral Investments shall be deposited and held in the Cash Collateral
Account.
SECTION 3. Delivery of the Pledged Securities.
(a) The Pledged Securities shall be pledged and delivered
to the Pledge Account and the Trustee shall become the Entitlement Holder of a
Security Entitlement to the Pledged Securities through action by the WAXS
Securities Intermediary, as confirmed (in writing or electronically or
otherwise in accordance with standard industry practice) to the Trustee by the
WAXS Securities Intermediary (i) indicating by book-entry that the Pledged
Securities and all Security Entitlements thereto have been credited to the
Pledge Account, or (ii)
7
<PAGE> 11
acquiring the Pledged Securities and all Security Entitlements thereto for the
Trustee and accepting the same for credit to the Pledge Account.
(b) Prior to or concurrently with the execution and
delivery hereof and prior to the transfer to the Trustee of the Pledged
Securities (or acquisition by the Trustee of any Security Entitlement thereto),
as provided in subsection (a) of this Section 3, the Trustee and the WAXS
Securities Intermediary shall establish the Pledge Account on the books of the
WAXS Securities Intermediary as Securities Account segregated from all other
custodial or collateral accounts such account to be maintained either (i)
directly at its offices located at 999 Peachtree Street, N.E., Suite 1100,
Atlanta, Georgia 30309 or (ii) through a "Securities Account" maintained by the
WAXS Securities Intermediary at the FRBB, as Securities Intermediary. Upon
transfer of the Pledged Securities to the Trustee (or the Trustee's acquisition
of a Security Entitlement thereto), as confirmed to the WAXS Securities
Intermediary by FRBB or another securities intermediary, the WAXS Securities
Intermediary shall make appropriate book entries indicating that the Pledged
Securities and/or such Security Entitlement have been credited to and are held
in the Pledge Account. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property held by the Trustee pursuant to this
Pledge Agreement shall be held in the Pledge Account or the Cash Collateral
Account subject (except as expressly provided in Section 6 hereof) to the
exclusive dominion and control (including, without limitation, Securities
Control) of the Trustee and exclusively for the benefit of the Trustee and for
the ratable benefit of the Holders of the Notes and segregated from all other
funds or other property otherwise held by the Trustee.
(c) All Collateral shall be retained in the Pledge Account
or the Cash Collateral Account pending disbursement pursuant to the terms
hereof.
(d) Concurrently with the execution and delivery of this
Pledge Agreement, the Trustee is delivering to the Pledgor and the Initial
Purchasers a duly executed certificate, in the form of Exhibit A hereto, of an
officer of the Trustee, confirming the Trustee's establishment and maintenance
of the Pledge Account with the WAXS Securities Intermediary and its receipt and
holding of the Pledge Securities or a Security Entitlement thereto and the
crediting of the Pledged Securities or such Security Entitlement to the Pledge
Account, all in accordance with this Pledge Agreement.
(e) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee an opinion of a
nationally recognized firm of independent public accountants, selected by the
Pledgor, substantially in the form of Exhibit B hereto.
(f) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee financing statements
in form acceptable for filing under
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the UCC of the State of New York, [__] and the State of Georgia, covering the
Collateral described in this Pledge Agreement.
SECTION 4. Delivery of Collateral Other than U.S. Government
Obligations.
(a) Collateral consisting of cash will be deemed to be
delivered to the Trustee (such that the Trustee will have an enforceable lien
and security interest thereon and therein), when it has been (and for so long
as it shall remain) deposited in or credited to the Cash Collateral Account.
(b) Collateral consisting of Cash Equivalents (other than
U.S. Government Obligations) will be deemed to be delivered to the Trustee
(such that the Trustee will have an enforceable lien and security interest
thereon and therein), when they have been (and for so long as they shall
remain) deposited in or credited to either Collateral Account.
(c) Collateral consisting of Securities (other than U.S.
Government Obligations) will be deemed delivered to the Trustee when the WAXS
Securities Intermediary (A) shall indicate by book entry that such Securities
have been credited to the Pledge Account or (B) shall receive such Security (or
a Financial Asset based on such Security) for the Trustee from or at the
direction of the Pledgor, and shall accept such Security (or such Financial
Asset) for credit to such Collateral Account;
(d) Collateral consisting of Securities and represented or
evidenced by certificates or instruments, will be deemed delivered to the
Trustee when all such certificates or instruments representing or evidencing
the Collateral, including, without limitation, amounts invested as provided in
Section 5, shall be delivered to the WAXS Securities Intermediary and held by
or on behalf of the Trustee pursuant hereto and shall be in registered form and
specially indorsed to the Trustee by an effective indorsement, all in form and
substance sufficient to convey a valid security interest in such Collateral to
the Trustee or shall be credited to the Pledge Account.
SECTION 5. Investing of Amounts in the Collateral Accounts.
If at any time, any amounts shall exist in the Collateral Accounts uninvested,
and if directed in writing by the Pledgor, the Trustee will, subject to the
provisions of Section 6 and Section 13, (a) invest such amounts on deposit in
the Collateral Accounts in such Cash Equivalents in the name of the Trustee as
the Pledgor may select and (b) invest interest paid on the Cash Equivalents
referred to in clause (a) above, and reinvest other proceeds of any such Cash
Equivalents that may mature or be sold, in each case in such Cash Equivalents
in the name of the Trustee, as the Pledgor may select and the Trustee may
approve (the Cash Equivalents referred to in clauses (a) and (b) above,
together with the Pledged Securities, being collectively referred to herein as
"Collateral
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Investments"). Except as otherwise provided in Sections 11 and 12, the Trustee
shall not be liable for any loss in the investment or reinvestment of amounts
held in the Collateral Accounts.
SECTION 6. Disbursements. The Trustee shall hold the
Collateral in the Collateral Accounts and release the same, or a portion
thereof, only as follows:
(a) At least one Business Day prior to the due date of any
of the scheduled interest payments on the Notes on or prior to January 15,
2001, the Pledgor may, pursuant to written instructions executed by the Pledgor
(an "Issuer Order"), direct the Trustee to release from the Collateral Accounts
and pay to the Holders of the Notes proceeds sufficient to provide for payment
in full (or, with respect to the interest payment date on January 15, 2001, in
part) of such interest then due on the Notes; provided, however, that in the
event Collateral is required to be liquidated, the Pledgor will give the
Trustee at least three Business Days' notice. Upon receipt of an Issuer Order,
the Trustee will take any action necessary to provide for the payment of the
interest on the Notes to the Holders of the Notes in accordance with the
payment provisions of the Indenture from (and to the extent of) proceeds of the
Collateral in the Collateral Accounts. Nothing in this Section 6 shall affect
the Trustee's rights to apply the Collateral to the payments of amounts due on
the Notes upon acceleration thereof.
(b) If the Pledgor makes any interest payment or portion
of an interest payment for which the Collateral is security from a source of
funds other than the Collateral Accounts ("Pledgor Funds"), the Pledgor may,
after payment in full of such interest payment or portion thereof from proceeds
of the Collateral or such Pledgor Funds or both, direct the Trustee by Issuer
Order to release to the Pledgor or to another party at the direction of the
Pledgor (the "Pledgor's Designee") proceeds from the Collateral Accounts in an
amount less than or equal to the amount of Pledgor Funds applied to such
interest payment. Upon receipt of such Issuer Order by the Trustee, the Trustee
shall pay over to the Pledgor or the Pledgor's Designee, as the case may be,
the requested amount from proceeds in the Collateral Accounts. Concurrently
with any release of funds to the Pledgor pursuant to this Section 6(b), the
Pledgor shall deliver to the Trustee a certificate signed by an officer of the
Pledgor stating that the Pledgor has made the interest payment from a source of
funds other than the Pledge Account, and that such release has been duly
authorized by the Pledgor and will not contravene any provision of applicable
law or Certificate of Incorporation or the By-laws of the Pledgor or any
material agreement or other material instrument binding upon the pledgor or any
of its subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Pledgor or any of its subsidiaries
or result in the creation or imposition of any Lien on any assets of the
Pledgor, except for the security interest granted under the Pledge Agreement.
(c) At least one Business Day prior to the due date of any
of the scheduled interest payments on the Notes on or prior to January 15,
2001, the Pledgor covenants to give the Trustee (by Issuer Order) notice as to
whether payment of interest will be made pursuant to Section 6(a) or 6(b) and
as to the respective amounts of interest that will be paid pursuant to
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<PAGE> 14
Section 6(a) or 6(b); provided, however, that, in the event Collateral is
required to be liquidated, the Pledgor will give the Trustee at least three
Business Days' notice. If no such notice is given, the Trustee will, subject to
Section 6(d), act pursuant to Section 6(a) as if it had received an Issuer
Order pursuant thereto for the payment in full of the interest then due.
(d) The Trustee shall not be required to liquidate any
Collateral Investments in order to make any scheduled payment of interest or
any release hereunder unless instructed to do so by Issuer Order or pursuant to
Section 13 hereof.
(e) Upon the Termination Date, the security interest in
the Collateral evidenced by this Pledge Agreement will automatically terminate
and be of no further force and effect and the Collateral, upon receipt by the
Trustee of an Issuer Order, shall promptly be paid over and transferred to the
Pledgor.
(f) In the event that the Collateral held in the Pledge
Account exceeds 100% of the amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgor, to
provide for payment of the scheduled interest due on the Notes in an amount
equal to the Pledge Amount (or, in the event an interest payment or payments
have been made, the Pledge Amount less an amount equal to any interest
previously paid) the Trustee shall release to the Pledgor, at the Pledgor's
written request, accompanied by an opinion prepared by a nationally recognized
firm of independent public accountants, any such excess Collateral.
(g) Upon the release of any Collateral from the Pledge
Account, in accordance with the terms of this Pledge Agreement, the security
interest evidenced by this Pledge Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(h) Nothing contained in Section 1, Section 13, this
Section 6 or any other Provision of this Pledge Agreement shall (i) afford the
Pledgor any right to issue Entitlement Orders with respect to any Security
Entitlement to the Pledge Securities or Collateral Investments or any
Securities Account in which any such Security Entitlement may be carried, or
otherwise afford the Pledgor control of any such Security Entitlement or (ii)
otherwise give rise to any rights of the Pledgor with respect to the Collateral
Investments, any Security Entitlement thereto or any Securities Account in
which any such Security Entitlement may be carried, other than the Pledgor's
rights under this Pledge Agreement as the beneficial owner of Collateral
pledged to and subject to the exclusive dominion and control (including,
without limitation, Securities Control) (except as expressly provided in this
Section 6) of the Trustee in its capacity as such (and not as a Securities
Intermediary). The Pledgor acknowledges, confirms and agrees
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that the Trustee holds a Security Entitlement to the Collateral Investments
solely as trustee for the Holders of the Notes and not as a Securities
Intermediary for the Pledgor.
SECTION 7. Representations and Warranties. The Pledgor hereby
represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge Agreement will
not contravene any provision of applicable law or the Certificate of
Incorporation or By-laws of the Pledgor or any material agreement or other
material instrument binding upon the Pledgor or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any Lien on any assets of the Pledgor, except for the
security interests granted under this Pledge Agreement; no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required (i) for the performance by the Pledgor of its obligations
under this Pledge Agreement, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Pledge Agreement or (iii) except for any such
consents, approvals, authorizations or orders required to be obtained by the
Trustee (or the Holders) for reasons other than the consummation of this
transaction, for the exercise by the Trustee of the rights provided for in this
Pledge Agreement or the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral,
free and clear of any Lien or claims of any person or entity (except for the
security interests granted under this Pledge Agreement). No financing statement
covering the Pledgor's interest in the Collateral is on file in any public
office other than the financing statements, if any, filed pursuant to this
Pledge Agreement.
(c) This Pledge Agreement has been duly authorized,
validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Pledge Agreement by the
Trustee and enforceability of the Pledge Agreement against the Trustee in
accordance with its terms) constitutes a valid and binding agreement of the
Pledgor, enforceable against the Pledgor in accordance with its terms, except
as (i) the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar laws
now or hereafter in effect relating to or affecting the rights or remedies of
creditors generally, (ii) the availability of equitable remedies may be limited
by equitable principles of general applicability and the discretion of the
court before which any proceeding therefor may be brought, (iii) the
exculpation provisions and rights to indemnification hereunder may be limited
by U.S. federal and state securities laws and public policy considerations and
(iv) the waiver of rights and defenses contained in Section 13(b), Section
17.11 and Section 17.15 hereof may be limited by applicable law.
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(d) Upon the delivery to the Trustee of the Collateral in
accordance with the procedures described in Section 3 and Section 4 hereof, the
pledge of and grant of a security interest in the Collateral securing the
payment of the Obligations for the benefit of the Trustee and the Holders of
the Notes will constitute a valid, first priority, perfected security interest
in such Collateral (except, with respect to Proceeds, only to the extent
permitted by Section 9-306 of the UCC), enforceable as such against all
creditors of the Pledgor and any persons purporting to purchase any of the
Collateral from the Pledgor, except in each case as enforcement may be affected
by general equitable principles (whether considered in a proceeding in equity
or at law) and other than as permitted by the Indenture.
(e) There are no legal or governmental proceedings pending
or, to the best of the Pledgor's knowledge, threatened to which the Pledgor or
any of its subsidiaries is a party or to which any of the properties of the
Pledgor or any of its subsidiaries is subject that would materially adversely
affect the power or ability of the Pledgor to perform its obligations under
this Pledge Agreement or to consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 8. Further Assurances. The Pledgor will, promptly
upon the request by the Trustee (which request the Trustee may submit at the
direction of the Holders of a majority in aggregate principal amount of the
Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Trustee, deliver any instruments to the Trustee and take
any other actions that are necessary or desirable to perfect, continue the
perfection of, or protect the first priority of the Trustee's security interest
in and to the Collateral, to protect the Collateral against the rights, claims
or interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee) or to effect the purposes of this
Pledge Agreement. The Pledgor also hereby authorizes the Trustee to file any
financing or continuation statements in the United States with respect to the
Collateral without the signature of the Pledgor (to the extent permitted by
applicable law). The Pledgor will promptly pay all reasonable costs incurred in
connection with any of the foregoing within 45 days of receipt of an invoice
therefor. The Pledgor also agrees, whether or not requested by the Trustee, to
use its reasonable best efforts to perfect or continue the perfection of, or to
protect the first priority of, the Trustee's security interest in and to the
Collateral, and to protect the Collateral against the rights, claims or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee).
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SECTION 9. Covenants. The Pledgor covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Pledge Agreement until the Termination Date:
(a) that it will not (i) (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of
the Collateral nor (ii) create or permit to exist any Lien upon or with respect
to any of the Collateral (except for the security interests granted under this
Pledge Agreement and any Lien created by or arising through the Trustee) and at
all times will be the sole beneficial owner of the Collateral; and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit the
Trustee's rights or remedies hereunder, including, without limitation, the
Trustee's right to sell or otherwise dispose of the Collateral or (ii) fail to
pay or discharge any tax, assessment or levy of any nature with respect to the
Collateral not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with respect to the
Collateral.
SECTION 10. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, subject to the terms
of this Pledge Agreement, the Pledgor hereby appoints and constitutes the
Trustee as the Pledgor's attorney-in-fact (with full power of substitution) to
exercise to the fullest extent permitted by law all of the following powers
upon and at any time after the occurrence and during the continuance of an
Event of Default: (a) collection of proceeds of any Collateral; (b) conveyance
of any item of Collateral to any purchaser thereof; (c) giving of any notices
or recording of any Liens under Section 3 hereof; and (d) paying or discharging
taxes or Liens levied or placed upon the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by the
Trustee in its sole reasonable discretion, and such payments made by the
Trustee to become part of the Obligations of the Pledgor to the Trustee, due
and payable immediately upon demand. The Trustee's authority under this Section
10 shall include, without limitation, the authority to endorse and negotiate
any checks or instruments representing proceeds of Collateral in the name of
the Pledgor, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral,
sign the Pledgor's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee in its reasonable discretion to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and
sign the Pledgor's name on any notice of Lien, and to take any other actions
arising from or incident to the powers granted to the Trustee in this Pledge
Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Pledgor.
SECTION 11. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order
to preserve and protect the
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security interest of the Trustee and the Holders of the Notes in and to the
Collateral granted hereby and shall not be interpreted to, and shall not impose
any duties on, the Trustee in connection therewith other than those expressly
provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Trustee accords similar property held by the Trustee for similar
accounts, it being understood that the Trustee in its capacity as such shall
not have any responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) investing or reinvesting any of
the Collateral; provided, however, that nothing contained in this Pledge
Agreement shall relieve the Trustee of any responsibilities as a securities
intermediary under applicable law.
SECTION 12. Indemnity.
(a) The Pledgor shall indemnify, hold harmless and defend
the Trustee and its directors, officers, agents, employees and attorneys from
and against any and all claims, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs,
and reasonable legal fees and damages arising from the Trustee's performance as
Trustee under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person. The
provisions of this Section 12 shall survive termination of this Pledge
Agreement and the resignation and removal of the Trustee.
(b) The Pledgor shall indemnify, hold harmless and defend
the WAXS Securities Intermediary and its directors, officers, agents, employees
and attorneys from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, and reasonable legal fees and damages arising
from the WAXS Securities Intermediary's performance as WAXS Securities
Intermediary under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person. The
provisions of this Section 12 shall survive termination of this Pledge
Agreement and the resignation and removal of the WAXS Securities Intermediary.
SECTION 13. Remedies upon Event of Default. If any Event of
Default under the Indenture or default hereunder (any such Event of Default or
default being referred to in this Pledge Agreement as an "Event of Default")
shall have occurred and be continuing:
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(a) The Trustee and the Holders of the Notes shall have,
in addition to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Collateral of a
secured party under the UCC in effect in the States of New York and Georgia at
that time. In addition, with respect to any Collateral that shall then be in or
shall thereafter come into the possession or custody of the Trustee, the
Trustee may and, at the direction of the Holders of a majority in aggregate
principal amount of the Notes then outstanding, shall appoint a broker or other
expert to sell or cause the same to be sold at any broker's board or at public
or private sale, in one or more sales or lots, at such price or prices such
broker or other expert may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any or all
Collateral so sold shall thereafter hold the same absolutely, free from any
claim, encumbrance or right of any kind whatsoever created by or through the
Pledgor. Unless any of the Collateral threatens, in the reasonable judgment of
the Trustee, to decline speedily in value, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is mailed to the Pledgor as provided in Section
17.1 hereof at least ten (10) days before the time of the sale or disposition.
The Trustee or any Holder of Notes may, in its own name or in the name of a
designee or nominee, buy any of the Collateral at any public sale and, if
permitted by applicable law, at any private sale. All expenses (including court
costs and reasonable attorneys' fees, expenses and disbursements) of, or
incident to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of the
Collateral.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Collateral pursuant to
this Section 13 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach of any
of the covenants contained in this Section 13 will cause irreparable injury to
the Trustee and the Holders of the Notes, that the Trustee and the Holders of
the Notes have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 13 shall be
specifically enforceable against the Pledgor, and the Pledgor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred.
SECTION 14. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other
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realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Trustee and the Holders of the Notes hereunder or (d) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Obligations, or any other amendment
or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of
any Liens on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
SECTION 16. WAXS Securities Intermediary's Representations,
Warranties and Covenants. The WAXS Securities Intermediary represents and
warrants that it is as of the date hereof, and it agrees that for so long as it
maintains the Collateral Accounts and acts as the Securities Intermediary
pursuant to this Pledge Agreement it shall be a Securities Intermediary and a
FRBB Member. In furtherance of the foregoing the WAXS Securities Intermediary
hereby:
(a) represents and warrants that it is a national banking
association that in the ordinary course of its business maintains securities
accounts for others and is acting in that capacity hereunder and with respect
to the Pledge Account;
(b) represents and warrants that it maintains a FRBB
Member Securities Account with the FRBB;
(c) agrees that the Pledge Account shall be an account to
which Financial Assets may be credited, and the WAXS Securities Intermediary
undertakes to treat the Trustee as entitled to exercise rights that comprise
(and entitled to the benefits of) such Financial Assets, and entitled to
exercise the rights of an Entitlement Holder in the manner contemplated by the
UCC;
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(d) hereby represents that it has not granted, and
covenants that so long as it acts as a Securities Intermediary hereunder it
shall not grant, control (including without limitation, Securities Control)
over or with respect to any Collateral credited to any Collateral Account from
time to time to any other Person other than the Trustee.
(e) covenants that in its capacity as WAXS Securities
Intermediary hereunder and with respect to the Collateral Accounts, it shall
not take any action inconsistent with, and represents and covenants that it is
not and so long as this Pledge Agreement remains in effect will not become
party to any agreement the terms of which are inconsistent with the provisions
of this Pledge Agreement;
(f) agrees that any item of property credited to the
Pledge Account shall be treated as a Financial Asset;
(g) agrees that any item of Collateral credited to any
Collateral Account shall not be subject to any security interest, Lien or right
of set-off in favor of the WAXS Securities Intermediary, except as may be
expressly permitted under the Indenture (and the WAXS Securities Intermediary
shall take such actions as shall be necessary and appropriate to cause such
Collateral to remain free of any Lien or security interest of any underlying
Securities Intermediary through which the WAXS Securities Intermediary holds
such Collateral or any Security Entitlement thereto);
(h) agrees, so long as it serves as WAXS Securities
Intermediary pursuant to this Pledge Agreement, to maintain the Collateral
Accounts and maintain appropriate books and records in respect thereof in
accordance with its usual procedures and subject to the terms of this Pledge
Agreement; and
(i) agrees, with the other parties to this Pledge
Agreement, that the WAXS Security Intermediary's jurisdiction, for
purposes of Section 8-110(e) of the UCC as it pertains to this Pledge
Agreement, the Collateral Accounts and the Security Entitlements
relating thereto, shall be the State of New York.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Any notice, approval, consent or other
communication shall be sufficiently given if in writing and delivered in person
or mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
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if to the Pledgor:
World Access, Inc.
945 East Paces Ferry Road
Suite 2200
Atlanta, Georgia 30326
Attention: Mark A. Gergel
Telecopier No.: (404) 231-2025
with a copy to:
Long Aldridge & Norman LLP
5300 One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308-3201
Attention: Leonard A. Silverstein, Esq.
Telecopier No.: (404) 527-4000
if to the Trustee:
First Union National Bank
999 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30309
Attention: Corporate Trust Department
Telecopier No.: (404) 827-7305
17.2 No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Pledge
Agreement.
17.3 Severability. The provisions of this Pledge Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
17.4 Headings. The headings in this Pledge Agreement have
been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
19
<PAGE> 23
17.5 Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
17.6 Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any
benefit or any legal or equitable right, remedy or claim under this Pledge
Agreement.
17.7 Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and neither the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default or in any breach of any of the terms and conditions hereof.
Failure of the Trustee or any Holder of Notes to exercise, or delay in
exercising, any right, power or privilege hereunder shall not preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
17.8 Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the UCC, except
where the context otherwise requires. To the extent a term or provision of this
Pledge Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Pledge Agreement
shall not be relevant to determine the meaning of this Pledge Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
17.9 Continuing Security Interest; Termination.
(a) This Pledge Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in the
Indenture or in this Pledge Agreement, remain in full force and effect until
the payment in full in cash of the Obligations. This Pledge Agreement shall be
binding upon the Pledgor, its transferees, successors and assigns, and shall
inure, together with the rights and remedies of the Trustee hereunder, to the
benefit of the Trustee, the Holders of the Notes and their respective
successors, transferees and assigns.
20
<PAGE> 24
(b) In addition to the provisions of Section 6(e) hereof and
subject to the provisions of Section 17.10 hereof, this Pledge Agreement shall
terminate upon the payment in full in cash of the Obligations. At such time,
and subject to Section 12, the Trustee shall, pursuant to an Issuer Order,
reassign and redeliver to the Pledgor all of the Collateral hereunder that has
not been sold, disposed of, retained or applied by the Trustee in accordance
with the terms of this Pledge Agreement and the Indenture. Such reassignment
and redelivery shall be without warranty by or recourse to the Trustee in its
capacity as such, except as to the absence of any Liens on the Collateral
created by or arising through the Trustee, and shall be at the reasonable
expense of the Pledgor.
17.10 Survival Provisions. All representations, warranties
and covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the
termination of this Pledge Agreement. The obligations of the Pledgor under
Sections 12 and 14 hereof shall survive the termination of this Pledge
Agreement.
17.11 Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12 Authority of the Trustee.
(a) The Trustee shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Trustee by the term
hereof, together with such powers as are reasonably incident thereto. The
Trustee may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Pledge Agreement or the
Indenture, neither the Trustee nor any director, officer, employee, attorney or
agent of the Trustee shall be liable to the Pledgor for any action taken or
omitted to be taken by the Trustee, in its capacity as Trustee, hereunder,
except for its own bad faith, gross negligence or willful misconduct, and the
Trustee shall not be responsible for the validity, effectiveness or sufficiency
hereof or of any document or security furnished pursuant hereto. The Trustee
and its directors, officers, employees, attorneys and agents shall be entitled
to rely on any communication, instrument or document believed by it or them to
be genuine and correct and to have been signed or sent by the proper person or
persons. The Trustee shall have no duty to cause any financing statement or
continuation statement to be filed in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with respect to any
action taken by the Trustee or the
21
<PAGE> 25
exercise or non-exercise by the Trustee of any option, right, request, judgment
or other right or remedy provided for herein or resulting or arising out of
this Pledge Agreement shall, as between the Trustee and the Holders of the
Notes, be governed by the Indenture and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the Trustee
and the Pledgor, the Trustee shall be conclusively presumed to be acting as
agent for the Holders of the Notes with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
17.13 Final Expression. This Pledge Agreement, together with
the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Pledge Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
17.14 Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 607 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
17.15 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES.
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31 C.F.R.
ss.ss. 357.0 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS PLEDGE AGREEMENT)
SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HEREBY APPOINTS CORPORATION SERVICE
COMPANY AS ITS AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING
WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS BROUGHT UNDER THE U.S.
FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED
IN THE CITY OF NEW YORK (EACH A "NEW YORK COURT"). EACH OF THE PARTIES HERETO
SUBMITS TO THE JURISDICTION OF ANY NEW YORK COURT AND TO THE COURTS OF ITS
CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS BROUGHT AGAINST IT
22
<PAGE> 26
AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR,
THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF FORUM NON CONVENIENS, WITH
RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED ON
ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS
CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON
SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT
ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES
NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE)
THE TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE, JUDGMENT OF A COURT THAT
IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT
SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE OR
SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE
23
<PAGE> 27
TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS
PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE
TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE,
TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE
AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, ON THE ONE
HAND, AND THE TRUSTEE AND/OR THE HOLDERS OF THE NOTES, ON THE OTHER HAND.
17.16 Effectiveness. This Pledge Agreement shall become
effective upon the effectiveness of the Indenture.
24
<PAGE> 28
IN WITNESS WHEREOF, the Pledgor and the Trustee have each
caused this Pledge Agreement to be duly executed and delivered as of the date
first above written.
Pledgor:
WORLD ACCESS, INC.
By:
------------------------------------
Name: Mark A. Gergel
Title: Chief Financial Officer
Trustee:
FIRST UNION NATIONAL BANK,
as Trustee
By:
------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Securities Intermediary, for
purposes of Section 16 only
By:
------------------------------------
Name:
Title:
25
<PAGE> 29
SCHEDULE I
PLEDGED SECURITIES
<TABLE>
<S> <C> <C> <C>
Description Original
of Debt CUSIP No(s). Final Maturity Principal Amount
------- ------------ -------------- ----------------
</TABLE>
I-1
<PAGE> 30
SCHEDULE II
PLEDGED SECURITIES
<TABLE>
<S> <C> <C> <C> <C>
Description Original Cost at
of Debt CUSIP No(s). Final Maturity Principal Amount Exchange Date
------- ------------ -------------- ---------------- -------------
</TABLE>
I-2
<PAGE> 31
EXHIBIT A
FIRST UNION NATIONAL BANK
OFFICER'S CERTIFICATE
Pursuant to Section 3 of the Collateral Pledge and Security Agreement
(the "Pledge Agreement") dated as of _______ __, ____ between World Access,
Inc. a Delaware corporation (the "Pledgor") and First Union National Bank,
trustee (the "Trustee") for the holder's of the Pledgor's 13 1/4% Senior Notes
Due 2009, the undersigned officer of the Trustee, on behalf of the Trustee,
makes the following certifications to the Pledgor and the initial holders of
the Notes. Capitalized terms used and not defined in this Officer's Certificate
have the meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Officer's Certificate, the Trustee has
acquired its security entitlement to the Pledged Securities
or through a "securities account" (as defined in Section
8-501(a) of the UCC) maintained by the Trustee at the WAXS
Securities Intermediary, for value and without notice of any
Adverse Claim thereto. Without limiting the generality of the
foregoing, the Pledge Account, the Cash Collateral Account,
the Pledged Securities and the other Collateral are not, and
the Trustee's security entitlement to the Collateral is not,
to the actual knowledge of the corporate trust officer having
responsibility for the administration of this Indenture on
behalf of the Trustee, subject to any Lien granted by or to
or arising through or in favor of any Securities Intermediary
(including, without limitation, the Trustee at the WAXS
Securities Intermediary, or the Federal Reserve Bank of
Richmond) through which the Trustee derives its security
entitlement to the Collateral.
2. The Trustee has not caused or permitted the Collateral
Account or its Security Entitlement thereto to become subject
to any Lien created by or arising through the Trustee.
A-1
<PAGE> 32
IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of First Union National Bank, Trustee this ___
day of _______, ____.
FIRST UNION NATIONAL BANK,
Trustee
By:
------------------------------
----------------------------
Name:
Title:
A-2
<PAGE> 33
EXHIBIT B
INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES
To the Board of Directors
World Access, Inc.
We understand that $________ 13.25% Senior Notes due 2008 ("Notes") of World
Access, Inc. (the "Issuer"), are to be issued on __________________. We also
understand that First Union National Bank (the "Trustee") will hold the
Securities listed on the attached Annex I (the "Securities") pursuant to
Section 6 of the Collateral Pledge and Security Agreement, between the Issuer
and the Trustee, dated as of ___________________ (the "Pledge Agreement").
We have been requested by the Issuer and the Trustee (collectively, the
"Intended Users") to prove the arithmetic accuracy of the computations shown on
the attached schedules, prepared by the Issuer.
We have performed the procedures enumerated below, which were agreed to by the
Intended Users, solely to assist you and the Trustee with respect to proving
the arithmetic accuracy of the computations shown on the attached schedules.
This engagement to apply agreed-upon procedures was performed in accordance
with standards established by the American Institute of Certified Public
Accountants. The sufficiency of the procedures is solely the responsibility of
the specified users of the report. Consequently, we make no representations
regarding the sufficiency of the procedures described below either for the
purpose for which this report has been requested or for any other purpose. The
procedures that we performed and our findings are as follows:
1. We have proved the arithmetic accuracy of the computations of the
Pledge Amount (as defined in the Pledge Agreement), as shown on the
attached Annex II, which was prepared by the Issuer.
2. We have proved the arithmetic accuracy of the computation of the
scheduled receipts of maturing principal and interest to be received
from the Securities and cash on deposit as shown on the attached Annex
I, which was prepared by the Issuer. Other than proving such
arithmetic accuracy, we have not confirmed or otherwise verified the
information on that schedule.
3. We recomputed each amount in the net cash flow column by deducting
each amount in the interest payment column from each amount in the
total available column, individually and in total.
In performing the above calculations, we have relied solely on the data set
forth in the attached schedules prepared and provided to us by the Issuer. The
scope of our engagement did not include
B-1
<PAGE> 34
verification of any underlying data, assumptions or definitions necessary to
derive the calculations. Such underlying data, assumptions and definitions
including, but are not limited to the following:
1. The principal amounts, coupon rates, and the related maturities
for the Securities and Notes; and
2. Interest start dates, maturity dates, and interest payment dates
for the Securities and the Notes.
We were not engaged to, and did not, perform and audit, the objective of which
would be the expression of an opinion on the specified elements, accounts, or
items included in the attached schedules. Accordingly, we do not express such
an opinion. Had we performed additional procedures, other matters might have
come to our attention that would have been reported to you.
This report is intended solely for the use of the Intended Users listed above
and should not be used by those who have not agreed to the procedures and taken
responsibility for the sufficiency of the procedures for their purposes.
Dated:
-----------
B-1
<PAGE> 35
ANNEX I
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Coupon Maturity Par Coupon Cash Total Interest Net Cash
Security Rate Date Amount Interest Flow Available(2) Payment(3) Flow(4)
</TABLE>
(1)Coupon interest is calculated assuming a 180-day semi-annual period and a
360 day year.
(2)Total Available for each period is equal to the Cash Flow for the period
plus Net Cash Flow from the previous period. (3) See Annex I attached
hereto.
(4)Net Cash flow for each period is equal to Total Available for the period
less the Interest Payment for each period.
<PAGE> 36
ANNEX II
<TABLE>
<CAPTION>
Interest Payment Date Assumed
on the Notes Principal Interest Rate Interest Payment (1)
- --------------------- ----------- --------------- ----------------------
<S> <C> <C> <C>
10.5%
10.5%
10.5%
10.5%
10.5%
10.5%
</TABLE>
- -------------------------------------------------------------------------------
(1) Interest payments for each period are calculated assuming a 180-day semi-
annual period and 360-day year.
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.8
AGREEMENT TO EXCHANGE AND CONSENT
AGREEMENT TO EXCHANGE AND CONSENT (the "Agreement"), dated as
of October 12, 1999 by and among World Access, Inc., a Delaware corporation
(the "Company"), FaciliCom International, Inc., a Delaware corporation
("FaciliCom"), and each of the holders (a "Noteholder") of FaciliCom's
outstanding 10.5% Senior Notes due 2008 (the "FaciliCom Notes") listed on
Schedule I hereto.
WITNESSETH
WHEREAS, FaciliCom and the Company and certain other parties
have entered into an Agreement and Plan of Merger (the "Merger Agreement"),
dated August 17, 1999, which provides for, among other things, the merger of
FaciliCom with and into the Company (the "Merger");
WHEREAS, in connection with the Merger, the Company proposes
(i) to exchange (A) $1,000 principal amount of its 13.25% Senior Notes due 2008
(the "Exchange Notes"), (B) such number of shares of the Company's common
stock, par value $0.01 per share (the "Exchange Shares"), having a market value
of $50 (determined as set forth below), and (C) a payment (the "Cash Payment")
of $10 in cash for each $1,000 principal amount of FaciliCom Notes tendered and
accepted by the Company for exchange (collectively, the "Exchange"), and (ii)
to seek the consent of the holders of the FaciliCom Notes to certain amendments
described in Exhibit A attached hereto (the "Amendments") to the FaciliCom
Indenture (as defined below), such Amendments to be set forth in a Second
Supplemental Indenture to the FaciliCom Indenture (the "Second Supplemental
Indenture") (collectively, the "Consent"); and
WHEREAS, it is a condition to the consummation of the
Exchange and Consent that (i) the Merger shall have been consummated and (ii)
the holders of at least a majority of the aggregate principal amount of the
FaciliCom Notes shall have tendered their FaciliCom Notes in the Exchange (and
such tenders shall have been accepted by the Company) and shall have agreed to
the Consent;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises, covenants and conditions hereinafter contained, the parties
agree as follows:
1. Agreement to Exchange.
(a) At the Closing (as defined in the Merger Agreement) and
subject only to (i) the simultaneous consummation of the Merger and the Consent
and (ii) the declaration by the Securities and Exchange Commission (the "SEC")
of the effectiveness of the Exchange Offer Registration Statement (as defined
below), each Noteholder hereby agrees to, and to direct its nominee to,
exchange all of such Noteholder's FaciliCom Notes listed on Schedule I hereto,
together with any other FaciliCom Notes the beneficial ownership (as defined
below) of which is acquired by such Noteholder during the period from and
including the date hereof through and including the date on which this
Agreement is terminated pursuant to Section 10.9 hereof
<PAGE> 2
2
(collectively, the "Subject Notes"), for (A) Exchange Notes, which shall have
terms substantially similar to the terms of the FaciliCom Notes, except that
such Exchange Notes shall contain the terms specified in the Summary of Terms
attached hereto as Exhibit B, (B) for Exchange Shares and (C) for the Cash
Payment, each on the basis set forth above in the second Whereas clause of this
Agreement. For purposes of this Agreement, "beneficial ownership" or
"beneficially owned" shall have the meaning ascribed to those terms by Section
13 under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act").
The Exchange Notes and the Exchange Shares will be registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement on Form S-4 (the "Exchange Offer Registration
Statement") and the Exchange Notes will be issued pursuant to an indenture (the
"Exchange Indenture") between the Company and a trustee (the "Trustee"), which
indenture will be substantially similar to the FaciliCom Indenture, except that
it shall reflect the Summary of Terms. The exchange offer as described in this
paragraph (a) shall be referred to as the "Registered Exchange Offer." All
holders of FaciliCom Notes will be eligible to participate in the Registered
Exchange Offer, notwithstanding that not all such holders are parties to this
Agreement.
(b) The number of Exchange Shares that each holder of FaciliCom
Notes shall be entitled to receive shall be calculated by multiplying the
aggregate principal amount of such holder's tendered and accepted FaciliCom
Notes by 0.05 and by dividing such product by the Market Price (as defined
below) of the Exchange Shares and rounding to the nearest whole number. "Market
Price" shall mean the average closing price of the Exchange Shares on Nasdaq
over the five consecutive trading days up to and including the trading day
prior to the last full trading day before Closing.
(c) Delivery of the Exchange Notes, Exchange Shares and Cash
Payment to each Noteholder whose FaciliCom Notes shall have been tendered and
accepted by the Company shall be made on the Closing Date (as defined in the
Merger Agreement). Exchange Notes and Exchange Shares shall be registered in
the name of the registered holder of the applicable FaciliCom Notes.
2. Consent. At the Closing and subject only to the simultaneous
consummation of (i) the Merger and (ii) the Exchange, each Noteholder hereby
agrees to consent, and agrees to cause its nominee as record holder of all
Subject Notes beneficially owned by it to consent, to the Amendments and to
direct the FaciliCom Trustee to execute and deliver on behalf of the
Noteholders on the Closing Date, immediately prior to the Closing, the Second
Supplemental Indenture, pursuant to Section 902 of the FaciliCom Indenture,
dated as of January 28, 1998, among FaciliCom and State Street Bank and Trust
Company (the "FaciliCom Trustee"), as amended by the First Supplemental
Indenture thereto (the "FaciliCom Indenture"), such Consent to be effective
with respect to all of such Noteholder's Subject Notes as of the time
immediately prior to the Closing. Each holder of FaciliCom Notes who tenders
FaciliCom Notes in exchange
<PAGE> 3
3
for the Exchange Notes in the Registered Exchange Offer shall by such action be
deemed to have agreed to the Consent.
3. Representations and Warranties of the Noteholder. Each Noteholder
hereby represents and warrants to the Company and FaciliCom with respect to
itself only that:
3.1 Authority. The Noteholder has all necessary power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Noteholder and the consummation by such
Noteholder of the transactions contemplated hereby have been duly and validly
authorized by all corporate proceedings on its part as are necessary to
authorize this Agreement or to consummate such transactions. This Agreement has
been duly and validly executed and delivered by the Noteholder and, assuming
the due authorization, execution and delivery by the other parties hereto,
constitutes its legal, valid and binding obligation, enforceable against such
Noteholder in accordance with its terms, subject to the effects of 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.
3.2 No Conflict.
(a) The execution and delivery of this Agreement by the
Noteholder do not, and the performance of this Agreement by such Noteholder
shall not, (i) conflict with or violate its organizational documents, (ii)
conflict with or violate any agreement, arrangement, law, rule, regulation,
order, judgment or decree to which it is a party or by which it is (or the
Subject Notes held of record or beneficially owned by it are) bound or affected
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the Subject Notes
held of record or beneficially owned by such Noteholder pursuant to any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which it is a party or by which
it is (or the Subject Notes held of record or beneficially owned by it are)
bound or affected, except, in the case of clauses (ii) and (iii) of this
Section 3.2, for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or delay the performance by the Noteholder
of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by the
Noteholder do not, and the performance of this Agreement by such Noteholder
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental entity except for applicable
requirements, if any, of the Exchange Act and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by the
Noteholder of its obligations under this Agreement.
<PAGE> 4
4
3.3 Title to the FaciliCom Notes. As of the date hereof, the
Noteholder is the record or beneficial owner of the FaciliCom Notes listed
beside its name on Schedule I hereto. The FaciliCom Notes listed on Schedule I
hereto are all the FaciliCom Notes either held of record or beneficially owned
by the Noteholder. The Noteholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the FaciliCom Notes
held of record or beneficially owned by such Noteholder. The FaciliCom Notes
listed on Schedule I hereto are owned and all other Subject Notes will be owned
by the Noteholder free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, charges and other
encumbrances of any nature whatsoever (collectively, "Liens"), other than Liens
arising as a result of this Agreement.
3.4 Investment Purposes. The Noteholder is agreeing to exchange
its Subject Notes and shall receive Exchange Notes and pursuant to the
Registered Exchange Offer for its own account solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution of the Exchange Notes in violation of the Securities Act. The
Noteholder has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of the Exchange and Consent
and an investment in the Exchange Notes and is able to bear the economic risk
of such investment.
4. Representations and Warranties of FaciliCom and the Company. Each of
FaciliCom and the Company hereby represents and warrants to each of the
Noteholders with respect to itself only that:
4.1 Authority. Each of FaciliCom and the Company has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of FaciliCom and the
Company and the consummation by each of FaciliCom and the Company of the
transactions contemplated hereby have been duly and validly authorized by all
corporate proceedings on its part as are necessary to authorize this Agreement
or to consummate such transactions. This Agreement has been duly and validly
executed and delivered by each of FaciliCom and the Company and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes its legal, valid and binding obligation, enforceable against each
of FaciliCom and the Company in accordance with its terms, subject to the
effects of 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.
4.2 No Conflict.
(a) The execution and delivery of this Agreement by each of
FaciliCom and the Company do not, and the performance of this Agreement by each
of FaciliCom and the Company shall not, (i) conflict with or violate its
organizational documents, (ii) conflict with or
<PAGE> 5
5
violate any agreement, arrangement, law, rule, regulation, order, judgment or
decree to which it is a party or by which it is bound or affected or (iii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which it is a party or by which its assets or properties are
bound or affected, except, in the case of clause (ii) and (iii) of this Section
4.2, for any such conflicts, violations, breaches, defaults or other
occurrences which would not prevent or delay the performance by each of
FaciliCom and the Company of its obligations under this Agreement.
(b) The execution and delivery of this Agreement by each of
FaciliCom and the Company do not, and the performance of this Agreement by each
of FaciliCom and the Company shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
entity, except for (i) applicable requirements, if any, of the Exchange Act,
the Securities Act or any applicable blue sky or state securities laws, (ii)
any consent, approval, authorization, permit, filing or notification required
in connection with the Merger and (iii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by each of FaciliCom
and the Company of its obligations under this Agreement.
5. Transfer of Title. Other than pursuant to the Exchange, each Noteholder
hereby covenants and agrees that it will not, prior to the termination of this
Agreement, either directly or indirectly, offer or otherwise agree to sell,
assign, pledge, hypothecate, transfer, exchange, or dispose of any Subject
Notes, owned either directly or indirectly by it or with respect to which each
such Noteholder has the power of disposition, whether now or hereafter
acquired, without the prior written consent of FaciliCom and the Company,
unless the person or entity to whom such Subject Notes have been sold,
assigned, pledged, hypothecated, transferred, exchanged or disposed agrees to
be bound by this Agreement as if a party hereto pursuant to an agreement in
form and substance reasonably satisfactory to FaciliCom and the Company. Each
Noteholder hereby agrees and consents to the entry of stop transfer
instructions by FaciliCom or the FaciliCom Trustee, as the case may be, against
the transfer of any Subject Notes inconsistent with the terms of this Section
5.
6. Registered Exchange Offer.
6.1 Registration Statement. Each of the Company and FaciliCom
agrees that it will use its reasonable best efforts to prepare, and have
declared effective by the SEC, the Exchange Offer Registration Statement.
6.2 Registered Exchange Offer. In connection with the Registered
Exchange Offer, the Company will:
<PAGE> 6
6
(a) after the Exchange Offer Registration Statement has
been declared effective by the SEC, mail to each Noteholder a copy of the
prospectus forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less
than 20 business days (or longer, if required by applicable law) after the date
on which notice of the Registered Exchange Offer is first mailed to the holders
of FaciliCom Notes;
(c) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of Manhattan, The City
of New York;
(d) permit holders of FaciliCom Notes to withdraw
tendered FaciliCom Notes at any time prior to the close of business, New York
City time, on the last business day on which the Registered Exchange Offer
shall remain open; and
(e) otherwise comply in all respects with all laws that
are applicable to the Registered Exchange Offer.
After the close of the Registered Exchange Offer and subject
to the consummation of the Merger and the Consent, the Company shall:
(a) accept for exchange all FaciliCom Notes tendered and
not validly withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to or deposit with the FaciliCom Trustee for
cancellation all FaciliCom Notes so accepted for exchange;
(c) cause the Trustee for the Exchange Notes to
authenticate and deliver to each Noteholder Exchange Notes with an equal
principal amount to the FaciliCom Notes of such Noteholder so accepted for
exchange; and
(d) issue the number of Exchange Shares and deliver the
amount of the Cash Payment determined as provided for herein to each holder of
FaciliCom Notes accepted for exchange.
6.3 Additional Representations. Each Noteholder
participating in the Registered Exchange Offer shall be required to represent
to the Company that at the time of the consummation of the Registered Exchange
Offer (i) any Exchange Notes received by such Noteholder will be acquired in
the ordinary course of such Noteholder's business, (ii) such Noteholder will
have no arrangements or understanding with any person to participate in and is
not participating in, and does not intend to participate in, the distribution
of the Exchange Notes within the meaning of the Securities Act and (iii) such
Noteholder is not an affiliate (as defined in Rule 405 under the Securities
Act) of the Company.
<PAGE> 7
7
7. Escrow Agreement. Upon the consummation of the Merger and the Exchange
and Consent, (i) funds held in the escrow account previously established for
the FaciliCom Notes shall be held for the benefit of the holders of the
FaciliCom Notes and the Exchange Notes on a pro rata basis determined by
reference to the aggregate principal amount of FaciliCom Notes exchanged for
Exchange Notes and (ii) interest payments on the FaciliCom Notes and Exchange
Notes shall be paid out of that portion of the funds held in such escrow
account that are held for the benefit of the holders of the FaciliCom Notes and
Exchange Notes, respectively, until exhausted.
8. Miscellaneous.
8.1 Permission to Disclose. Each Noteholder hereby agrees and
consents to the disclosure by the Company and FaciliCom of this Agreement in
connection with the Merger and the Registered Exchange Offer or as otherwise
required by law (except that such Noteholder's name will not be disclosed in
any press release, filing or other notice or report unless required by law or
the SEC).
8.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
8.3 Entire Agreement. Subject to the consummation of the Exchange
and the Consent, this Agreement constitutes the entire agreement between the
Company, FaciliCom and the Noteholders party hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the Company, FaciliCom and the Noteholders party
hereto with respect to the subject matter hereof.
8.4 Amendment. This Agreement may not be amended and no other
actions may be taken under this Agreement except by an instrument in writing
signed by the Company, FaciliCom and each of the holders of the Subject Notes
covered by this Agreement.
8.5 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule or law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereby shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable
law in a mutually acceptable manner in order that the terms of this Agreement
remain as originally contemplated.
<PAGE> 8
8
8.6 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission confirmation if sent by facsimile (with a confirming
copy sent by overnight courier) and on the next business day if sent by Federal
Express, United Parcel Service, Express Mail or other reputable overnight
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by notice):
If to the Noteholders, to the addresses specified on Schedule I.
If to the Company, to:
Mark Gergel
World Access, Inc.
945 East Paces Ferry Road
Suite 2200
Atlanta, GA 30326
Facsimile: (404) 261-6190
with a copy to:
Leonard Silverstein, Esq.
Long Aldridge & Norman
303 Peachtree Street, N.E.
Atlanta, GA 30308
Telephone: (404) 527-4000
Fax: (404) 527-4198
If to FaciliCom, to:
Christopher King
FaciliCom International, Inc.
1401 New York Avenue, NW
8th floor
Washington, DC
Telephone: (404) 527-4000
Fax: (404) 527-4198
with a copy to:
Alan Klein, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017-3454
Facsimile: (212) 455-2502
<PAGE> 9
9
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
8.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
8.9 Termination. This Agreement shall terminate on the first to
occur of (x) a written agreement to terminate of the Company, FaciliCom and the
Noteholders party hereto, (y) termination of the Merger Agreement in accordance
with its terms or (z) February 28, 2000, unless in any such case it is extended
by the Company, FaciliCom and each of the Noteholders party hereto. Upon
termination, this Agreement shall be of no further force and effect among the
parties except for the provisions of Section 8.10 which shall survive the
termination of this Agreement.
8.10 Fees and Expenses. Each party shall bear its own expenses,
including the fees and expenses of accountants, financial or other advisors or
representatives engaged by it, incurred in connection with this Agreement and
the transactions contemplated hereby.
8.11 Survival of Consents, Representations and Warranties. The
consents, representations and warranties contained in or made pursuant to this
Agreement shall survive the Closing.
8.12 Successors and Assigns. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors or assigns.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its respective officers thereunto duly authorized all
as of the date first above written
WORLD ACCESS, INC.
By: /s/ W. Tod Chmar
-----------------------------------------------
Name: W. Tod Chmar
Title: EVP
FACILICOM INTERNATIONAL, INC.
<PAGE> 10
10
By: /s/ Christopher S. King
-----------------------------------------------
Name: Christopher S. King
Title: CFO
MORGAN STANLEY DEAN WITTER DIVERSIFIED
INCOME TRUST
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MORGAN STANLEY DEAN WITTER SELECT
DIMENSIONS INVESTMENT SERIES - THE
DIVERSIFIED INCOME PORTFOLIO
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MORGAN STANLEY HIGH INCOME ADVANTAGE
TRUST
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MORGAN STANLEY HIGH INCOME ADVANTAGE
TRUST II
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
<PAGE> 11
MORGAN STANLEY HIGH INCOME ADVANTAGE
TRUST III
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MORGAN STANLEY DEAN WITTER VARIABLE
INVESTMENT SERIES - HIGH YIELD PORTFOLIO
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MORGAN STANLEY DEAN WITTER HIGH YIELD
SECURITIES, INC.
By: /s/ Peter Avelar
-----------------------------------------------
Name: Peter Avelar
Title: Their Vice President
MANAGED HIGH INCOME PORTFOLIO
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
SMITH BARNEY INCOME FUNDS -
DIVERSIFIED STRATEGIC INCOME FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
<PAGE> 12
SMITH BARNEY INCOME FUNDS - HIGH
INCOME FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
SMITH BARNEY INCOME FUNDS -
BALANCED FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
HIGH INCOME OPPORTUNITY FUND INC.
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
GREENWICH STREET SERIES FUND -
DIVERSIFIED STRATEGIC INCOME FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
ZENIX INCOME FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
TRAVELERS SERIES FUND INC. - SMITH
BARNEY HIGH INCOME PORTFOLIO
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
<PAGE> 13
USA HIGH YIELD FUND N.V.
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
SALOMON BROTHERS GLOBAL
HORIZONS INVESTMENT SERIES -
DIVERSIFIED STRATEGIC INCOME FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
NOMURA GLOBAL INVESTMENT FUND -
DIVERSIFIED BOND FUND
By: /s/ Cornelius J. Mack
-----------------------------------------------
Name: Cornelius J. Mack
Title: Director
J.& W. SELIGMAN & CO., AS INVESTMENT
ADVISOR FOR SELIGMAN GLOBAL HORIZON
FUNDS, SELIGMAN HIGH YIELD BOND SERIES AND
CERTAIN OTHER INSTITUTIONAL CLIENTS
By: /s/ Daniel J. Charleston
-----------------------------------------------
Name: Daniel J. Charleston
Title: Managing Director
SUN AMERICA, INC.
By: /s/ Rafael Fogel
-----------------------------------------------
Name: Rafael Fogel
Title: As Agent
<PAGE> 14
PUTNAM HIGH YIELD ADVANTAGE FUND
By: /s/ John R. Verani
-----------------------------------------------
Name: John R. Verani
Title: Vice President
<PAGE> 15
SCHEDULE I
1. Morgan Stanley Dean Witter Diversified Income Trust
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $6,400,000
2. Morgan Stanley Dean Witter Select Dimensions Investment Series - The
Diversified Income Portfolio
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $600,000
3. Morgan Stanley High Income Advantage Trust
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $2,000,000
4. Morgan Stanley High Income Advantage Trust II
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $3,000,000
5. Morgan Stanley High Income Advantage Trust III
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $1,000,000
6. Morgan Stanley Dean Witter Variable Investment Series - High
Yield Portfolio
2 World Trade Center
72nd Floor
New York, NY 10048
Beneficial ownership: $5,000,000
7. Morgan Stanley Dean Witter High Yield Securities, Inc.
2 World Trade Center
New York, NY 10048
Beneficial ownership: $30,000,000
8. Managed High Income Portfolio
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $4,615,000
<PAGE> 16
9. Smith Barney Income Funds - Diversified Strategic Income Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $8,505,000
10. Smith Barney Income Funds - High Income Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $17,390,000
11. Smith Barney Income Funds - Balanced Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $2,375,000
12. High Income Opportunity Fund Inc.
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $6,575,000
13. Greenwich Street Series Fund - Diversified Strategic Income Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $247,500
14. Zenix Income Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $1,200,000
15. Travelers Series Fund Inc. - Smith Barney High Income Portfolio
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $1,375,000
16. USA High Yield Fund N.V.
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $655,000
17. Salomon Brothers Global Horizons Investment
Series - Diversified Strategic Income Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $125,000
<PAGE> 17
3
18. Nomura Global Investment Fund - Diversified Bond Fund
388 Greenwich Street, 23rd Floor
New York, NY 10013
Beneficial ownership: $135,000
19. J.& W. Seligman & Co., as investment advisor for
Seligman Global Horizon Funds, Seligman High Yield
Bond Series and certain other institutional clients
100 Park Avenue, 7th Floor
New York, NY 10017
Beneficial ownership: $34,600,000
20. Sun America, Inc.
1999 Avenue of the Stars 38th Floor
Los Angeles, CA
Beneficial ownership: $21,500,000
21. Putnam
One Post Office Square
Boston, MA 02109
Beneficial ownership: $21,000,000
<PAGE> 18
EXHIBIT A
The following is a summary of the proposed amendments to the FaciliCom
Indenture:
Elimination in their entirety of the following Sections:
- Section 801: Company may consolidate, etc., only on certain terms.
- Section 1002: Maintenance of Office or Agency covenant.
- Section 1003: Money for Note Payments to Be held in Trust covenant.
- Section 1004: Corporate Existence covenant.
- Section 1005: Payment of Taxes and Other Claims covenant.
- Section 1006: Maintenance of Properties covenant.
- Section 1007: Insurance covenant.
- Section 1008: Statement by Officers as to Default covenant.
- Section 1009: Provision of Financial Statements and Reports covenant.
- Section 1010: Repurchase of Notes upon Change of Control covenant.
- Section 1011: Limitation on Indebtedness covenant.
- Section 1012: Limitation on Restricted Payments covenant.
- Section 1013: Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries covenant.
- Section 1014: Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries covenant.
- Section 1015: Limitation on Transactions with Stockholders and
Affiliates covenant.
- Sections 1016: Limitation on Liens covenant.
<PAGE> 19
- Sections 1017: Limitation on Asset Sales covenant.
- Section 1018: Limitation on Issuance of Guarantees of Indebtedness by
Restricted Subsidiaries covenant.
- Section 1019: Business of the Company; Restriction on Transfers of
Existing Business covenant.
- Section 1020: Limitation on Investments in Unrestricted Subsidiaries
covenant.
- Section 1021: Limitation on Sale-Leaseback Transactions covenant.
<PAGE> 20
EXHIBIT B
SUMMARY OF TERMS OF EXCHANGE INDENTURE
Terms The Exchange Indenture will be the same in all
material respects as the FaciliCom Indenture, except
as set forth below. Additional technical and
conforming changes will also be made to the Exchange
Indenture.
Issuer World Access, Inc. (the "Company")
Interest Interest on the Exchange Notes will payable
semi-annually, in cash, at a rate of 13.25% per annum
on each interest payment date. Accrued interest on
the FaciliCom Notes through the date of consummation
of the Registered Exchange Offer will be paid, along
with accrued interest on the Exchange Notes from the
date following the consummation of the Registered
Exchange Offer to the date of the first regularly
scheduled interest payment date of the FaciliCom
Notes following such consummation (the "First
Interest Payment Date"), in cash, on such First
Interest Payment Date.
Optional Redemption The Exchange Notes will be redeemable, at the
election of the Company, in whole or in part, at any
time and from time to time, on or after January 15,
2003, upon not less than 30 nor more than 60 days'
notice at the Redemption Prices (expressed in
percentages of principal amount thereof), if redeemed
during the 12-month period commencing on January 15
of the years set forth below plus, in each case,
accrued and unpaid interest thereon, if any, to the
date of redemption:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 106.625%
2004 104.417%
2005 102.208%
2006 (and thereafter) 100.000%
</TABLE>
On and after the redemption date, interest shall
cease to accrue on the Exchange Notes.
Covenants and Definitions
Set forth below is a summary of the covenants and definitions which will
be revised in the Exchange Indenture. The provisions which have been changed
have been marked against the versions thereof contained in the FaciliCom
Indenture. The new provisions have been
<PAGE> 21
underscored and the deleted provisions have been struck through. Additional
technical and conforming changes may also be made.
SECTION 1011. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, Incur any Indebtedness; provided, however, that the
Company may Incur Indebtedness if immediately thereafter the ratio of (i) the
aggregate principal amount (or accreted value, as the case may be) of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the Pro Forma Consolidated
Cash Flow for the preceding two full fiscal quarters multiplied by two,
determined on a pro forma basis as if any such Indebtedness had been Incurred
and the proceeds thereof had been applied at the beginning of such two fiscal
quarters, would be greater than zero and less than 5 to 1.
(b) The foregoing limitations of paragraph (a) of this covenant
will not apply to any of the following Indebtedness ("Permitted Indebtedness"),
each of which shall be given independent effect:
(i) Indebtedness of the Company evidenced by the FaciliCom
Notes and the Notes;
(ii) Indebtedness of FaciliCom or any of its Restricted
Subsidiaries outstanding on the Original Issue Date;
(iii) Indebtedness of the Company or any Restricted
Subsidiary under one or more Credit Facilities, in an aggregate principal
amount at any one time outstanding not to exceed the greater of (x) $35
135.0 million and (y) 80% of Eligible Accounts Receivable at any one time
outstanding, subject to any permanent reductions required by any other
terms of this Indenture;
(iv) Indebtedness of the Company or any Restricted Subsidiary
Incurred to finance the cost (including the cost of design, development,
construction, acquisition, installation or integration) of
Telecommunications Assets;
(v) Indebtedness of a Restricted Subsidiary owed to and held
by the Company or another Restricted Subsidiary, except that (A) any
transfer of such Indebtedness by the Company or a Restricted Subsidiary
(other than to the Company or another Restricted Subsidiary) or (B) the
sale, transfer or other disposition by the Company or any Restricted
Subsidiary of Capital of a Restricted Subsidiary which is owed
Indebtedness of another Restricted Subsidiary shall, in each case, be an
Incurrence of Indebtedness by such Restricted Subsidiary, subject to the
other provisions of this Indenture;
(vi) Indebtedness of the Company owed to and held by a
Restricted Subsidiary which is unsecured and subordinated in right to the
payment and performance to the obligations of the Company under this
Indenture and the Notes, except that the limitations of paragraph (a) of
this Section 1011 shall apply to such Indebtedness at such time as (A) any
transfer of such Indebtedness by a Restricted Subsidiary (other than to
<PAGE> 22
3
another Restricted Subsidiary) and (B) the sale, transfer or other
disposition by the Company or any Restricted Subsidiary of Capital Stock
of a Restricted Subsidiary which is owed such Indebtedness, subject to
other provisions of this Indenture;
(vii) Indebtedness of the Company or a Restricted Subsidiary
issued in exchange for, or the net proceeds of which are used to refinance
(whether by amendment, renewal, extension or refunding), then outstanding
Indebtedness of the Company or a Restricted Subsidiary, other than
Indebtedness Incurred under clauses (iii), (v), (vi), (viii), (ix), (xi)
and (xii) of this paragraph, and any refinancing thereof in an amount not
to exceed the amount so refinanced or refunded (plus premiums, accrued
interest, and reasonable fees and expenses); provided that such new
Indebtedness shall only be permitted under this clause (vii) if (A) in
case the Notes are refinanced in part or the Indebtedness to be refinanced
is pari passu with the Notes, such new Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued, or remains outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes,
(B) in case the Indebtedness to be refinanced is subordinated in right of
payment to the Notes, such new Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding is expressly made subordinate in right of
payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the Notes and (C) such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does not
mature prior to the Stated Maturity of the Indebtedness to be refinanced
or refunded, and the Average Life of such new Indebtedness is at least
equal to the remaining Average Life of the Indebtedness to be refinanced
or refunded; and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any Restricted
Subsidiary pursuant to this clause (vii);
(viii) Indebtedness of (x) the Company not to exceed, at any
one time outstanding, 2.00 times the Net Cash Proceeds from the issuance
and sale, other than to a Subsidiary, of Common Stock (other than
Redeemable Stock) of the Company (less the amount of such proceeds used to
make Restricted Payments as provided in clause (iii) or (iv) of the second
paragraph of Section 1012) and (y) the Company or Acquired Indebtedness of
a Restricted Subsidiary not to exceed, at one time outstanding, the fair
market value of any Telecommunications Assets acquired by the Company in
exchange for Common Stock of the Company issued after the Issue Date;
provided, however, that in determining the fair market value of any such
Telecommunications Assets so acquired, if the estimated fair market value
of such Telecommunications Assets exceeds (A) $2.0 million (as estimated
in good faith by the Board Of Directors), then the fair market value of
such Telecommunications Assets will be determined by a majority of the
Board of Directors of the Company, which determination will be evidenced
by a resolution thereof, and (B) $10.0 million (as estimated in good faith
by the Board of Directors), then the Company shall deliver the Trustee a
written appraisal as to the fair market value of such Telecommunications
Assets prepared by a nationally recognized investment banking or public
accounting firm (or, if no nationally recognized investment banking or
public
<PAGE> 23
4
accounting firm is qualified to prepare such an appraisal, by a nationally
recognized appraisal firm); and provided further that such Indebtedness
does not mature prior to the Stated Maturity of the Notes and the Average
Life of such Indebtedness is longer than that of the Notes;
(ix) Indebtedness of the Company or any Restricted
Subsidiary (A) in respect of performance, surety or appeal bonds or
letters of credit supporting trade payables, in each case provided in the
ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements covering Indebtedness of the Company; provided that such
agreements do not increase the Indebtedness of the obligor outstanding at
any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder, and (C) arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred
by any Person acquiring all or any portion of such business assets or
Restricted Subsidiary for the purpose of financing such acquisition), in a
principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such disposition;
(x) Indebtedness of the Company, to the extent that the net
proceeds thereof are promptly (A) used to repurchase Notes tendered in a
Change of Control Offer or (B) deposited to defease all of the Notes
pursuant to Article Thirteen;
(xi) Indebtedness of a Restricted Subsidiary represented by
a Guarantee of the Notes permitted by and made in accordance with Section
1018; and
(xii) Indebtedness of the Company or any Restricted
Subsidiary in addition to that permitted to be incurred pursuant to
clauses (i) through (xi) above in an aggregate principal amount not in
excess of $10 million (or, to the extent not denominated in United States
dollars, the United States Dollar Equivalent thereof) at any one time
outstanding; and
(xiii) Indebtedness of the Company existing upon the
consummation of the merger of FaciliCom with and into the Company;
(c) For purposes of determining any particular amount of
Indebtedness under this Section 1011, 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 1018. For purposes of determining compliance with this
Section 1011, in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness
<PAGE> 24
5
described in the above clauses, the Company, in its sole discretion may, at the
time of such Incurrence, (i) classify such item of Indebtedness under and
comply with either of paragraph (a) or (b) of this covenant (or any of such
definitions), as applicable, (ii) classify and divide such item of Indebtedness
into more than one of such paragraphs (or definitions), as applicable, and
(iii) elect to comply with such paragraphs (or definitions), as applicable in
any order.
SECTION 1012. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, (i) (A) declare or pay any dividend or make any
distribution in respect of the Company's Capital Stock to the Holders thereof
(other than dividends or distributions payable solely in shares of Capital
Stock (other than Redeemable Stock) of the Company or in options, warrants or
other rights to acquire such shares of Capital Stock) or (B) declare or pay any
dividend or make any distribution in respect of the Capital Stock of any
Restricted Subsidiary to any Person other than dividends and distributions
payable to the Company or any Restricted Subsidiary or to all holders of
Capital Stock of such Restricted Subsidiary on a pro rata basis; (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of
the Company (including options, variants or other rights to acquire such shares
of Capital Stock) held by any Person or any shares of Capital Stock of any
Restricted Subsidiary (including options, warrants and other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than
a wholly owned Restricted Subsidiary) or any holder (or any Affiliate thereof)
of 5% or more of the Company's Capital Stock; (iii) make any voluntary or
optional principal payment, or voluntary or optional redemption, repurchase,
defeasance, or other acquisition or retirement for value, of Indebtedness of
the Company that is subordinated in right of payment to the Notes; or (iv) make
any Investment, other than a Permitted Investment, in any Person (such payments
or any other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing;
(B) the Company could not Incur at least $1.00 of Indebtedness
under paragraph (a) of Section 1011; and
(C) the aggregate amount of all Restricted Payments declared or
made from and after the Closing Date would exceed the sum of:
(1) Cumulative Consolidated Cash flow minus 200% of Cumulative
Consolidated Fixed Charges;
(2) 100% of the aggregate Net Cash Proceeds from the issue or
sale to a Person, which is not a Subsidiary of the Company, of
Capital Stock of the Company (other than Redeemable Stock) or of debt
securities of the Company which have been converted into or exchanged
for such Capital Stock (except to
<PAGE> 25
6
the extent such Net Cash Proceeds are used to Incur new Indebtedness
outstanding pursuant to clause (viii) of paragraph (b) of Section
1011); and
(3) to the extent any Permitted Investment that was made after
the Closing Date is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (i) the cash return of capital with respect
to such Permitted Investment (less the cost of disposition, if any)
and (ii) the initial amount of such Permitted Investment.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof
if, at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment
to the Notes including a premium, if any, and accrued and unpaid interest and
Liquidated Damages, if any, with the net proceeds of, or in exchange for,
Indebtedness Incurred under clause (viii) of paragraph (b) of Section 1011;
(iii) the repurchase, redemption or other acquisition of Capital Stock of the
Company in exchange for, or out of the Net Cash Proceeds of a substantially
concurrent (A) capital contribution to the Company or (B) offering of, shares
of Capital Stock (other than Redeemable Stock) of the Company (except to the
extent such proceeds are used to incur new Indebtedness outstanding pursuant to
clause (viii) of paragraph (b) of Section 1011); (iv) the Acquisition of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a substantially concurrent
(A) capital contribution to the Company or (B) offering of, shares of the
Capital Stock of the Company (other than Redeemable Stock) (except to the
extent such proceeds are used to incur new Indebtedness outstanding pursuant to
clause (viii) of paragraph (b) of Section 1011); (v) payments or distributions
to dissenting stockholders in accordance with applicable law, pursuant to or in
connection with a consolidation, merger or transfer of assets that complies
with Article Eight; (vi) the declaration or payment of any dividend or
distribution in respect of, and in accordance with the terms of, the Company's
(A) 50,000 outstanding shares of 4.25% Cumulative Senior Perpetual Convertible
Preferred Stock, Series A, par value $0.01 per share (the "Senior Preferred
Stock"), and, in the event that The 1818 Fund III, L.P. ("The 1818 Fund")
exercises its option to purchase up to 20,000 additional shares of Senior
Preferred Stock, then such additional shares as well and (B) 23,174 outstanding
shares of 4.25% Cumulative Junior Convertible Preferred Stock, Series B, par
value $0.01 per share (the "Junior Preferred Stock"); (vii) the conversion of
the Senior Preferred Stock, the Junior Preferred Stock or the Company's
Convertible Preferred Stock, Series C, par value $0.01 per share, into Capital
Stock of the Company in accordance with the terms of such preferred stock and
(vi) (viii) other Restricted Payments not to exceed $2 million; provided that,
except in the case of clause (i), no Default or Event of Default shall have
occurred and be continuing or occur as a consequence of the actions or payments
set forth therein.
Each Restricted Payment permitted pursuant to the immediately
preceding paragraph (other than the Restricted Payment referred to in clause
(ii) thereof) and the Net Cash Proceeds from any capital contributions to the
Company or issuance of Capital Stock referred to in clauses
<PAGE> 26
7
(iii) and (iv) of the immediately preceding paragraph, shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
Section 1012 have been met with respect to any subsequent Restricted Payments.
In the event the proceeds of an issuance of Capital Stock of the Company are
used for the redemption, repurchase or other acquisition of the Notes, then the
Net Cash Proceeds of such issuance shall be included in clause (C) of the first
paragraph of this Section 1012 only to the extent such proceeds are not used
for such redemption, repurchase or other acquisition of the Notes.
Section 1013. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
So long as any of the Notes are Outstanding, the Company shall not, and
shall not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to do any one of the
following:
(i) pay dividends or make any other distribution permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by
the Company or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary;
(iii) make loans or advances to the Company or any other Restricted
Subsidiary; or
(iv) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Exchange Date in this Indenture or any
other agreements or instruments in effect on the Closing Exchange Date,
and any extensions, refinancings, renewals or replacements of such
agreements; provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less favorable
in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended,
refinanced, renewed or replaced;
(ii) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if the encumbrance or
restriction applies only in the event of a default with respect to a
financial covenant contained in such Indebtedness or agreement and such
encumbrance or restriction is not materially more disadvantageous to the
Holders than is customary in comparable financing (as determined by the
Company)
<PAGE> 27
8
and the Company determines that any such encumbrance or restriction will
not materially affect the Company's ability to make principal or interest
payments on the Notes;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or assets
of such Person acquired by the Company or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in contemplation
thereof, which encumbrances or restrictions are not applicable to any
Person or the property or assets of any Person other than such Person or
the property or assets of such Person so acquired;
(v) in the case of clause (iv) of the first paragraph of this
Section 1013, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject to,
a lease, purchase mortgage obligation, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any restricted Subsidiary not
otherwise prohibited by this Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do
not, individually or in the aggregate, detract from the value of property
or assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary; or
(vi) with respect to a Restricted Subsidiary and imposed pursuant to
an agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock of, or property and asserts of,
such Restricted Subsidiary. Nothing contained in this Section 1013 shall
prevent the Company or any Restricted Subsidiary from (1) creating,
incurring, assuming or suffering to exist any Liens otherwise permitted in
Section 1016 or (2) restricting the sale or other disposition of property
or assets of the Company or any of its Restricted Subsidiaries that secure
Indebtedness of the Company or any of its Restricted Subsidiaries.
SECTION 1015. Limitation on Transactions with Stockholders and Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or
assets, or the rendering of any service) with any holder (or any Affiliate of
such holder) of 5% or more of any class of Capital Stock of the Company or any
Restricted Subsidiary or with any Affiliate of the Company or any Restricted
Subsidiary, unless the following conditions have been met:
(i) such transaction or series of transactions is on terms no less
favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction with a person
that is not such a holder or an Affiliate;
<PAGE> 28
9
(ii) if such transaction or series of transactions involves aggregate
consideration in excess of $2.0 million, then such transaction or series
of transactions is approved by a majority of the Board of Directors of the
Company and is evidenced by a resolution therein; and
(iii) if such transaction or series of transactions involves
aggregate consideration in exceeds of $10.0 million, then the Company or
such Restricted Subsidiary shall deliver to the Trustee a written opinion
as to the fairness to the Company or such Restricted Subsidiary of such
transaction from a financial point of view from a nationally recognized
investment banking firm (or, if an investment banking firm is generally
not qualified to give such an opinion, by a nationally recognized
appraisal firm or accounting firm).
The foregoing limitation does not limit, and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) any Restricted Payments not prohibited by Section 1012; (iv) loans and
advances to officers or employees of the Company and its Subsidiaries not
exceeding at any one time outstanding $1.5 million in the aggregate, made in
the ordinary course of business; and (v) arrangements with TMG, Armstrong
and/or its subsidiaries existing on the date of this the Original Indenture and
listed on Schedule A attached thereto as such arrangements may be extended or
renewed; provided that the terms of any arrangement altered by any such
extension or renewal may not be altered in a manner adverse to the Company or
the Holders of the Notes; (vi) the issuance of up to 20,000 additional shares
of Senior Preferred Stock to The 1818 Fund pursuant to an option agreement
existing on the date of this Indenture; (vii) the sale to and purchase by the
Company from MCI WorldCom, Inc. and its Affiliates of telecommunications
services and equipment in the ordinary course of business; and (viii) the
issuance and sale by the Company of Common Stock.
SECTION 1017. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Sale unless (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
disposed of as determined by the good faith judgment of the Board of Directors
evidenced by a Board Resolution and (ii) at least 80% of the consideration
received for such sale or other disposition consists of cash or cash
equivalents or the assumption of unsubordinated Indebtedness; provided that any
securities, notes or other obligations issued by an Investment Grade Company
with a Total Equity Market Capitalization in excess of $25 billion determined
at the time any commitment to effect any such Asset Sale is entered into that
are received by the Company or the Restricted Subsidiary, as the case may be,
that are converted within 180 days thereof into cash or cash equivalents shall
be deemed to be cash or cash equivalents; provided further that the amount of
cash or cash equivalents realized upon the sale of any such securities,
<PAGE> 29
10
notes or other obligations must be included within the amount of Net Cash
Proceeds for purposes of clause (i)(B) of the next paragraph.
The Company shall, or shall cause the relevant Restricted Subsidiary to,
within 270 days after the date of receipt of the Net Cash Proceeds from an
Asset Sale, (i) (A) apply an amount equal to such Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company or Indebtedness of
any Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Restricted Subsidiaries or (B) if the Net Cash Proceeds
from such Asset Sale exceed $15 million, apply an amount equal to such Net Cash
Proceeds to make an offer to purchase (an "Offer to Purchase") from the Holders
on a pro rata basis an aggregate principal amount of Notes equal to such Net
Cash Proceeds, at a purchase price equal to 100% of the principal amount of the
Notes, plus, in each case, accrued and unpaid interest to the date of purchase
and less the product of (a) the Market Value per share of the Common Stock of
the Company and (b) the number of shares (including any portion of a share) of
such Common Stock determined by dividing $50 by the Market Price of the Common
Stock for each $1,000 in principal amount of Notes accepted for purchase by the
Company (the "Offer to Purchase Payment"), provided that the Company shall not
be obligated to make any Offer to Purchase after it has made one or more Offers
to Purchase, which offer or offers, in the aggregate, were for an aggregate
principal amount of Notes equal to the aggregate principal amount of Notes
issued on the Exchange Date (regardless of the actual aggregate principal
amount of Notes actually tendered in such Offer or Offers to Purchase), or (C)
if the Company has made sufficient Offers to Purchase such that it has
satisfied its obligation as described in the final proviso to clause (B),
invest an equal amount, or the amount not so applied pursuant to clause (A), in
property or assets of a nature or type or that are used in a business (or in a
company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or the business of, the Company and its Restricted Subsidiaries existing on
the date of such investment (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) and (ii) apply (no later than the end of the 270-day period
referred to above) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (i)) as provided in the following paragraphs of this Section
1017. The amount of such Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 270-day period referred to above in the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds".
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $10.0 million, the Company must, not later than the 30th
Business Day thereafter, make an offer (an "Excess Proceeds Offer") to purchase
from the Holders on a pro rata basis an aggregate principal amount of Notes
equal to the Excess Proceeds on such date, at a purchase price equal to 100% of
the principal amount of the Notes, plus, in each case, accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase less the
product of (a) the Market Value per share of the Common Stock of the Company
and (b) the number of shares (including any portion of a share) of such Common
Stock determined by dividing $50 by the Market Price of the Common Stock
<PAGE> 30
11
for each $1,000 in principal amount of Notes accepted for purchase by the
Company (the "Excess Proceeds Payment").
The Company shall commence an Offer to Purchase or an Excess Proceeds
Offer by mailing a notice to the Trustee and each Holder stating: (i) that the
Offer to Purchase or Excess Proceeds Offer, as applicable, is being made
pursuant to this Section 1017 and that all Notes validly tendered will be
accepted for payment on a pro rata basis; (ii) the purchase price and the date
of purchase (which shall be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed) (the "Excess Proceeds Offer
Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the Offer to Purchase Payment or the Excess Proceeds Payment, as
applicable, any Note accepted for payment pursuant to the Offer to Purchase or
the Excess Proceeds Offer, as applicable, shall cease to accrue interest and
Liquidated Damages, if any, on and after the applicable Offer Excess Proceeds
Payment Date; (v) that Holders electing to have a Note purchased pursuant to
the Offer to Purchase or the Excess Proceeds Offer, as applicable, will be
required to surrender the Note together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the applicable Offer Excess
Payment Payment Date; (vi) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the applicable Offer Excess
Proceeds Payment Date, a telegram, facsimile transmission or letter setting
forth the name of such Holder, the principal amount of Notes delivered for
purchase and a statement that such Holder is withdrawing his election to have
such Notes purchased; and (vii) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, provided that each Note purchased
and each new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the applicable Offer Excess Proceeds Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to the Offer to Purchase or the Excess Proceeds Offer, as applicable;
(ii) deposit with the Paying Agent money sufficient to pay the purchase price
of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officer's Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall upon Company Order promptly authenticate and mail to such Holders
a new Note equal in principal amount to any unpurchased portion of the Note
surrendered; provided that each Note purchased and each new Note issued shall
be in a principal amount of $1,000 or integral multiples thereof. With respect
to any Excess Proceeds Offer, to To the extent that the aggregate principal
amount of Notes tendered is less than the Excess Proceeds, the Company may use
any remaining Excess Proceeds for general corporate purposes. The Company shall
publicly announce the results of the Excess Proceeds Offer as soon as
practicable after the Excess Proceeds Payment Date. For purposes of this
Section 1017, the Trustee shall act as the Paying Agent.
<PAGE> 31
12
The Company shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that such Excess Proceeds are
received by the Company undertakes an Offer to Purchase or Excess Proceeds
Offer under this Section 1017. and the Company is required to repurchase Notes
as described above.
"Exchange Date" means the date of the consummation of the registered
exchange offer pursuant to which holders of the FaciliCom Notes tendered such
notes in exchange for the Notes issued by the Company pursuant to this
Indenture.
"FaciliCom" means FaciliCom International, Inc., a Delaware
corporation.
"FaciliCom Notes" means the 10 1/2% Senior Notes due 2008 issued by
FaciliCom pursuant to the Original Indenture.
"Investment Grade Company" means a Person whose debt securities are
rated BBB- or higher by Standard & Poor's Ratings Service. Inc. or Baa3 or
higher by Moody's Investor Service, Inc. (or an equivalent rating by another
nationally recognized rating agency acceptable to the Holders).
"Market Price" means, on any given day, the average closing price of
the shares of the Company's Common Stock on the principal trading market of
such Common Stock over the five consecutive trading days up to and including
the day of such valuation.
"Market Value" means the average of the closing price of the
applicable security on such security's principal trading market over the five
consecutive trading days up to and including the trading day prior to the last
full trading day before the initiation of any Offer to Purchase described in
clause (i) (B) or the time any commitment to effect an Asset Sale is entered
into as described in the preceding paragraph.
"Original Indenture" means the Indenture, dated as of January 28,
1998, among FaciliCom and State Street Bank and Trust Company, as supplemented
by the First Supplemental Indenture thereto, pursuant to which FaciliCom issued
the FaciliCom Notes.
"Original Issue Date" means January 28, 1998, the date FaciliCom
issued the FaciliCom Notes.
"Permitted Business" means any business involving voice, data and
other telecommunications services or equipment.
"Telecommunications Assets" means, with respect to any person,
equipment used in the telecommunications business or ownership rights with
respect to IRUs, MAOUs or minimum investment units (or similar ownership
interests) in fiber optic cable and international or domestic
telecommunications switches or other transmission facilities (or Common Stock
of a
<PAGE> 32
13
Person that becomes a Restricted Subsidiary, the Assets of which consist
primarily of any such Telecommunications Assets), in each case purchased or
acquired through Indebtedness, provided that such Indebtedness does not exceed
the Fair Market Value of such assets, by the Company or a Restricted Subsidiary
after the Closing Date.
"Total Equity Market Capitalization" of any Person means, as of any
date of determination, the product of (i) the aggregate number of outstanding
shares of Common Stock of such Person on such date on a fully-diluted basis and
(ii) the average closing price of such Common Stock over the five consecutive
trading days immediately preceding such date. If no closing price exists with
respect to shares of any such class, the value of such shares shall be
determined by the Board of Directors in good faith and evidenced by a
resolution of the Board of Directors filed with the Trustee.
<PAGE> 1
EXHIBIT 4.10
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of October
13, 1999, by and among World Access, Inc., a Delaware corporation (the
"Company"), and [X] (the "Buyer").
THE PARTIES AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
(a) Upon the terms and subject to the conditions of this
Agreement, the Company shall sell to the Buyer and the Buyer shall purchase
from the Company, at the Share Closing (as defined below), such number of
shares of common stock, par value $.01 per share, of the Company (the "Shares")
as determined below for an aggregate purchase price (the "Purchase Price") of
[ ]. The number of Shares to be delivered
by the Company to the Buyer at the Share Closing shall be equal to the Purchase
Price divided by the average of the daily closing price of common stock, par
value $.01 per share, of the Company as reported on the National Market System
of the NASDAQ Stock Market (as reported in The Wall Street Journal or, if not
reported therein, in another authoritative source) for the five (5) consecutive
full trading days (in which such shares are traded on the National Market
System of the NASDAQ Stock Market) ending at the close of trading on the
trading day immediately preceding the Share Closing Date (as defined below).
Notwithstanding the foregoing, in no event shall the Purchase Price be less
than $13.00 or greater than $17.00, and in the event that the Purchase Price is
less than $13.00 or greater than $17.00, the Purchase Price shall, for purposes
hereof, equal $13.00 or $17.00, as applicable.
(b) Subject to the satisfaction or waiver of the
conditions set forth herein, the purchase and sale of the Shares (the "Share
Closing") shall take place at the offices of Long Aldridge & Norman LLP, One
Peachtree Center, 303 Peachtree Street, Atlanta, Georgia 30308, on the date of
the closing of the transactions contemplated by that certain Agreement and Plan
of Merger, dated August 17, 1999 (the "Merger Agreement"), between the Company,
FaciliCom International, Inc. ("FaciliCom"), Armstrong International
Telecommunications, Inc., Epic Interests, Inc. and BFV Associates, Inc. (the
"FCI Closing") (the date of the Share Closing being referred to herein as the
"Share Closing Date"). At the Share Closing, the Buyer shall pay the Purchase
Price to an account or accounts designated by the Company, by wire transfer of
immediately available federal funds and the Company shall issue to the Buyer a
certificate or certificates evidencing the Shares purchased hereunder.
2. Representations and Warranties of the Company to the Buyer.
The Company hereby represents and warrants to the Buyer as follows:
<PAGE> 2
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The Company has the right, power and capacity to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly
and validly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and constitutes the Company's legal, valid and binding obligation,
enforceable in accordance with its terms.
(c) The Shares, when issued, sold and delivered in
accordance with the terms of this Agreement, shall be duly and validly issued,
fully-paid and non-assessable.
(d) The Company has filed all reports required to be filed
by it, since December 31, 1998, with the Securities and Exchange Commission
(the "SEC") pursuant to Sections 13, 14 and 15 of the Securities Exchange Act
of 1934, as amended, or with the NASDAQ Stock Market (collectively, the
"Company SEC Reports"). None of the Company SEC Reports, as of their respective
dates (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and such Company SEC
Reports conformed, in all material respects, with all of the statutes and
published rules and regulations enforced or promulgated by the regulatory
authority or exchange with which they were filed.
3. Representations and Warranties of the Buyer to the Company.
The Buyer hereby represents and warrants to the Company as follows:
(a) The Buyer has the right, power and capacity to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly
and validly authorized by all necessary action, corporate or otherwise, on the
part of the Buyer. This Agreement has been duly and validly executed and
delivered by the Buyer and constitutes the Buyer's legal, valid and binding
obligation, enforceable in accordance with its terms.
(b) The Buyer has not retained any investment banker,
broker or adviser in connection with the transactions contemplated by this
Agreement.
(c) The Buyer has, or will have at the Share Closing,
sufficient financing to pay the entire amount of the Purchase Price in
accordance with the terms of this Agreement.
-2-
<PAGE> 3
4. Securities Laws Representations and Covenants of the Buyer.
(a) This Agreement is made with the Buyer in reliance upon
the Buyer's representation to the Company, which by the Buyer's execution of
this Agreement the Buyer hereby confirms, that the Shares will be acquired for
investment for the Buyer's own account, not as a nominee or agent, and not with
a view to the direct or indirect sale or distribution of any part thereof, and
that the Buyer has no present intention of selling, granting any participation
in, or otherwise distributing the same.
(b) The Buyer covenants that in no event will it dispose
of any of the Shares other than pursuant to an effective registration statement
or Rule 144 ("Rule 144") or Rule 144A promulgated by the SEC under the
Securities Act of 1933, as amended (the "Securities Act") (or any similar or
analogous rule) unless and until (i) the Buyer shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition, and (ii)
if requested by the Company, the Buyer shall have furnished the Company with an
opinion of counsel reasonably satisfactory in form and substance to the Company
and the Company's counsel to the effect that (x) such disposition will not
require registration under the Securities Act and (y) appropriate action
necessary for compliance with the Securities Act and any applicable state,
local or foreign law has been taken.
(c) The Buyer represents that: (i) the Buyer is an
"Accredited Investor" as that term is defined in Regulation D promulgated by
the SEC under the Securities Act and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the Buyer's prospective investment in the Shares; (ii) the Buyer has
received all the information requested by it from the Company and considered
necessary or appropriate for deciding whether to purchase the Shares; (iii) the
Buyer has the ability to bear the economic risks of such Buyer's prospective
investment; and (iv) the Buyer is able, without materially impairing its
financial condition, to hold the Shares for an indefinite period of time and to
suffer complete loss on its investment.
5. Covenants of the Company.
(a) The Company shall file with the SEC, as soon as
reasonably practicable following the Share Closing, but in no event later than
thirty (30) days following the Share Closing, a registration statement on Form
S-3 in connection with the resale, pursuant to open market or privately
negotiated transactions, of the Shares (the "Registration Statement"), which
Registration Statement shall be in a form that can be declared effective as
soon as reasonably practicable after the filing thereof. The Company shall use
its reasonable best efforts to have the staff of the SEC declare the
Registration Statement effective as soon as reasonably practicable following
the filing thereof.
(b) The Company shall use its reasonable best efforts to
keep the Registration Statement (including, if appropriate, the filing of
successor registration statements on Form S-3
-3-
<PAGE> 4
covering the Shares) effective until the earlier of (i) the Buyer's ability to
sell the Shares pursuant to Rule 144(k) promulgated by the SEC under the
Securities Act or (ii) five (5) years from the date the staff of the SEC first
declared the Registration Statement effective (the "Registration Period"), and
pursuant thereto the Company will:
(i) prepare and file such amendments and
supplements to such Registration Statement as may be necessary to keep such
Registration Statement effective during the Registration Period and comply with
the provisions of the Securities Act with respect to the disposition of all
Shares covered by such Registration Statement during such period;
(ii) furnish to the Buyer such number of copies
of such Registration Statement, each amendment and supplement thereto, and such
other documents as the Buyer may reasonably request in order to facilitate the
disposition of the Shares owned by the Buyer;
(iii) use its best efforts to register or qualify
the Shares owned by the Buyer under such other United States securities or blue
sky laws of such jurisdictions as the Buyer reasonably requests and do any and
all other acts and things which may be reasonably necessary or advisable to
enable the Buyer to consummate the disposition in such jurisdictions of such
Shares; provided, however, that the Company shall not be required to qualify to
do business in such jurisdiction if not otherwise so required;
(iv) notify the Buyer of the happening of any
event as a result of which the Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and the Company will prepare a supplement or amendment
to the Registration Statement so that, as thereafter delivered to the
purchasers of such Shares, the Registration Statement will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(v) cause the listing and the continuation of
listing of all the Shares covered by the Registration Statement on the National
Market System of the NASDAQ Stock Market, the New York Stock Exchange, the
American Stock Exchange or any successor national exchange or market, and cause
the Registrable Securities to be quoted or listed on each additional national
securities exchange or quotation system upon which the common stock of the
Company is then listed or quoted;
(vi) enter into such customary indemnity
agreements as reasonably requested in order to expedite or facilitate the
disposition of such Shares;
(vii) make available for inspection by the Buyer, any
underwriter participating in any disposition of Shares pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
the Buyer or any underwriter, all financial and other records, pertinent
corporate documents and properties of the Company (other than documents and
-4-
<PAGE> 5
information deemed by the Company to be confidential or trade secrets), and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by the Buyer or such
underwriters, attorneys, accountants or agents in connection with the
Registration Statement;
(viii) indemnify, to the extent permitted by law,
the Buyer and the Buyer's officers and directors and each person who controls
the Buyer (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses (collectively, "Losses" and
individually, a "Loss") caused by any untrue or alleged untrue statement of
material fact contained in the Registration Statement or any amendment thereof
or supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company shall not be liable in any case
pursuant to this Section 5(b)(viii) to the extent that any Loss arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, or any amendment or
supplement thereto, in conformity with and in reliance upon information
furnished in writing to the Company by the Buyer; and provided, further, that
the indemnity set forth herein shall not inure to the benefit of the Buyer or
the Buyer's officers or directors or any person who controls the Buyer if a
copy of the Registration Statement, or amendment or supplement thereto, in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected was provided to the Buyer prior to the resale of the
Buyer's Shares pursuant to the Registration Statement. The Buyer will
indemnify, to the extent permitted by law, the Company and the Company's
officers and directors and each person who controls the Company (within the
meaning of the Securities Act) against all Losses caused by any untrue or
alleged untrue statement of material fact contained in the Registration
Statement or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in conformity with and in reliance upon information furnished in writing to the
Company by the Buyer; provided, however, that the indemnity set forth herein
shall not inure to the benefit of the Company or the Company's officers or
directors or any person who controls the Company if a copy of the Registration
Statement, or amendment or supplement thereto, in which such untrue statement
or alleged untrue statement or omission or alleged omission was corrected was
provided to the person asserting a Loss based upon such untrue statement or
alleged untrue statement or omission or alleged omission prior to the resale of
the Buyer's Shares to such person pursuant to the Registration Statement; and
(ix) allow any transferee of the Shares owned by
the Buyer (other than a transferee in a sale effected pursuant to Rule 144 or
registered under the Registration Statement) to enjoy the benefits of this
Section 5(b).
6. Conditions of the Buyer's Obligations at the Share Closing.
The obligations of the Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
-5-
<PAGE> 6
(a) The representations and warranties of the Company
contained in Section 2 hereof shall be true, correct and complete in all
material respects on the Share Closing Date with the same force and effect as
though made on and as of such date.
(b) The FCI Closing shall have occurred.
(c) The Company and its subsidiaries, taken as a whole,
shall not have suffered, since the date hereof, any change, circumstance or
effect or any breach of the provisions of this Agreement that, individually or
in the aggregate with all other changes, circumstances and effects or breaches,
is or would reasonably be expected to be materially adverse to (i) the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or (ii) the ability of the Company to
consummate the transactions contemplated by this Agreement (each, a "Material
Adverse Effect"); provided, however, that a Material Adverse Effect shall not
be deemed to have occurred with respect to any change, circumstance or effect
relating to (x) the economy or financial markets in general, (y) in general,
the industries in which the Company or its subsidiaries operate and not
specifically relating to the Company or its subsidiaries or (z) the trading
price of the Company as reported by the National Market System of the NASDAQ
Stock Market.
(d) If applicable, the waiting period (and any extension
thereof) relating to the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have
been terminated or shall have expired.
7. Conditions of the Company's Obligations at the Share Closing.
The obligations of the Company to consummate the transactions contemplated by
this Agreement are subject to the satisfaction or waiver of the following
conditions:
(a) The representations and warranties of the Buyer
contained in Sections 3 and 4 hereof shall be true, correct and complete in all
material respects on the Share Closing Date with the same force and effect as
though made on and as of such date.
(b) The FCI Closing shall have occurred.
8. Termination. This Agreement may be terminated at any time
prior to the Share Closing Date (i) by mutual written consent of the Company
and the Buyer, (ii) by either the Company or the Buyer, upon termination of the
Merger Agreement in accordance with its terms, or (iii) by either the Company
or the Buyer, if the Share Closing Date shall not have occurred on or before
December 31, 1999.
-6-
<PAGE> 7
9. Miscellaneous.
(a) All notices, demands or other communications hereunder
shall be in writing and shall be deemed given when delivered personally, mailed
by certified mail, return receipt requested, sent by overnight courier service
or faxed (transmission confirmed), or otherwise actually delivered (i) if to
the Company, at Resurgens Plaza, Suite 2210, 945 East Paces Ferry Road,
Atlanta, Georgia (facsimile: (404) 233-2280), Attention: W. Tod Chmar, and (ii)
if to the Buyer, at [-], or at such other address as the Company or the Buyer
may designate in writing to the other party.
(b) This Agreement shall be governed and construed in
accordance with the laws of the State of Georgia (without giving effect to
choice of law principles thereof).
(c) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) This Agreement may be amended only by a written
instrument signed by the Company and the Buyer. No failure to exercise and no
delay in exercising, on the part of any party, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
(e) All rights, covenants and agreements of the parties
contained in this Agreement shall, except as otherwise provided herein, be
binding upon and inure to the benefit of their respective successors and
assigns. This Agreement, and the rights and obligations hereunder, may not be
assigned by either party without the prior written consent of the other party.
(f) The Company and the Buyer will each bear their
respective legal and other fees and expenses in connection with the
transactions contemplated in this Agreement if such transactions are not
successfully completed.
(g) Each party hereto agrees to do all acts and to make,
execute and deliver such written instruments as shall from time to time be
reasonably required to carry out the terms and provisions of this Agreement.
(h) This Agreement constitutes the entire agreement among
the parties hereto and supersedes and preempts any prior written or oral
agreements between the parties hereto which may have related to the subject
matter hereof in any way.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WORLD ACCESS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[BUYER]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-8-
<PAGE> 1
EXHIBIT 4.13
EXECUTION COPY
- --------------------------------------------------------------------------------
COLLATERAL PLEDGE AND
SECURITY AGREEMENT
Dated as of January 28, 1998
from
FACILICOM INTERNATIONAL, INC.,
Pledgor
to
STATE STREET BANK AND TRUST COMPANY,
Trustee
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SECTION 1. Definitions, Appointment; Deposit and Investment......................................................2
1.1 Definitions...........................................................................................2
1.2 Appointment of the Trustee............................................................................6
1.3 Pledge and Grant of Security Interest.................................................................6
SECTION 2. Delivery of Collateral; Establishment of Collateral Accounts..........................................6
SECTION 3. Delivery of the Pledged Securities....................................................................7
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations.........................................8
SECTION 5. Investing of Amounts in the Collateral Accounts.......................................................9
SECTION 6. Disbursements.........................................................................................9
SECTION 7. Representations and Warranties.......................................................................11
SECTION 8. Further Assurances...................................................................................13
SECTION 9. Covenants............................................................................................13
SECTION 10. Power of Attorney....................................................................................14
SECTION 11. No Assumption of Duties; Reasonable Care.............................................................14
SECTION 12. Indemnity............................................................................................15
SECTION 13. Remedies upon Event of Default.......................................................................15
SECTION 14. Expenses.............................................................................................16
SECTION 15. Security Interest Absolute...........................................................................16
SECTION 16. FaciliCom Securities Intermediary's Representations,
Warranties and Covenants.............................................................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 17. Miscellaneous Provisions...........................................................................18
17.1 Notices............................................................................................18
17.2 No Adverse Interpretation of Other Agreements......................................................19
17.3 Severability.......................................................................................19
17.4 Headings...........................................................................................19
17.5 Counterpart Originals..............................................................................19
17.6 Benefits of Pledge Agreement.......................................................................19
17.7 Amendments, Waivers and Consents...................................................................19
17.8 Interpretation of Agreement........................................................................20
17.9 Continuing Security Interest; Termination..........................................................20
17.10 Survival Provisions................................................................................20
17.11 Waivers............................................................................................20
17.12 Authority of the Trustee...........................................................................21
17.13 Final Expression...................................................................................21
17.14 Rights of Holders of the Notes.....................................................................21
17.15 GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL; WAIVER OF DAMAGES..........................................................21
17.16 Effectiveness......................................................................................23
</TABLE>
ii
<PAGE> 4
<TABLE>
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<S> <C>
SCHEDULE I: Pledged Securities............................................................................I-1
EXHIBIT A: Officer's Certificate.........................................................................A-1
EXHIBIT B: Independent Public Accountant's Report .......................................................B-1
</TABLE>
iii
<PAGE> 5
This Collateral Pledge and Security Agreement (this "Pledge Agreement")
is made and entered into as of January 28, 1998 by FaciliCom International,
Inc., a Delaware corporation (the "Pledgor"), having its principal offices at
1401 New York Avenue, N.W., Washington, D.C. 20005, in favor of State Street
Bank and Trust Company, a Massachusetts Trust Company having its principal
corporate trust office at 225 Franklin Street, Boston, Massachusetts 02110,
Attention: Corporate Trust Department, as trustee for the holders (the
"Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Pledgor and the Initial Purchasers (as defined in the
Purchase Agreement) are parties to a Purchase Agreement dated January 23, 1998
(the "Purchase Agreement"), pursuant to which the Pledgor will issue and sell to
the Initial Purchasers $300 million aggregate principal amount of 10 1/2 %
Senior Notes due 2008 (the "Notes");
WHEREAS, the Pledgor and the Trustee (as defined herein), have entered
into that certain indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Pledgor is issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required to
purchase, or cause the purchase of, and pledge to the Trustee for the benefit of
the Holders of, the Notes on the Closing Date (as defined in the Purchase
Agreement) U.S. Government Obligations (as defined in the Indenture) in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments of such securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Pledgor and delivered to the
Trustee, to provide for payment in full of the first six scheduled interest
payments due on the Notes to secure the Pledgor's obligation to provide for
payment in full of the first six scheduled interest payments due on the Notes
(such obligation, together with the obligation to repay the principal, premium
(including without limitation any Liquidated Damages (as defined in the
Registration Rights Agreement)) and interest on the Notes in the event that the
Notes become due and payable prior to such time as the first six scheduled
interest payments thereon shall have been paid in full, being collectively
referred to herein as the "Obligations");
WHEREAS, the Pledgor has opened a securities account (the "Pledge
Account") with State Street Bank and Trust Company, as Securities Intermediary
(the "FaciliCom Securities Intermediary"), at its office at 225 Franklin Street,
Boston, Massachusetts 02110, Account No. GE4407 (designated "Pledge Account
pledged by FaciliCom International, Inc. to State Street Bank and Trust Company
as Trustee and Sole Entitlement Holder"), in the name of the Pledgor
<PAGE> 6
but under the sole dominion and control of the Trustee and subject to the terms
of this Pledge Agreement;
WHEREAS, the Pledgor has opened a non-interest bearing cash collateral
account (the "Cash Collateral Account") with the FaciliCom Securities
Intermediary, at its office at 225 Franklin Street, Boston, Massachusetts 02110,
Account No. GE4408 (designated "Cash Collateral Account pledged by FaciliCom
International, Inc. to State Street Bank and Trust Company, as Trustee"), in the
name of the Pledgor but under the sole dominion and control of the Trustee and
subject to the terms of this Pledge Agreement;
WHEREAS, pursuant to the Purchase Agreement it is a condition precedent
to the purchase of the Notes by the Initial Purchasers that the Pledgor apply
certain of the proceeds of the offering of the Notes to purchase the Pledged
Securities (as defined below) and deposit such Pledged Securities into the
Pledge Account to be held therein under the sole dominion and control of the
Trustee and subject to the terms of this Pledge Agreement;
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has
agreed to execute and deliver this Pledge Agreement and pledge to the Trustee,
for its benefit and the ratable benefit of the Holders of the Notes, the Pledged
Securities and the related Collateral in order to secure the payment by the
Pledgor of all the Obligations.
NOW, THEREFORE, in consideration of the premises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes, the Pledgor
and the Trustee hereby agree, for the benefit of the Trustee and for the ratable
benefit of the Holders of the Notes, as follows:
SECTION 1. Definitions, Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement, terms
defined or referenced in the Indenture are used in this Pledge Agreement as such
terms are defined or referenced therein.
(b) Unless otherwise defined in the Indenture or in this
Pledge Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code
in effect in the State of New York from time to time and/or in Section 357.2 of
the Treasury Regulations (as defined in Section 1.1(c)) are used in this Pledge
Agreement as such terms are defined in such Article 8 or 9 and/or such Section
357.2. Such terms shall include, but not be limited to, "book-entry security,"
"certificated security", "entitlement holder", "CUBES", "entitlement order",
"financial asset", "instrument", "participant's securities account", "proceeds",
"securities account", "securities intermediary", "security", "security
entitlement" and "STRIPS".
<PAGE> 7
3
(c) In this Pledge Agreement the following terms have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Adverse Claim" has the meaning specified in UCC ss.
8-102(a)(1).
"Cash Collateral Account" has the meaning specified in
Preliminary Statements hereof.
"Cash Equivalents" means any of the following, to the extent
owned by the Pledgor free and clear of all liens other than liens created
hereunder: (a) U.S. Government Obligations, (b) insured certificates of deposit
of, or time deposits with, any commercial bank that (i) is a member of the
Federal Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c), (iii) is organized under the laws of the
United States of America or any State thereof and (iv) has combined capital and
surplus of at least $500 million, (c) commercial paper in an aggregate amount of
no more than $5 million per issuer outstanding at any time, issued by any
corporation organized under the laws of any State of the United States of
America and rated at least "Prime-1" (or the then equivalent grade) by Moody's
Investors Service, Inc. or "A-l" (or the then equivalent grade) by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies or (d) overnight
repurchase agreements (including overnight repurchase agreements between the
Trustee and the FaciliCom Securities Intermediary) secured by U.S. Government
Obligations.
"Certificated Security" has the meaning specified in Section
8-103(a)(4) of the UCC.
"CFR" means U.S. Code of Federal Regulations.
"Collateral" has the meaning specified in Section 1.3.
"Collateral Accounts" means the Pledge Account and the Cash
Collateral Account.
"Deposit Account" has the meaning specified in Section
9-105(e) of the UCC.
"Entitlement Holder" has the meaning specified in UCC ss.
8-102(a)(7).
"Entitlement Order" has the meaning specified in UCC ss.
8-102(a)(8).
"FaciliCom Securities Intermediary" has the meaning specified
in the preliminary statements.
<PAGE> 8
4
"Financial Asset" has the meaning specified in UCC ss.
8-102(a)(9).
"FRBB" means Federal Reserve Bank of Boston.
"FRBB Account" means the participant's securities account
maintained in the name of the FaciliCom Securities Intermediary by the FRBB.
"FRBB Member": any Person that is eligible to maintain (and
that maintains) with the FRBB one or more FRBB Member Securities Accounts in
such Person's name.
"FRBB Member Securities Account": in respect of any Person, an
account in the name of such Person at the FRBB, to which account U.S. Government
Obligations held for such Person are or may be credited.
"General Intangibles" has the meaning specified in Section
9-106 of the UCC.
"Instruments" has the meaning specified in Section 9-105 of
the UCC.
"Investment Property" has the meaning specified in UCC ss.
9-115(l)(f).
"Lien": any lien, mortgage, security interest, charge, Adverse
Claim or encumbrance of any kind, including the rights of a vendor, lessor, or
similar party under any conditional sale agreement or other title retention
agreement or lease substantially equivalent thereto.
"Money" has the meaning specified in Section 1-201(24) of the
UCC.
"Pledgor" has the meaning specified in the recital of the
parties hereto.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include without limitation, all
interest, dividends or other earnings, income or distributions from or in
respect of, or from or in respect of investments or reinvestments of, the cash
and Cash Equivalents and Investment Property from time to time on deposit in the
Collateral Accounts, all collections and distributions with respect to the U.S.
Government Obligations and all other proceeds of Collateral.
"Securities Account" has the meaning specified in UCC ss.
8-501(a).
"Securities Control": shall mean "control" as defined in UCC
ss. 9-115(l)(e).
"Securities Intermediary": a Person that is a "securities
intermediary" (as
<PAGE> 9
5
defined in UCC ss. 8-102(a)(14)) and, in respect of any book-entry security, a
"securities intermediary" (as defined in 31 C.F.R. ss. 357.2 or, as applicable
to such Book-Entry Security, the corresponding Federal Book-Entry Regulations).
"Security" has the meaning specified in Section 8-102(a)(15)
of the UCC.
"Security Certificate" has the meaning specified in Section
8-102(a)(16) of the UCC.
"Security Entitlement": as defined in UCC ss. 8-102(a)(17) or,
in respect of any book-entry security, as defined in 31 C.F.R. ss. 357.2 (or, as
applicable to such book-entry security, the corresponding Federal Book-Entry
Regulations).
"Settlement Date" means, as to any U.S. Government
Obligations, the date on which the purchase of such U.S. Government Obligations
shall have been settled.
"Termination Date" means the earlier of (a) the date of the
payment in full in cash of each of the first six scheduled interest payments due
on the Notes under the terms of the Indenture and (b) the date of the payment in
full of all obligations due and owing under this Pledge Agreement, the Indenture
and the Notes, in the event such obligations become due and payable prior to the
payment of the first six scheduled interest payments on the Notes.
"Treasury Regulations" means (a) the federal regulations
contained in 31 CFR Part 357 (including, without limitation, Section 357.2,
Section 357.10 through Section 357.14 and Section 357.41 through Section 357.44
of 31 CFR) and (b) to the extent substantially identical to the federal
regulations referred to in clause (a) above (as in effect from time to time) the
federal regulations governing other U.S. Government Obligations.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Pledge Agreement until a successor Trustee shall have become
such, and thereafter "Trustee" shall mean the Person who is then the Trustee
hereunder.
"UCC" means, unless otherwise specified herein, the Uniform
Commercial as in effect in New York State.
"Uncertificated Security" has the meaning specified in Section
8-102(a)(18) of the UCC.
"U.S. Government Obligations" means Securities (including,
without limitation, United States Treasury Securities, including Treasury bills,
Treasury notes, Treasury bonds, STRIPS and CUBES) and the Security Entitlements
in, and Financial Assets based on such Securities maintained in the form of
entries in the commercial book-entry system of the FRBB
<PAGE> 10
6
and held for the related Entitlement Holder by a FRBB Member pursuant to the
Treasury Regulations.
1.2 Appointment of the Trustee. The Pledgor hereby appoints the
Trustee as Trustee in accordance with the terms and conditions set forth herein
and the Trustee hereby accepts such appointment.
1.3 Pledge and Grant of Security Interest. As security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
grants to the Trustee for its benefit and for the ratable benefit of the Holders
of the Notes, a lien on and security interest in all of the Pledgor's right,
title and interest in, to and under the following property, (whether
characterized as Certificated Securities or Uncertificated Securities, Financial
Assets, Security Entitlements, Deposit Accounts, banks accounts, Securities
Accounts, Money, Proceeds, Investment Property, General Intangibles or
otherwise): (a) the U.S. Government Obligations identified by CUSIP No. in
Schedule I to this Pledge Agreement (the "Pledged Securities"), the scheduled
payments of principal and interest of which will be sufficient to provide for
payment in full of the first six scheduled interest payments due on the Notes,
(b) any and all applicable Security Entitlements to the Pledged Securities, (c)
the Pledge Account, all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing the Pledge Account, (d) all
Collateral Investments (as hereinafter defined) and all certificates and
instruments, if any, representing or evidencing the Collateral Investments, and
any and all Security Entitlements to the Collateral Investments, and any and all
related Securities Accounts in which any Security Entitlements to the Collateral
Investments is carried, (e) the Cash Collateral Account, (f) all notes,
certificates of deposit, Deposit Accounts, checks and other instruments, if any,
from time to time hereafter delivered to or otherwise possessed by the Trustee
for or on behalf of the Pledgor in substitution for or in addition to any or all
of the then existing Collateral, (g) all interest, dividends, cash, instruments
and other property, if any, from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then existing
Collateral and (h) except as otherwise provided herein, all proceeds of any and
all of the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (g) of this Section
1.3) (such property being collectively referred to herein as the "Collateral").
SECTION 2. Delivery of Collateral; Establishment of Collateral
Accounts. (a) The Trustee has established with the FaciliCom Securities
Intermediary, and at all times until the Termination Date, the Pledgor shall
maintain with the FaciliCom Securities Intermediary, each of the Cash Collateral
Account and the Pledge Account. The following provisions shall apply to the
establishment and maintenance of each such Collateral Account:
<PAGE> 11
7
(i) The Trustee shall cause each Collateral Account to
be, and each Collateral Account shall be, separate from all other
accounts maintained by the Trustee.
(ii) The Trustee shall, in accordance with all applicable
laws, have sole dominion and control (including, without limitation,
Securities Control) over each Collateral Account, and it shall be a
term and condition of each Collateral Account and the Pledgor
irrevocably instructs the Trustee, notwithstanding any other term or
condition to the contrary in any other agreement, that no Collateral
shall be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(iii) The Trustee shall, in accordance with and subject to
all applicable laws, be the sole Entitlement Holder of, and have the
power to originate Entitlement Orders with respect to, the Pledge
Account and all U.S. Government Obligations, Securities, Security
Entitlements and other Financial Assets held therein, and it shall be a
term and condition of the Pledge Account that the Trustee shall have
the right to issue such Entitlement Orders with respect to the Pledge
Account and such Securities, Security Entitlements and other Financial
Assets without further consent of the Pledgor, and that no Collateral
shall be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(b) On the Closing Date, the Pledgor shall transfer, or
cause to be transferred, to the Trustee an amount equal to $86,549,914.84 by
depositing all such proceeds into the Cash Collateral Account.
(c) As soon as possible after receipt of the amount
referred to in Section 2(b), (i) the Trustee shall apply such amount to purchase
the U.S. Government Obligations (in the name of the Trustee) listed on Schedule
I hereto, and cause the FaciliCom Securities Intermediary to credit such U.S.
Government Obligations to the Pledge Account as Collateral hereunder; and (ii)
the Trustee shall ensure that, on the Settlement Date, the FRBB credits in the
FRBB Account those U.S. Government Obligations being settled on such date.
(d) The Trustee will, from time to time, reinvest the
proceeds of Collateral that may mature or be sold in such Collateral Investments
(in the name of the Trustee) as it may be directed in writing by the Pledgor,
and cause such Collateral Investments to be credited to the Pledge Account as
Collateral hereunder. Such proceeds that are not so reinvested in Collateral
Investments shall be deposited and held in the Cash Collateral Account.
SECTION 3. Delivery of the Pledged Securities. (a) The
Pledged Securities shall be pledged and delivered to the Pledge Account and the
Trustee and the Trustee shall become the Entitlement Holder of a Security
Entitlement to the Pledged Securities through action by the
<PAGE> 12
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FaciliCom Securities Intermediary, as confirmed (in writing or electronically or
otherwise in accordance with standard industry practice) to the Trustee by the
FaciliCom Securities Intermediary (i) indicating by book-entry that the Pledged
Securities and all Security Entitlements thereto have been credited to the
Pledge Account, or (ii) acquiring the Pledged Securities and all Security
Entitlements thereto for the Trustee and accepting the same for credit to the
Pledge Account.
(b) Prior to or concurrently with the execution and
delivery hereof and prior to the transfer to the Trustee of the Pledged
Securities (or acquisition by the Trustee of any Security Entitlement thereto),
as provided in subsection (a) of this Section 3, the Trustee and the FaciliCom
Securities Intermediary shall establish the Pledge Account on the books of the
FaciliCom Securities Intermediary as Securities Account segregated from all
other custodial or collateral accounts such account to be maintained either (i)
directly at its offices located at 225 Franklin Street, Boston Massachusetts
02110 or (ii) through a "Securities Account" maintained by the FaciliCom
Securities Intermediary at the FRBB, as Securities Intermediary. Upon transfer
of the Pledged Securities to the Trustee (or the Trustee's acquisition of a
Security Entitlements thereto), as confirmed to the FaciliCom Securities
Intermediary by FRBB or another securities intermediary, the FaciliCom
Securities Intermediary shall make appropriate book entries indicating that the
Pledged Securities and/or such Security Entitlement have been credited to and
are held in the Pledge Account. Subject to the other terms and conditions of
this Pledge Agreement, all funds or other property held by the Trustee pursuant
to this Pledge Agreement shall be held in the Pledge Account or the Cash
Collateral Account subject (except as expressly provided in Section 6 hereof) to
the exclusive dominion and control (including, without limitation, Securities
Control) of the Trustee and exclusively for the benefit of the Trustee and for
the ratable benefit of the Holders of the Notes and segregated from all other
funds or other property otherwise held by the Trustee.
(c) All Collateral shall be retained in the Pledge
Account or the Cash Collateral Account pending disbursement pursuant to the
terms hereof.
(d) Concurrently with the execution and delivery of this
Pledge Agreement, the Trustee is delivering to the Pledgor and the Initial
Purchasers a duly executed certificate, in the form of Exhibit A hereto, of an
officer of the Trustee, confirming the Trustee's establishment and maintenance
of the Pledge Account with the FaciliCom Securities Intermediary and its receipt
and holding of the Pledge Securities or a Security Entitlement thereto and the
crediting of the Pledged Securities or such Security Entitlement to the Pledge
Account, all in accordance with this Pledge Agreement.
(e) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee an opinion of a
nationally recognized firm of independent public accountants, selected by the
Pledgor, substantially in the form of Exhibit C hereto.
<PAGE> 13
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(f) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee financing statements
in form acceptable for filing under the UCC of the State of New York,
Commonwealth of Massachusetts and the District of Columbia, covering the
Collateral described in this Pledge Agreement.
SECTION 4. Delivery of Collateral Other than U.S.
Government Obligations. (a) Collateral consisting of cash will be deemed to be
delivered to the Trustee (such that the Trustee will have an enforceable lien
and security interest thereon and therein), when it has been (and for so long as
it shall remain) deposited in or credited to the Cash Collateral Account.
(b) Collateral consisting of Cash Equivalents (other
than U.S. Government Obligations) will be deemed to be delivered to the Trustee
(such that the Trustee will have an enforceable lien and security interest
thereon and therein), when they have been (and for so long as they shall remain)
deposited in or credited to either Collateral Account.
(c) Collateral consisting of Securities (other than U.S.
Government Obligations) will be deemed delivered to the Trustee when the
FaciliCom Securities Intermediary (A) shall indicate by book entry that such
Securities have been credited to the Pledge Account or (B) shall receive such
Security (or a Financial Asset based on such Security) for the Trustee, from or
at the direction of the Pledgor, and shall accept such Security (or such
Financial Asset) for credit to such Collateral Account;
(d) Collateral consisting of Securities and represented
or evidenced by certificates or instruments, will be deemed delivered to the
Trustee when all such certificates or instruments representing or evidencing the
Collateral, including, without limitation, amounts invested as provided in
Section 5, shall be delivered to the FaciliCom Securities Intermediary and held
by or on behalf of the Trustee pursuant hereto and shall be in registered form
and specially indorsed to the Trustee by an effective indorsement, all in form
and substance sufficient to convey a valid security interest in such Collateral
to the Trustee or shall be credited to the Pledge Account.
SECTION 5. Investing of Amounts in the Collateral
Accounts. If at any time, any amounts shall exist in the Collateral Accounts
uninvested, and if directed in writing by the Pledgor, the Trustee will, subject
to the provisions of Section 6 and Section 13, (a) invest such amounts on
deposit in the Collateral Accounts in such Cash Equivalents in the name of the
Trustee as the Pledgor may select and (b) invest interest paid on the Cash
Equivalents referred to in clause (a) above, and reinvest other proceeds of any
such Cash Equivalents that may mature or be sold, in each case in such Cash
Equivalents in the name of the Trustee, as the Pledgor may select and the
Trustee may approve (the Cash Equivalents referred to in clauses (a) and (b)
above, together with the Pledged Securities, being collectively referred to
herein as "Collateral Investments"); provided, however, that the amount in cash
and Pledged Securities on deposit in
<PAGE> 14
10
the Collateral Accounts, collectively, at any time during the term of this
Pledge Agreement, must be sufficient to provide for the payment in full of the
remaining interest payments at such time on the Notes up to and including the
sixth scheduled interest payment. Except as otherwise provided in Sections 11
and 12, the Trustee shall not be liable for any loss in the investment or
reinvestment of amounts held in the Collateral Accounts.
SECTION 6. Disbursements. The Trustee shall hold the
Collateral in the Collateral Accounts and release the same, or a portion
thereof, only as follows:
(a) At least one Business Day prior to the due date of
any of the first six scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions executed by the Pledgor (an "Issuer Order"),
direct the Trustee to release from the Collateral Accounts and pay to the
Holders of the Notes proceeds sufficient to provide for payment in full of such
interest then due on the Notes; provided, however, that in the event Collateral
is required to be liquidated, the Pledgor will give the Trustee at least three
Business Days' notice. Upon receipt of an Issuer Order, the Trustee will take
any action necessary to provide for the payment of the interest on the Notes to
the Holders of the Notes in accordance with the payment provisions of the
Indenture from (and to the extent of) proceeds of the Collateral in the
Collateral Accounts. Nothing in this Section 6 shall affect the Trustee's rights
to apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or portion
of an interest payment for which the Collateral is security from a source of
funds other than the Collateral Accounts ("Pledgor Funds"), the Pledgor may,
after payment in full of such interest payment or portion thereof from proceeds
of the Collateral or such Pledgor Funds or both, direct the Trustee by Issuer
Order to release to the Pledgor or to another party at the direction of the
Pledgor (the "Pledgor's Designee") proceeds from the Collateral Accounts in an
amount less than or equal to the amount of Pledgor Funds applied to such
interest payment. Upon receipt of such Issuer Order by the Trustee, the Trustee
shall pay over to the Pledgor or the Pledgor's Designee, as the case may be, the
requested amount from proceeds in the Collateral Accounts. Concurrently with any
release of funds to the Pledgor pursuant to this Section 6(b), the Pledgor shall
deliver to the Trustee a certificate signed by an officer of the Pledgor stating
that the Pledgor has made the interest payment from a source of funds other than
the Pledge Account, and that such release has been duly authorized by the
Pledgor and will not contravene any provision of applicable law or Certificate
of Incorporation or the By-laws of the Pledgor or any material agreement or
other material instrument binding upon the pledgor or any of its subsidiaries or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries or result in the
creation or imposition of any Lien on any assets of the Pledgor, except for the
security interest granted under the Pledge Agreement.
(c) At least one Business Day prior to the due date of
any of the first six scheduled interest payments on the Notes, the Pledgor
covenants to give the Trustee (by Issuer
<PAGE> 15
11
Order) notice as to whether payment of interest will be made pursuant to Section
6(a) or 6(b) and as to the respective amounts of interest that will be paid
pursuant to Section 6(a) or 6(b); provided, however, that, in the event
Collateral is required to be liquidated, the Pledgor will give the Trustee at
least three Business Days' notice. If no such notice is given, the Trustee will,
subject to Section 6(d), act pursuant to Section 6(a) as if it had received an
Issuer Order pursuant thereto for the payment in full of the interest then due.
(d) The Trustee shall not be required to liquidate any
Collateral Investments in order to make any scheduled payment of interest or any
release hereunder unless instructed to do so by Issuer Order or pursuant to
Section 13 hereof.
(e) Upon the Termination Date, the security interest in
the Collateral evidenced by this Pledge Agreement will automatically terminate
and be of no further force and effect and the Collateral, upon receipt by the
Trustee of an Issuer Order, shall promptly be paid over and transferred to the
Pledgor.
(f) In the event that the Collateral held in the Pledge
Account exceeds 100% of the amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgor, to
provide for payment in full of the first six scheduled interest payments due on
the Notes (or, in the event an interest payment or payments have been made, an
amount sufficient to provide for payment in full of all interest payments
remaining, up to and including the sixth scheduled interest payment), the
Trustee shall release to the Pledgor, at the Pledgor's written request,
accompanied by an opinion prepared by a nationally recognized firm of
independent public accountants, any such excess Collateral.
(g) Upon the release of any Collateral from the Pledge
Account, in accordance with the terms of this Pledge Agreement, the security
interest evidenced by this Pledge Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(h) Nothing contained in Section 1, Section 13, this
Section 6 or any other Provision of this Pledge Agreement shall (i) afford the
Pledgor any right to issue Entitlement Orders with respect to any Security
Entitlement to the Pledge Securities or Collateral Investments or any Securities
Account in which any such Security Entitlement may be carried, or otherwise
afford the Pledgor control of any such Security Entitlement or (ii) otherwise
give rise to any rights of the Pledgor with respect to the Collateral
Investments, any Security Entitlement thereto or any Securities Account in which
any such Security Entitlement may be carried, other than the Pledgor's rights
under this Pledge Agreement as the beneficial owner of Collateral pledged to and
subject to the exclusive dominion and control (including, without limitation,
Securities Control) (except as expressly provided in this Section 6) of the
Trustee in its capacity as such (and not as a Securities Intermediary). The
Pledgor acknowledges, confirms and agrees
<PAGE> 16
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that the Trustee holds a Security Entitlement to the Collateral Investments
solely as trustee for the Holders of the Notes and not as a Securities
Intermediary for the Pledgor.
SECTION 7. Representations and Warranties. The
Pledgor hereby represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge
Agreement will not contravene any provision of applicable law or the
Certificate of Incorporation or By-laws of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any
of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor
or any of its subsidiaries, or result in the creation or imposition of
any Lien on any assets of the Pledgor, except for the security
interests granted under this Pledge Agreement; no consent, approval,
authorization or order of, or qualification with, any governmental body
or agency is required (i) for the performance by the Pledgor of its
obligations under this Pledge Agreement, (ii) for the pledge by the
Pledgor of the Collateral pursuant to this Pledge Agreement or (iii)
except for any such consents, approvals, authorizations or orders
required to be obtained by the Trustee (or the Holders) for reasons
other than the consummation of this transaction, for the exercise by
the Trustee of the rights provided for in this Pledge Agreement or the
remedies in respect of the Collateral pursuant to this Pledge
Agreement.
(b) The Pledgor is the beneficial owner of the
Collateral, free and clear of any Lien or claims of any person or
entity (except for the security interests granted under this Pledge
Agreement). No financing statement covering the Pledgor's interest in
the Collateral is on file in any public office other than the financing
statements, if any, filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized,
validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Pledge Agreement
by the Trustee and enforceability of the Pledge Agreement against the
Trustee in accordance with its terms) constitutes a valid and binding
agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as (i) the enforceability hereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, preference,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors generally,
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability and the discretion of the court
before which any proceeding therefor may be brought, (iii) the
exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations
<PAGE> 17
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and (iv) the waiver of rights and defenses contained in Section 13(b),
Section 17.11 and Section 17.15 hereof may be limited by applicable
law.
(d) Upon the delivery to the Trustee of the Collateral
in accordance with the procedures described in Section 3 and Section 4
hereof, the pledge of and grant of a security interest in the
Collateral securing the payment of the Obligations for the benefit of
the Trustee and the Holders of the Notes will constitute a valid, first
priority, perfected security interest in such Collateral (except, with
respect to Proceeds, only to the extent permitted by Section 9-306 of
the UCC), enforceable as such against all creditors of the Pledgor and
any persons purporting to purchase any of the Collateral from the
Pledgor, except in each case as enforcement may be affected by general
equitable principles (whether considered in a proceeding in equity or
at law) and other than as permitted by the Indenture.
(e) There are no legal or governmental proceedings
pending or, to the best of the Pledgor's knowledge, threatened to which
the Pledgor or any of its subsidiaries is a party or to which any of
the properties of the Pledgor or any of its subsidiaries is subject
that would materially adversely affect the power or ability of the
Pledgor to perform its obligations under this Pledge Agreement or to
consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 8. Further Assurances. The Pledgor will,
promptly upon the request by the Trustee (which request the Trustee may submit
at the direction of the Holders of a majority in aggregate principal amount of
the Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Trustee, deliver any instruments to the Trustee and take any
other actions that are necessary or desirable to perfect, continue the
perfection of, or protect the first priority of the Trustee's security interest
in and to the Collateral, to protect the Collateral against the rights, claims
or interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee) or to effect the purposes of this
Pledge Agreement. The Pledgor also hereby authorizes the Trustee to file any
financing or continuation statements in the United States with respect to the
Collateral without the signature of the Pledgor (to the extent permitted by
applicable law). The Pledgor will promptly pay all reasonable costs incurred in
connection with
<PAGE> 18
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any of the foregoing within 45 days of receipt of an invoice therefor. The
Pledgor also agrees, whether or not requested by the Trustee, to use its
reasonable best efforts to perfect or continue the perfection of, or to protect
the first priority of, the Trustee's security interest in and to the Collateral,
and to protect the Collateral against the rights, claims or interests of third
persons (other than any such rights, claims or interests created by or arising
through the Trustee).
SECTION 9. Covenants. The Pledgor covenants and agrees
with the Trustee and the Holders of the Notes that from and after the date of
this Pledge Agreement until the Termination Date:
(a) that it will not (i) (and will not purport to) sell
or otherwise dispose of, or grant any option or warrant with respect
to, any of the Collateral nor (ii) create or permit to exist any Lien
upon or with respect to any of the Collateral (except for the security
interests granted under this Pledge Agreement and any Lien created by
or arising through the Trustee) and at all times will be the sole
beneficial owner of the Collateral; and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to sell or otherwise dispose of the
Collateral or (ii) fail to pay or discharge any tax, assessment or levy
of any nature with respect to the Collateral not later than five days
prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to the Collateral.
SECTION 10. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, subject to the terms of
this Pledge Agreement, the Pledgor hereby appoints and constitutes the Trustee
as the Pledgor's attorney-in-fact (with full power of substitution) to exercise
to the fullest extent permitted by law all of the following powers upon and at
any time after the occurrence and during the continuance of an Event of Default:
(a) collection of proceeds of any Collateral; (b) conveyance of any item of
Collateral to any purchaser thereof; (c) giving of any notices or recording of
any Liens under Section 3 hereof; and (d) paying or discharging taxes or Liens
levied or placed upon the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by the Trustee in its
sole reasonable discretion, and such payments made by the Trustee to become part
of the Obligations of the Pledgor to the Trustee, due and payable immediately
upon demand. The Trustee's authority under this Section 10 shall include,
without limitation, the authority to endorse and negotiate any checks or
instruments representing proceeds of Collateral in the name of the Pledgor,
execute and give receipt for any certificate of ownership or any document
constituting Collateral, transfer title to any item of Collateral, sign the
Pledgor's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee in its reasonable discretion to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's
<PAGE> 19
15
name on any notice of Lien, and to take any other actions arising from or
incident to the powers granted to the Trustee in this Pledge Agreement. This
power of attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 11. No Assumption of Duties; Reasonable Care.
The rights and powers granted to the Trustee hereunder are being granted in
order to preserve and protect the security interest of the Trustee and the
Holders of the Notes in and to the Collateral granted hereby and shall not be
interpreted to, and shall not impose any duties on, the Trustee in connection
therewith other than those expressly provided herein or imposed under applicable
law. Except as provided by applicable law or by the Indenture, the Trustee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Trustee accords similar property held by
the Trustee for similar accounts, it being understood that the Trustee in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Collateral, whether or not the Trustee has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral; provided, however, that nothing contained in
this Pledge Agreement shall relieve the Trustee of any responsibilities as a
securities intermediary under applicable law.
SECTION 12. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and its directors and officers from and against
any and all claims, actions, obligations, liabilities and expenses, including
reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees and damages arising from the Trustee's performance as
Trustee under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person. The
provisions of this Section 12 shall survive termination of this Pledge Agreement
and the resignation and removal of the Trustee.
SECTION 13. Remedies upon Event of Default. If any Event
of Default under the Indenture or default hereunder (any such Event of Default
or default being referred to in this Pledge Agreement as an "Event of Default")
shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have,
in addition to all other rights given by law or by this Pledge
Agreement or the Indenture, all of the rights and remedies with respect
to the Collateral of a secured party under the UCC in effect in the
State of New York and the District of Columbia at that time. In
addition, with respect to any Collateral that shall then be in or shall
thereafter come into the possession or custody of the Trustee, the
Trustee may and, at the direction of the Holders of a majority in
aggregate principal amount of the Notes then outstanding, shall appoint
a broker or
<PAGE> 20
16
other expert to sell or cause the same to be sold at any broker's board
or at public or private sale, in one or more sales or lots, at such
price or prices such broker or other expert may deem best, for cash or
on credit or for future delivery, without assumption of any credit
risk. The purchaser of any or all Collateral so sold shall thereafter
hold the same absolutely, free from any claim, encumbrance or right of
any kind whatsoever created by or through the Pledgor. Unless any of
the Collateral threatens, in the reasonable judgment of the Trustee, to
decline speedily in value, the Trustee will give the Pledgor reasonable
notice of the time and place of any public sale thereof, or of the time
after which any private sale or other intended disposition is to be
made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions disposing
of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be
met if such notice is mailed to the Pledgor as provided in Section 17.1
hereof at least ten (10) days before the time of the sale or
disposition. The Trustee or any Holder of Notes may, in its own name or
in the name of a designee or nominee, buy any of the Collateral at any
public sale and, if permitted by applicable law, at any private sale.
All expenses (including court costs and reasonable attorneys' fees,
expenses and disbursements) of, or incident to, the enforcement of any
of the provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 13 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 13
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no
Event of Default has occurred.
SECTION 14. Expenses. The Pledgor will upon demand pay
to the Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
<PAGE> 21
17
SECTION 15. Security Interest Absolute. All rights of
the Trustee and the Holders of the Notes and security interests hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any exchange, surrender, release or non-perfection of
any Liens on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Obligations or of this
Pledge Agreement.
SECTION 16. FaciliCom Securities Intermediary's
Representations, Warranties and Covenants. The FaciliCom Securities Intermediary
represents and warrants that it is as of the date hereof, and it agrees that for
so long as it maintains the Collateral Accounts and acts as the Securities
Intermediary pursuant to this Pledge Agreement it shall be a Securities
Intermediary and a FRBB Member. In furtherance of the foregoing the FaciliCom
Securities Intermediary hereby:
(a) represents and warrants that it is a corporation that
in the ordinary course of its business maintains securities accounts
for others and is acting in that capacity hereunder and with respect to
the Pledge Account;
(b) represents and warrants that it maintains a FRBB
Member Securities Account with the FRBB;
(c) agrees that the Pledge Account shall be an account to
which Financial Assets may be credited, and the FaciliCom Securities
Intermediary undertakes to treat the Trustee as entitled to exercise
rights that comprise (and entitled to the benefits of) such Financial
Assets, and entitled to exercise the rights of an Entitlement Holder in
the manner contemplated by the UCC;
(d) hereby represents that it has not granted, and
covenants that so long as it acts as a Securities Intermediary
hereunder it shall not grant, control (including without
<PAGE> 22
18
limitation, Securities Control) over or with respect to any Collateral
credited to any Collateral Account from time to time to any other
Person other than the Trustee.
(e) covenants that in its capacity as FaciliCom
Securities Intermediary hereunder and with respect to the Collateral
Accounts, it shall not take any action inconsistent with, and
represents and covenants that it is not and so long as this Pledge
Agreement remains in effect will not become party to any agreement the
terms of which are inconsistent with the provisions of this Pledge
Agreement;
(f) agrees that any item of property credited to the
Pledge Account shall be treated as a Financial Asset;
(g) agrees that any item of Collateral credited to any
Collateral Account shall not be subject to any security interest, Lien
or right of set-off in favor of the FaciliCom Securities Intermediary,
except as may be expressly permitted under the Indenture (and the
FaciliCom Securities Intermediary shall take such actions as shall be
necessary and appropriate to cause such Collateral to remain free of
any Lien or security interest of any underlying Securities Intermediary
through which the FaciliCom Securities Intermediary holds such
Collateral or any Security Entitlement thereto);
(h) agrees, so long as it serves as FaciliCom Securities
Intermediary pursuant to this Pledge Agreement, to maintain the
Collateral Accounts and maintain appropriate books and records in
respect thereof in accordance with its usual procedures and subject to
the terms of this Pledge Agreement; and
(i) agrees, with the other parties to this Pledge
Agreement, that the FaciliCom Security Intermediary's jurisdiction, for
purposes of Section 8-110(e) of the UCC as it pertains to this Pledge
Agreement, the Collateral Accounts and the Security Entitlements
relating thereto, shall be the State of New York.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Any notice, approval, consent or other
communication shall be sufficiently given if in writing and delivered in person
or mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
<PAGE> 23
19
if to the Pledgor:
FaciliCom International, Inc.
1401 New York Avenue, N.W.
Eighth Floor
Washington, D.C. 20005
Attention: Christopher S. King
Telecopier No.: (202) 496-1109
with a copy to:
Swidler & Berlin
3000 K Street, N.W.
Suite 300
Washington, D.C. 20007-5116
Attention: Morris F. DeFeo, Jr., Esq.
Telecopier No.: (202) 424-7647
if to the Trustee:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Telecopier No.: (617) 664-5371
17.2 No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Pledge
Agreement.
17.3 Severability. The provisions of this Pledge Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
17.4 Headings. The headings in this Pledge Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
<PAGE> 24
20
17.5 Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
17.6 Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
17.7 Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and neither the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default or in any breach of any of the terms and conditions hereof.
Failure of the Trustee or any Holder of Notes to exercise, or delay in
exercising, any right, power or privilege hereunder shall not preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Trustee or any Holder of Notes of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Trustee or such Holder of Notes would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
17.8 Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the UCC, except
where the context otherwise requires. To the extent a term or provision of this
Pledge Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Pledge Agreement
shall not be relevant to determine the meaning of this Pledge Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
17.9 Continuing Security Interest; Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in the Indenture or in this
Pledge Agreement, remain in full force and effect until the payment in full in
cash of the Obligations. This Pledge Agreement shall be binding upon the
Pledgor, its transferees, successors and assigns, and shall inure, together with
the rights and remedies of the
<PAGE> 25
21
Trustee hereunder, to the benefit of the Trustee, the Holders of the Notes and
their respective successors, transferees and assigns.
(b) In addition to the provisions of Section 6(e) hereof
and subject to the provisions of Section 17.10 hereof, this Pledge Agreement
shall terminate upon the payment in full in cash of the Obligations. At such
time, and subject to Section 12, the Trustee shall, pursuant to an Issuer Order,
reassign and redeliver to the Pledgor all of the Collateral hereunder that has
not been sold, disposed of, retained or applied by the Trustee in accordance
with the terms of this Pledge Agreement and the Indenture. Such reassignment and
redelivery shall be without warranty by or recourse to the Trustee in its
capacity as such, except as to the absence of any Liens on the Collateral
created by or arising through the Trustee, and shall be at the reasonable
expense of the Pledgor.
17.10 Survival Provisions. All representations, warranties
and covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Sections 12 and
14 hereof shall survive the termination of this Pledge Agreement.
17.11 Waivers. The Pledgor waives presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12 Authority of the Trustee. (a) The Trustee shall have
and be entitled to exercise all powers hereunder that are specifically granted
to the Trustee by the term hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons. The Trustee shall have no duty
to cause any financing statement or continuation statement to be filed in
respect of the Collateral.
<PAGE> 26
22
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with respect to any
action taken by the Trustee or the exercise or non-exercise by the Trustee of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Trustee and the Holders of the Notes, be governed by the Indenture and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of the Notes with
full and valid authority so to act or refrain from acting, and the Pledgor shall
not be obligated or entitled to make any inquiry respecting such authority.
17.13 Final Expression. This Pledge Agreement, together
with the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Pledge Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
17.14 Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 607 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
17.15 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31
C.F.R. ss.ss. 357.0 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS PLEDGE
AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HEREBY APPOINTS CORPORATION SERVICE
COMPANY AS ITS AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING
WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS BROUGHT UNDER THE U.S.
FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED
IN THE CITY OF NEW YORK (EACH A "NEW YORK COURT"). EACH OF THE PARTIES HERETO
SUBMITS TO THE JURISDICTION OF ANY NEW YORK COURT AND TO THE COURTS OF ITS
CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS BROUGHT AGAINST IT
<PAGE> 27
23
AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR,
THE TRUSTEE AND THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF FORUM NON CONVENIENS, WITH
RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED ON
ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS
CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD
FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON
SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT
ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES
NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE, JUDGMENT OF A COURT THAT
IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH
HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PLEDGOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE
<PAGE> 28
24
TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS
PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE
TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, ON THE ONE HAND, AND
THE TRUSTEE AND/OR THE HOLDERS OF THE NOTES, ON THE OTHER HAND.
17.16 Effectiveness. This Pledge Agreement shall become
effective upon the effectiveness of the Indenture.
<PAGE> 29
25
IN WITNESS WHEREOF, the Pledgor and the Trustee have each
caused this Pledge Agreement to be duly executed and delivered as of the date
first above written.
Pledgor:
FACILICOM INTERNATIONAL, INC.
By:
----------------------------------------
Name:
Title:
Trustee:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY,
as Securities Intermediary, for purposes
of Section 16 only
By:
----------------------------------------
Name:
Title:
<PAGE> 30
SCHEDULE I
PLEDGED SECURITIES
<TABLE>
<CAPTION>
Description Original Cost at
of Debt CUSIP No(s). Final Maturity Principal Amount Closing Date
------- ------------ -------------- ---------------- ------------
<S> <C> <C> <C> <C>
Treasury Note 912827B50 7/15/98 14,206,000.00 14,446,925.77
Treasury Note 912827D74 1/15/99 14,792,000.00 14,986,023.33
Treasury Note 912627F98 7/15/99 15,263,000.00 15,535,970.28
Treasury Strip 76116EED8 1/15/00 15,750,000.00 14,223,403.06
Treasury Strip 76116EEE6 7/15/00 15,750,000.00 13,857,246.27
Treasury Strip 76116EEF3 1/15/01 15,750,000.00 13,499,857.98
</TABLE>
I-1
<PAGE> 1
EXHIBIT 5.1
November 5, 1999
World Access, Inc.
945 E. Paces Ferry Road, Suite 2200
Atlanta, Georgia 30326
Re: Registration Statement on Form S-4 of World Access, Inc.
Ladies and Gentlemen:
We have acted as counsel to World Access, Inc., a Delaware corporation (the
"Company"), in connection with a Registration Statement on Form S-4 (SEC
Registration No. 333-89479) (the "Registration Statement") and the filing
thereof with the Securities and Exchange Commission (the "Commission") for the
purpose of registering under the Securities and Exchange Act of 1933, as
amended, (i) $300,000,000 aggregate principal amount of 13.25% Senior Notes due
2008 (the "Exchange Notes") and (ii) $15,000,000 aggregate market value of the
Company's common stock, $.01 par value per share (the "Exchange Shares"). The
Exchange Notes and Exchange Shares are to be issued in exchange (the "Exchange
Offer") for the outstanding $300,000,000 aggregate principal amount of FaciliCom
International, Inc.'s 10 1/2% Series B Senior Notes due 2008 (the "FaciliCom
Notes").
Our opinion is furnished for the benefit of the Company solely with
regard to the Registration Statement, may be relied upon by the Company only in
connection with the Registration Statement and may not otherwise be relied upon,
used, quoted or referred to by or filed with any other person or entity without
our prior written permission.
In rendering our Opinions (as defined below), we have examined such
agreements, documents, instruments and records as we deemed necessary or
appropriate under the circumstances hereinafter set forth, including: (i) the
Certificate of Incorporation and Bylaws of the Company, in each case as amended
through the date hereof; (ii) the Registration Statements; and (iii) the draft
Indenture, dated October 27, 1999 by and between the Company and First Union
National Bank, a national banking association, as Trustee (the "Indenture"). In
making all of our examinations, we assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to the original documents of all
documents submitted to us as copies and the authenticity of the originals of
such latter documents, and the due execution and delivery of all documents by
any persons or entities where due execution and delivery by such persons or
entities is a prerequisite to the effectiveness of such documents. We have
assumed further that (i) at the time of execution, authorization, issuance and
delivery of the Exchange Notes, the Indenture will have been duly authorized,
executed and delivered by the Company and (ii) execution, delivery and
performance by the Company of the Indenture and the Exchange Notes will not
violate any applicable laws (excepting from such assumption the laws of the
State of Georgia, the Delaware General Corporation Law and the Federal laws of
the United States).
As to various factual matters that are material to our Opinions, we have
relied upon the factual statements set forth in a certificate of officers of
the Company and certificates of various public officials. We have not
independently verified or investigated, nor do we assume any responsibility
for, the factual accuracy or completeness of such factual statements.
Members of this firm are admitted to the Bar of the State of Georgia and
are duly qualified to practice law in that state. We do not herein express any
opinion concerning any matter respecting or affected by any laws other than
the laws of the State of Georgia and the Delaware General Corporation Law that
are now in effect and that, in the exercise of reasonable professional
judgment, are normally considered in transactions
<PAGE> 2
World Access, Inc.
November 5, 1999
Page 2
such as those contemplated by the issuance of the Exchange Notes and Exchange
Shares. The Opinions hereinafter set forth are based upon pertinent laws and
facts in existence as of the date hereof, and we expressly disclaim any
obligation to advise you of changes to such pertinent laws or facts that
hereafter may come to our attention.
The only opinions rendered by this firm are in numbered paragraphs (1) and
(2) below (our "Opinions"), and no other opinion is implied or to be inferred.
Additionally, our Opinions are based upon and subject to the qualifications,
limitations and exceptions set forth in this letter.
Based on and subject to the foregoing, we are of the opinion that:
(1) The Exchange Notes are duly authorized and, when authenticated, issued
and delivered in exchange for a like principal amount of the FaciliCom Notes in
the Exchange Offer as set forth in the Registration Statement and in accordance
with the provisions of the Indenture, will be legally issued, fully paid and
nonassessable and will constitute binding obligations of the Company,
enforceable against the Company in accordance with the terms of the Indenture,
subject to the qualifications that (a) enforcement of the Company's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance or transfer,
insolvency, reorganization, moratorium, and other laws relating to or affecting
rights and remedies of creditors and by general equitable principles (whether
considered in a proceeding at law or in equity) and matters of public policy,
and (b) an implied covenant of good faith and fair dealing.
(2) The Exchange Shares are duly authorized and, when issued and
delivered in the Exchange Offer as set forth in the Registration Statement,
will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to reference to our firm under the heading "Legal
Matters" set forth in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
LONG ALDRIDGE & NORMAN LLP
By: /s/ Thomas Wardell
----------------------------------------
Thomas Wardell
LAS/ldd
<PAGE> 1
EXHIBIT 8.1
November 5, 1999
World Access, Inc.
945 East Paces Ferry Road
Suite 2200
Atlanta, Georgia 30326
Re: Federal Income Tax Considerations of the Exchange Offer
and the Consent Solicitation
Ladies and Gentlemen:
You have requested our opinion as to the federal income tax considerations
of an offer by World Access, Inc. ("World Access") to exchange new World Access
13.25% Senior Notes due 2008, World Access common stock and a payment of cash
(the "Exchange Offer") for all outstanding 10 1/2% Series B Senior Notes due
2008 of FaciliCom International, Inc. (the "FaciliCom notes") and the
solicitation of consents with respect to the FaciliCom notes (the "Consent
Solicitation") on the terms and conditions set forth in the Prospectus and
Consent Solicitation dated November 5, 1999 (the "Prospectus and Consent
Solicitation"), as described in the Registration Statement on Form S-4 (Reg. No.
333-89479), filed by World Access with the Securities and Exchange Commission
(the "Registration Statement").
In rendering our opinion, we have examined and relied upon the accuracy and
completeness of the facts, information, covenants and representations contained
in originals or copies, certified or otherwise identified to our satisfaction,
of the Prospectus and Consent Solicitation filed as part of the Registration
Statement, and such other documents and representations of representatives of
World Access as we have deemed necessary or appropriate. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such documents.
We have also assumed the transactions related to the Exchange Offer and Consent
Solicitation will be consummated as described in the Prospectus and Consent
Solicitation.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Service Code of 1986, as amended, proposed, temporary and
final Treasury Regulations promulgated thereunder, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service and other
authorities as we have considered relevant. We caution that statutes,
regulations,
<PAGE> 2
World Access, Inc.
November 5, 1999
Page 2
judicial decisions and administrative interpretations are subject to change at
any time and, in some circumstances, with retroactive effect. Any change in the
authorities upon which our opinion is based could affect the conclusions stated
herein.
Based on the foregoing, we are of the opinion that, except as to matters
upon which we have expressly declined to express an opinion, the statements and
legal conclusions contained in the Prospectus and Consent Solicitation under
the caption "Federal Income Tax Considerations", to the extent they constitute
matters of law or legal conclusions are accurate in all material respects. In
addition, we consent to the reference to Long Aldridge & Norman LLP in the
Prospectus and Consent Solicitation under the caption "Legal Matters" and
"Federal Income Tax Considerations" and to the filing of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission.
As expressly set forth in the Prospectus and Consent Solicitation with
respect to the specific tax consequences described under the caption "Federal
Income Tax Considerations", we express no opinion as to the tax consequences to
any holder of FaciliCom notes, whether federal, state, local or foreign, of the
Exchange Offer or Consent Solicitation or of any transaction related to the
Exchange Offer and Consent Solicitation.
This opinion is solely for your benefit and is not to be used, circulated,
quoted or otherwise referred to for any purpose without our express prior
written consent.
Very truly yours,
LONG ALDRIDGE & NORMAN LLP
By: /s/ Mark S. Lange
-------------------------------
Mark S. Lange,
a Partner
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statements on Form S-4 and related Prospectus of World
Access, Inc. and subsidiaries for the registration of $300 million of 13.25%
Senior Notes due 2008 and $15 million of common stock and to the incorporation
by reference therein of our report dated March 26, 1999, with respect to the
consolidated financial statements and schedules of World Access, Inc. and
subsidiaries included in its Annual Report (Form 10-K/A, Amendment No. 3) for
the year ended December 31, 1998, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Atlanta, Georgia
November 2, 1999
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Amendment No. 1 to Registration Statement (No.
333-89479) of World Access, Inc. on Form S-4 of our report, dated December 9,
1998, on the consolidated financial statements of FaciliCom International, Inc.
and subsidiaries, appearing in the Prospectus, which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
November 2, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated March 5, 1998, except for the
discontinued operations reclassifications in the Consolidated Statements of
Operations and Note D, which are as of April 9, 1999, relating to the financial
statements and financial statement schedules of World Access, Inc. for each of
the two years in the period ended December 31, 1997, which appears in World
Access, Inc.'s Annual Report on Form 10-K, as amended, for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers, LLP
Atlanta, Georgia
November 2, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement on Form S-4 and related
Prospectus of World Access, Inc. and subsidiaries for the registration of
$300 million of 13.25% Senior Notes due 2008 and $15 million of common stock
and to the incorporation by reference therein of our report dated June 5, 1998,
with respect to the combined financial statements of Cherry Communications
Incorporated (d/b/a Resurgens Communications Group) and Cherry Communications
U.K. Limited for the year ended December 31, 1997 included in WA Telecom
Current Report on Form 8-K dated July 27, 1998, as amended by Amendment No. 1
on Form 8-K/A dated September 4, 1998, as amended by Amendment No. 2 on Form
8-K/A dated September 25, 1998.
/s/ Ernst & Young LLP
Atlanta, Georgia
November 2, 1999
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We have issued our report dated July 11, 1997, except for Notes 2 and 10 as
to which the date is July 24, 1997, accompanying the combined financial
statements of Cherry Communications Incorporated and Cherry Communications U.K.
Limited for each of the two years in the period ended December 31, 1996 included
in the WA Telecom Current Report on Form 8-K dated July 27, 1998, as amended by
Amendment No. 1 on Form 8-K/A dated September 4, 1998, as amended by Amendment
No. 2 on Form 8-K/A dated September 25, 1998. We consent to the incorporation by
reference of the aforementioned report in the Registration Statement on Form S-4
of World Access, Inc. and to the use of our name as it appears under the caption
"Experts."
/s/ GRANT THORNTON LLP
Chicago, Illinois
November 2, 1999
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement on Form S-4 and related Prospectus
of World Access, Inc. and subsidiaries for the registration of $300 million of
13.25% Senior Notes due 2008 and $15 million of common stock and to the
incorporation by reference therein of our report dated November 4, 1998, with
respect to the consolidated financial statements and schedule of Telco Systems,
Inc. for the year ended August 30, 1998 included in World Access, Inc.'s
Registration Statement on Form S-4 dated November 10, 1998.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 2, 1999
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (No.
333-89479) on Form S-4 of World Access, Inc. of our report dated December 4,
1997, relating to the consolidated balance sheets of NACT Telecommunications,
Inc. and subsidiary as of September 30, 1997, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
years in the three-year period ended September 30, 1997, which report appears in
the Registration Statement on Form S-4 filed on October 6, 1998, as amended by
Amendment No. 1 to Form S-4 filed on October 7, 1998, and Amendment No. 2 to
Form S-4 filed on October 7, 1998, and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG LLP
Salt Lake City, Utah
November 2, 1999
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM T-1
----------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305-(b) (2)[ ]
----------------------------
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C> <C>
TWO FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288 58-1079889
(Address of principal executive office) (Zip Code) (IRS Employer Identification No.)
</TABLE>
Brian K. Justice
First Union National Bank
1100 First Union Plaza
999 Peachtree Street N.E.
Atlanta, Georgia 30309
(404) 827-7352
(Name, Address and Telephone Number of Agent for Service)
----------------------------
WORLD ACCESS, INC.
(Exact name of obligor as specified in its charter)
GEORGIA
(State or other jurisdiction of incorporation or organization)
58-2398004
(IRS employer identification no.)
945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
(Name, address, including zip code, and telephone number, including
area code, of principal executive offices)
MARK A. GERGEL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
WORLD ACCESS, INC.
945 EAST PACES FERRY ROAD
SUITE 2200
ATLANTA, GEORGIA 30326
(404) 231-2025
----------------------------
$300,000,000 WORLD ACCESS, INC. 13.25% SENIOR NOTES DUE 2008
(Title of the indenture securities)
================================================================================
1
<PAGE> 2
1. General information.
(a) The following are the names and addresses of each examining
or supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Atlanta, Georgia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market
Regulation, Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor.
The obligor is not an affiliate of the Trustee.
(See Note 2 on Page 5)
16. List of Exhibits.
<TABLE>
<S> <C>
(1) Articles of Association of the Trustee as now in effect. (See
Exhibit 1 of the Form T-1 filed in connection with Registration
Statement No. 333-33869, which is incorporated herein by
reference)
(2) Certificate of Authority of the Trustee to commence business.
(See Exhibit 2 of the Form T-1 filed in connection with
Registration Statement No. 333-33869, which is incorporated
herein by reference)
(3) Authorization of the Trustee to exercise corporate trust powers.
Incorporated in Exhibit (4).
(4) By-Laws of the Trustee, as amended, to date. (See Exhibit 4 of
the Form T-1 filed in connection with Registration Statement
No.333-33869, which is incorporated herein by reference)
(5) Not applicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included on Page 4 of this Form T-1
Statement.
(7) Most recent report of condition of the Trustee. (See Exhibit 7 of
the Form T-1 filed in connection with Registration Statement No.
333-33869, which is incorporated herein by reference)
(8) Not applicable.
(9) Not applicable.
</TABLE>
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Atlanta, and State of Georgia on the 5th day of November, 1999.
FIRST UNION NATIONAL BANK
(Trustee)
BY: /s/ BRIAN K. JUSTICE
-------------------------------------------
Brian K. Justice
3
<PAGE> 4
EXHIBIT T-1 (6)
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in
connection with the proposed issuance of Notes of World Access, Inc., First
Union National Bank, as the Trustee herein named, hereby consents that reports
of examinations of said Trustee by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon requests therefor.
FIRST UNION NATIONAL BANK
BY: /s/ Sabrina Fuller
-------------------------------------------
Sabrina Fuller
Dated: November 5, 1999
4
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
WORLD ACCESS, INC.
OFFER TO EXCHANGE ITS
13.25% SENIOR NOTES DUE 2008,
COMMON STOCK AND CASH
FOR ALL OUTSTANDING 10 1/2% SERIES B SENIOR NOTES DUE 2008 OF
FACILICOM INTERNATIONAL, INC.
(THE "FACILICOM NOTES")
PURSUANT TO THE PROSPECTUS AND CONSENT SOLICITATION
DATED NOVEMBER 5, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 12:00 P.M., NEW YORK CITY TIME, ON DECEMBER 7,
1999 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE").
The Exchange Agent for the Exchange Offer is
FIRST UNION NATIONAL BANK
1525 WEST W.T. HARRIS BOULEVARD
3C3 NC-1153
CHARLOTTE, NORTH CAROLINA 28262
By Facsimile:
(704) 590-7628
For Confirmation and/or Information Call:
(704) 590-7408
BY TENDERING YOUR FACILICOM NOTES IN THE EXCHANGE OFFER, YOU WILL ALSO BE
CONSENTING TO CERTAIN PROPOSED AMENDMENTS TO THE INDENTURE UNDER WHICH THE
FACILICOM NOTES WERE ISSUED.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
------------------------
List below the FaciliCom Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the certificate numbers and principal
amount of FaciliCom Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF FACILICOM NOTES (1) (2) (3)
- ----------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF FACILICOM
PRINCIPAL AMOUNT NOTES TENDERED
NAME(S) AND ADDRESS(ES) OF CERTIFICATE OF FACILICOM (IF LESS THAN
REGISTERED HOLDER(S) NUMBER(S)* NOTES ALL)**
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by such FaciliCom Notes.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The undersigned acknowledges that he or she has received and reviewed the
Prospectus and Consent Solicitation dated November 5, 1999 (the "Prospectus"),
of World Access, Inc., a Delaware corporation (the "Company"), and this Letter
of Transmittal (the "Letter"), which together constitute the Company's
solicitation of your consent to amend the indenture governing the FaciliCom
Notes as more fully described in the Prospectus and the Company's offer (the
"Exchange Offer") to exchange for up to $300,000,000 aggregate principal amount
of FaciliCom Notes the following consideration (the "Exchange Consideration"):
(i) a like principal amount of its 13.25% Senior Notes due 2008 (the "Exchange
Notes"), (ii) shares of the Company's common stock, par value $0.01 per share,
having a market value of $50 for each $1,000 principal amount of FaciliCom Notes
tendered and accepted for exchange (the "Exchange Shares") and (iii) a payment
of $10 in cash for each $1,000 principal amount of FaciliCom Notes tendered and
accepted for exchange (the "Cash Payment").
The undersigned has completed the appropriate boxes above and below and
signed this Letter to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
This Letter is to be used either if certificates for FaciliCom Notes are to
be forwarded herewith or if delivery of FaciliCom Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Exchange
Offer -- Procedures for Tendering" in the Prospectus. Delivery of this Letter
and any other required documents should be made to the Exchange Agent. Delivery
of documents to a book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose FaciliCom Notes are not immediately available or who cannot
deliver their FaciliCom Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their FaciliCom
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 1.
2
<PAGE> 3
[ ] CHECK HERE IF FACILICOM NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
- --------------------------------------------------------------------------------
The Depository Trust Company
- --------------------------------------------------------------------------------
Account Number
- --------------------------- Transaction Code Number
- ---------------------------------
[ ] CHECK HERE IF FACILICOM NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
- --------------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
- ----------------------------------------------------------------
If delivered by book-entry transfer:
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Date of execution of Notice of Guaranteed Delivery
- -------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
FaciliCom Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the FaciliCom Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to the Company all right, title and interest in and
to such FaciliCom Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the FaciliCom
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim when the same are accepted by
the Company. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Company or the Exchange Agent to be necessary
or desirable to complete the sale, assignment and transfer of the FaciliCom
Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents that
(i) the Exchange Notes and Exchange Shares acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such Exchange Notes and Exchange Shares, whether or not such person is
the holder, (ii) such holder or such other person has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes or Exchange Shares within the meaning of the Securities Act and
is not participating in, and does not intend to participate in, the distribution
of such Exchange Notes or Exchange Shares within the meaning of the Securities
Act, and (iii) such holder or such other person is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or, if such holder
or such other person is an affiliate, such holder or such other person will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the undersigned is a broker-dealer which will receive Exchange Notes or
Exchange Shares for its own account in exchange for FaciliCom Notes that were
acquired as a result of market-making activities or other trading activities, it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and it acknowledges that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale, offer to resell or other
transfer of such Exchange Notes or Exchange Shares; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
All authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter.
The undersigned understands that tenders of the FaciliCom Notes pursuant to
any one of the procedures described under "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus under "The Exchange Offer -- Certain Conditions to the Exchange
Offer," the Company may not be required to accept for exchange any of the
FaciliCom Notes tendered. FaciliCom Notes not accepted for exchange or withdrawn
will be returned to the undersigned at the address set forth below unless
otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the Exchange Consideration (and, if
applicable, substitute certificates representing FaciliCom Notes for any
FaciliCom Notes not exchanged) in the name of the undersigned. Similarly, unless
otherwise indicated under the box entitled "Special Delivery Instructions"
below, please deliver the Exchange Consideration (and, if applicable, substitute
certificates representing FaciliCom Notes for any FaciliCom Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of FaciliCom Notes."
4
<PAGE> 5
The undersigned, by completing the box entitled "Description of FaciliCom
Notes" above and signing this Letter and delivering such notes and this Letter
to the Exchange Agent, will be deemed to have tendered the FaciliCom Notes as
set forth in such box above and consented to the matters described in the
Prospectus under the caption "The Exchange Offer -- the Proposed Amendments."
5
<PAGE> 6
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------
X
- ------------------------------------------------------------ ---------------------
Signature(s) of Owner(s)/or Authorized Signatory Date
Area Code and Telephone Number:
------------------------------
</TABLE>
If a holder is tendering any FaciliCom Notes, this Letter must be
signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the FaciliCom Notes or by any person(s) authorized to
become registered holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity,
please set forth full title. SEE INSTRUCTION 3.
Name(s)
------------------------------------------------------
(Please Type or Print)
Capacity:
------------------------------------------------------
Address:
------------------------------------------------------
------------------------------------------------------
(Include Zip Code)
------------------------------------------------------
(Signature Guarantee)
(if Required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:
--------------------------------------------------------------------------
(Authorized Signature)
--------------------------------------------------------------------------
(Title)
--------------------------------------------------------------------------
(Name of Firm)
Dated:
-------------------------------------------------------------------- ,
1999
- --------------------------------------------------------------------------------
6
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if the Exchange Notes, Exchange Shares or Cash Payment
are to be issued in the name of and sent to someone other than the person or
persons whose signature(s) appear on this Letter above.
Issue [ ] Exchange Notes [ ] Exchange Shares
[ ] Cash Payment to:
Name(s) ---------------------------------------------------------------
- ---------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address ------------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------
(SOCIAL SECURITY NUMBER)
(COMPLETE SUBSTITUTE FORM W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Exchange Notes, Exchange Shares or
Cash Payment are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of FaciliCom Notes" on
this Letter above.
Mail [ ] Exchange Notes [ ] Exchange Shares
[ ] Cash Payment to:
Name(s) ---------------------------------------------------------------
--------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address ------------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER
OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE (IN EACH CASE, TOGETHER WITH THE
CERTIFICATE(S) FOR FACILICOM NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF
SUCH FACILICOM NOTE AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND FACILICOM NOTES; GUARANTEED DELIVERY
PROCEDURE. This Letter is to be used to forward, and must accompany, all
certificates representing FaciliCom Notes tendered pursuant to the Exchange
Offer unless such certificates are accompanied by an Agent's Message (as defined
below) in which case you need not submit this Letter to the Exchange Agent.
Certificates representing the FaciliCom Notes in proper form for transfer (or a
confirmation of book-entry transfer of such FaciliCom Notes into the Exchange
Agent's account at the book-entry transfer facility) must be received by the
Exchange Agent at its address set forth herein on or before the Expiration Date.
A tender will not be deemed to have been timely received when the tendering
holder's properly completed and duly signed Letter or an Agent's Message
accompanied by the FaciliCom Notes is mailed prior to the Expiration Date but is
received by the Exchange Agent after the Expiration Date.
The term "Agent's Message" means a message transmitted by The Depository
Trust Company ("DTC") to, and received by, the depositary and forming a part of
a Book-Entry Confirmation, which states that DTC has received an express
acknowledgment from the participant in DTC tendering the FaciliCom Notes, that
such participant has received and agrees to be bound by the terms of this Letter
and the Company may enforce such agreement against the participant.
The method of delivery of this letter, the FaciliCom Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
exchange agent. If such delivery is by mail, it is recommended that registered
mail properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to permit timely delivery.
If a holder desires to tender FaciliCom Notes and such holder's FaciliCom
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, FaciliCom Notes (or a confirmation of book-entry transfer of
FaciliCom Notes into the Exchange Agent's account at the book-entry transfer
facility with an Agent's Message) or other required documents to reach the
Exchange Agent on or before the Expiration Date, such holder may still tender in
the Exchange Offer if:
(a) the tender is made through an Eligible Institution (as defined
below);
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by us (by facsimile
transmission, mail or hand delivery), setting forth the holder's
name and address as holder of the FaciliCom Notes and the amount of
FaciliCom Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three Nasdaq trading days after
the Expiration Date the certificates for all physically tendered
FaciliCom Notes, in proper form for transfer, or a book-entry
confirmation with an Agent's Message, as the case may be, and any
other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) the certificates for all physically tendered FaciliCom Notes, in
proper form for transfer, or a book-entry confirmation as the case
may be, and all other documents required by this Letter of
Transmittal are received by the Exchange Agent within three Nasdaq
trading days after the Expiration Date.
See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
2. WITHDRAWALS. Any holder who has tendered FaciliCom Notes may withdraw
the tender by delivering written notice of withdrawal (which may be sent by
telegram, facsimile (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier)) to the Exchange Agent prior to the close of
business on the Expiration Date and prior to acceptance for exchange thereof by
us. For a withdrawal to be effective, a written notice of withdrawal must (i)
specify the name of the person having tendered the FaciliCom Notes to
8
<PAGE> 9
be withdrawn (the "Depositor"), (ii) identify the FaciliCom Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such FaciliCom Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter by which such FaciliCom Notes were tendered or
as otherwise set forth in Instruction 3 below (including any required signature
guarantees), or be accompanied by documents of transfer sufficient to have the
trustee for the FaciliCom Notes register the transfer of such FaciliCom Notes
into the name of the person having made the original tender and withdrawing the
tender and (iv) specify the name in which any such FaciliCom Notes are to be
registered, if different from that of the Depositor. If FaciliCom Notes have
been tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the participant's account at the
book-entry transfer facility to be credited, if different from that of the
Depositor, with the withdrawn FaciliCom Notes or otherwise comply with the
book-entry transfer facility's procedures. See "The Exchange Offer--Withdrawal
of Tenders" in the Prospectus.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter is signed by the registered holder of the FaciliCom
Notes tendered hereby, the signature must correspond with the name as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If this Letter is signed by a participant in DTC, the signature must
correspond with the name as it appears on the security position listing as the
holder of the FaciliCom Notes.
If this Letter or any FaciliCom 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. Unless waived by us, evidence
satisfactory to us of their authority to so act must also be submitted with the
Letter of Transmittal.
If any tendered FaciliCom Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
The signatures on this Letter 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, as amended (each, an "Eligible
Institution"), unless the FaciliCom Notes are tendered: (i) by a registered
holder (or by a participant in DTC whose name appears on a security position
listing as the owner) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter and the Exchange
Consideration is being issued directly to such registered holder (or deposited
into the participant's account at DTC), or (ii) for the account of an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of
FaciliCom Notes should indicate in the applicable box the name and address to
which Exchange Consideration issued pursuant to the Exchange Offer is to be
issued or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. If no such instructions are
given, any Exchange Consideration will be issued in the name of, and delivered
to, the name or address of the person signing this Letter and any FaciliCom
Notes not accepted for exchange will be returned to the name or address of the
person signing this Letter.
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under
the federal income tax laws, payments that may be made by the Company on account
of Exchange Consideration issued pursuant to the Exchange Offer may be subject
to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the holder has not been notified by the
Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied For" in the
9
<PAGE> 10
space provided for the TIN in Part I of the Substitute Form W-9, sign and date
the Substitute Form W-9, and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the Indenture governing the Exchange Notes) shall retain
31% of payments made to the tendering holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent or the Company with his or her TIN within sixty (60) days after
the date of the Substitute Form W-9, the Company (or the Paying Agent) shall
remit such amounts retained during the sixty (60) day period to the holder and
no further amounts shall be retained or withheld from payments made to the
holder thereafter. If, however, the holder has not provided the Exchange Agent
or the Company with his or her TIN within such sixty (60) day period, the
Company (or the Paying Agent) shall remit such previously retained amounts to
the IRS as backup withholding. In general, if a holder is an individual, the
taxpayer identification number is the Social Security number of such individual.
If the Exchange Agent or the Company is not provided with the correct taxpayer
identification number, the holder may be subject to a $50 penalty imposed by the
IRS. Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such holder must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent. For further information
concerning backup withholding and instructions for completing the Substitute
Form W-9 (including how to obtain a taxpayer identification number if you do not
have one and how to complete the Substitute Form W-9 if FaciliCom Notes are
registered in more than one name), consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
Tendering holders are urged to also consult their own tax advisors to determine
whether they are exempt from these backup withholding and reporting
requirements.
Failure to complete the Substitute Form W-9 will not, by itself, cause
FaciliCom Notes to be deemed invalidly tendered, but may require the Company (or
the Paying Agent) to withhold 31% of the amount of any payments made on account
of the Exchange Consideration. Backup withholding is not an additional federal
income tax. Rather, the federal income tax liability of a person subject to
backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of FaciliCom Notes to it or its order pursuant to the
Exchange Offer. If, however, Exchange Consideration and/or substitute FaciliCom
Notes not exchanged 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 FaciliCom Notes tendered hereby, or if tendered FaciliCom Notes
are registered in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed for any reason other than the transfer
of FaciliCom Notes to the Company or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
7. WAIVER OF CONDITIONS. Conditions enumerated in the Prospectus may be
waived by the Company, in whole or in part, at any time from time to time in its
reasonable discretion.
8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of FaciliCom Notes,
by execution of this Letter, shall waive any right to receive notice of the
acceptance of their FaciliCom Notes for exchange.
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of FaciliCom Notes being tendered and the certificate
number or numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter.
10
<PAGE> 11
10. MUTILATED, LOST, STOLEN OR DESTROYED FACILICOM NOTES. If any
certificate has been lost, mutilated, destroyed or stolen, the holder should
promptly notify First Union National Bank at the telephone number indicated
above. The holder will then be instructed as to the steps that must be taken to
replace the certificate(s). This Letter of Transmittal and related documents
cannot be processed until the FaciliCom Notes have been replaced.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter, may be directed to First Union National Bank at the
address and telephone number indicated above.
11
<PAGE> 12
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYER'S NAME: WORLD ACCESS, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PART I--TAXPAYER IDENTIFICATION NUMBER TIN: -----------------------
SUBSTITUTE ENTER YOUR TAXPAYER IDENTIFICATION NUMBER IN THE OR (SOCIAL SECURITY NUMBER)
FORMW-9 APPROPRIATE BOX. FOR MOST INDIVIDUALS, THIS IS YOUR SOCIAL
SECURITY NUMBER. IF YOU DO NOT HAVE A NUMBER, SEE EMPLOYER OR
IDENTIFICATION NUMBER HOW TO OBTAIN A "TIN" IN THE ----------------------------
ENCLOSED GUIDELINES. EMPLOYER IDENTIFICATION NUMBER
NOTE: IF THE ACCOUNT IS IN MORE THAN ONE NAME, SEE THE
CHART ON PAGE 2 OF THE ENCLOSED GUIDELINES TO DETERMINE
WHAT NUMBER TO GIVE.
---------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PART II -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE ENCLOSED
GUIDELINES)
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
PAYER'S REQUEST FOR CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
TAXPAYER IDENTIFICATION (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I AM
NUMBER ("TIN") WAITING FOR A NUMBER TO BE ISSUED TO ME), AND
AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE (A) I AM EXEMPT FROM BACKUP
CERTIFICATION WITHHOLDING, (B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS") THAT
I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS OR (C) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
SIGNATURE __________ DATE __________
</TABLE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
CERTIFICATION GUIDELINES--YOU MUST CROSS OUT ITEM (2) OF THE ABOVE CERTIFICATION IF YOU
HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
UNDERREPORTING OF INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING
NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER
NOTIFICATION FROM THE IRS THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT
CROSS OUT ITEM (2).
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE
CONSIDERATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------
CERTIFICATE OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY, UNDER PENALTIES OF PERJURY, THAT A TAXPAYER
IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND THAT I
MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER
IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE
SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE (OR
I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR
FUTURE). I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER
IDENTIFICATION NUMBER TO THE PAYER, 31% OF ALL PAYMENTS MADE
TO ME ON ACCOUNT OF THE EXCHANGE CONSIDERATION SHALL BE
RETAINED UNTIL I PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO
THE PAYER AND THAT, IF I DO NOT PROVIDE MY TAXPAYER
IDENTIFICATION NUMBER WITHIN (60) DAYS, SUCH RETAINED
AMOUNTS SHALL BE REMITTED TO THE INTERNAL REVENUE SERVICE AS
BACKUP WITHHOLDING AND 31% OF ALL REPORTABLE PAYMENTS MADE
TO ME THEREAFTER WILL BE WITHHELD AND REMITTED TO THE
INTERNAL REVENUE SERVICE UNTIL I PROVIDE A TAXPAYER
IDENTIFICATION NUMBER.
, 1999
SIGNATURE DATE
- --------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer Identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer. All "section" references are to the Internal Revenue Code of
1986, as amended. "IRS" is the Internal Revenue Service.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals (joint The actual owner of
accounts) the account or, if
combined funds, the
first individual on
the account
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust (grantor is also trustee(1)
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner(3)
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
7. (Continued) representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
13
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") or by
calling 1 (800) TAX-FORM and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of 1940
who regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except that a corporation
that provides medical and health care services or bills and collects payments
for such services is not exempt from backup withholding or information
reporting. Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7), if
the account satisfies the requirements of section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A State, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details see sections 6041, 6041(A)(a), 6042, 6044, 6045,
6049, 6050A and 6050N, and the regulations under such sections.
PRIVACY ACT NOTICE. Section 6109 requires you to give your correct taxpayer
identification number to persons who must file information returns with the IRS
to report interest, dividends, and certain other income paid to you, mortgage
interest you paid, the acquisition or abandonment of secured property,
cancellation of debt, or contributions you made to an IRA. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your tax
return. You must provide your taxpayer identification number whether or not you
are qualified to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Wilfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
14
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF OUTSTANDING
10 1/2% SERIES B SENIOR NOTES DUE 2008
OF
FACILICOM INTERNATIONAL, INC.
IN EXCHANGE FOR
13.25% SENIOR NOTES DUE 2008,
COMMON STOCK AND CASH
OF
WORLD ACCESS, INC.
Registered holders of outstanding 10 1/2% Series B Senior Notes due 2008 of
FACILICOM INTERNATIONAL, INC. (the "FaciliCom Notes") who wish to tender their
FaciliCom Notes in exchange for a like principal amount of 13.25% Senior Notes
due 2008 of WORLD ACCESS, INC., shares of World Access, Inc. common stock, par
value $0.01 per share having a market value of $50 for each $1,000 principal
amount of FaciliCom Notes tendered and $10 in cash for each $1,000 principal
amount of FaciliCom Notes tendered, and whose FaciliCom Notes are not
immediately available or who cannot deliver their FaciliCom Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
FIRST UNION NATIONAL BANK (the "Exchange Agent") prior to the Expiration Date,
may use this Notice of Guaranteed Delivery or one substantially equivalent
hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission (receipt confirmed by telephone and an original delivered
by guaranteed overnight courier) or letter to the Exchange Agent. See "The
Exchange Offer -- Procedures for Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer Is:
FIRST UNION NATIONAL BANK
1525 WEST W.T. HARRIS BOULEVARD
3C3 NC-1153
CHARLOTTE, NC 28262
BY FACSIMILE: (704) 590-7628
CONFIRM BY TELEPHONE: (704) 590-7408
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to 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, such signature guarantee must appear in the applicable
space provided on the Letter of Transmittal for Guarantee of Signatures.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of FaciliCom Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus and Consent Solicitation dated November 5, 1999 of World Access, Inc.
(the "Prospectus"), receipt of which is hereby acknowledged.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SECURITIES TENDERED
- ------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
CERTIFICATE AMOUNT PRINCIPAL
NAME AND ADDRESS OF REGISTERED HOLDER NUMBER(S) OF REPRESENTED BY AMOUNT
AS IT APPEARS ON THE OUTSTANDING FACILICOM NOTES FACILICOM FACILICOM OF FACILICOM
PLEASE PRINT NOTES NOTES NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office,
branch, agency or correspondent in the United States, hereby guarantees to
deliver to the Exchange Agent at its address set forth above, the
certificates representing the FaciliCom Notes, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees, and any other documents required
by the Letter of Transmittal within three Nasdaq Stock Market trading days
after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm:
- --------------------------------------
Address:
- ---------------------------------------------
- ------------------------------------------------------
Zip Code:
- -------------------------------------------
Area Code and
Telephone Number:
- ----------------------------------
- ------------------------------------------------------
(Authorized Signature)
Title:
- ------------------------------------------------
Name:
- -----------------------------------------------
(Please type or print)
DO NOT SEND CERTIFICATES FOR FACILICOM NOTES WITH THIS FORM. THEY SHOULD BE SENT
TO THE EXCHANGE AGENT WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL
2
<PAGE> 1
EXHIBIT 99.3
EXCHANGE AGENCY AGREEMENT
This Agreement is entered into as of [_______], 1999 between FIRST
UNION NATIONAL BANK, a national banking association, as Exchange Agent (the
"Agent") and WORLD ACCESS, INC., a corporation organized under the laws of the
State of Delaware ("WAXS").
WAXS and FACILICOM INTERNATIONAL, INC. ("FaciliCom") have entered into
an Agreement and Plan of Merger, dated as of August 17, 1999 (the "Merger
Agreement") pursuant to which WAXS and FaciliCom have agreed to merge (the
"Merger"). As a condition to the Merger, certain FaciliCom noteholders have
entered into an Agreement to Exchange and Consent, dated as of [_____________],
1999 with WAXS (the "Agreement to Exchange and Consent") in which certain
holders of FaciliCom's outstanding 10 1/2 % Series B Senior Notes due 2008 (the
"FaciliCom Notes") have agreed to exchange their FaciliCom Notes for Exchange
Notes, Exchange Shares and a Cash Payment (each as defined below).
In accordance with the Agreement to Exchange and Consent, WAXS
proposes to exchange (the "Exchange Offer") for up to $300,000,000 aggregate
principal amount of FaciliCom Notes the following consideration (the "Exchange
Consideration"): (i) an equal aggregate principal amount of its 13.25% Senior
Notes due 2008 (the "Exchange Notes"), (ii) shares of WAXS common stock, par
value $0.01 per share, having a market value of $50 for each $1,000 principal
amount of FaciliCom Notes tendered and accepted for exchange (the "Exchange
Shares") and (iii) a payment of $10 in cash for each $1,000 principal amount of
FaciliCom Notes tendered and accepted for exchange (the "Cash Payment"). The
terms and conditions of the Exchange Offer as currently contemplated are set
forth in a prospectus and consent solicitation dated , 1999 (the
"Prospectus"), proposed to be distributed to all record holders of the FaciliCom
Notes. The FaciliCom Notes, the Exchange Notes and the Exchange Shares are
collectively referred to herein as the "Securities."
The Exchange Offer will terminate at 12:00 p.m. New York City time
on [______________], 1999, unless extended by WAXS in its sole discretion (the
"Expiration Date"). The Exchange Notes are to be issued by WAXS pursuant to the
terms of an indenture dated as of [_______________], 1999 (the "Indenture")
between WAXS and First Union National Bank, as trustee (the "Trustee").
Subject to the provisions hereof, WAXS hereby appoints and the Agent
hereby accepts the appointment as Agent for the purposes of receiving,
accepting for delivery and otherwise acting upon tenders of the FaciliCom Notes
in accordance with the form of letter of transmittal to be mailed to holders of
the FaciliCom Notes pursuant to the Prospectus (the "L/T") and with the terms
and conditions set forth herein and under the caption "The Exchange Offer" in
the Prospectus.
WAXS expressly reserves the right to extend, amend or terminate the
Exchange Offer, and not to accept for exchange any FaciliCom Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
specified in the Prospectus under the caption "The Exchange Offer-Certain
Conditions to the Exchange Offer." WAXS will give oral (confirmed in writing)
or written notice of any extension, amendment, termination or nonacceptance to
the Agent as promptly as practicable.
The Agent has received the following documents in connection with its
appointment (the "Exchange Offer Documents"):
1. the L/T, including Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9;
2. a form of Notice of Guaranteed Delivery;
3. the Prospectus;
<PAGE> 2
4. a cover letter to clients; and
5. a cover letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
The Agent is authorized and hereby agrees as follows:
(a) to establish an account with respect to the FaciliCom
Notes at the Depository Trust Company ("DTC") for purposes of the
Exchange Offer within two business days after the date of the
Prospectus, and any financial institution that is a participant in
DTC's systems shall be able to make book-entry delivery of FaciliCom
Notes by causing DTC to transfer such FaciliCom Notes into the Agent's
account in accordance with DTC's procedure for such transfer;
(b) that tenders of FaciliCom Notes may be made only as set
forth in the L/T and in the section of the Prospectus captioned "The
Exchange Offer" and that FaciliCom Notes shall be considered properly
tendered to the Agent only when tendered in accordance with the
procedures set forth herein and therein;
(c) to address, and deliver by hand or next day courier, a
complete set of the Exchange Offer Documents to each person who, prior
to the Expiration Date, is or becomes a registered holder of FaciliCom
Notes promptly after such person becomes a registered holder of
FaciliCom Notes;
(d) to receive all tenders of FaciliCom Notes made pursuant
to the Exchange Offer and stamp the L/T with the day, month and
approximate time of receipt;
(e) to examine each L/T and FaciliCom Notes received or
agent's message (as defined in the Prospectus) and book-entry
transfer, as the case may be, to determine whether: (i) the L/T and
any such other documents are duly executed and properly completed in
accordance with instructions set forth therein and book-entry
confirmations are in due and proper form and contain the information
required to be set forth therein and (ii) the FaciliCom Notes have
otherwise been properly tendered. In each case where the L/T or any
other document has been improperly completed or executed or book-entry
confirmations are not in due and proper form and do not contain
adequate information or any of the certificates for FaciliCom Notes
are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, the Agent
will endeavor to inform the presenters of the need for fulfillment of
all requirements and to take any other action as may be necessary or
advisable to cause such irregularity to be corrected. The Agent shall
be entitled to rely on the electronic messages sent by DTC regarding
ATOP delivery of the Notes to the Agent's account at DTC from the DTC
participants listed on the DTC position listing provided to the Agent;
(f) to take such actions necessary and appropriate to correct
any irregularity or deficiency associated with any tender not in
proper order;
(g) to follow instructions given by the Chief Executive
Officer and President, Executive Vice President and Chief Financial
Officer, or Corporate Controller and Secretary of WAXS or any other
party designated by such an officer in writing (the "Designated
Officers"), with respect to the waiver of any irregularities or
deficiencies associated with any tender;
2
<PAGE> 3
(h) to hold all valid tenders subject to further instructions
from any Designated Officer;
(i) to render a report via facsimile, in the form of Exhibit
A attached hereto, on each business day during the Exchange Offer to
Mark A. Gergel of WAXS at (404) 365-9847, Leonard A. Silverstein, Esq.
and L. Briley Brisendine, Jr., Esq. of Long Aldridge & Norman LLP,
counsel to WAXS, at (404) 527-4198 and such other persons as any of
them may direct;
(j) to follow and act upon any written amendments,
modifications or supplements to these instructions, any of which may
be given to the Agent by any Designated Officer of WAXS or such other
person or persons as they shall designate in writing;
(k) to return to the presenters, in accordance with the
provisions of the L/T, any FaciliCom Notes that were not received in
proper order and as to which the irregularities or deficiencies were
not cured or waived;
(l) in the event the Exchange Offer is consummated, to
deliver the Exchange Consideration to tendering noteholders, in
accordance with the instructions of such noteholders specified in the
respective L/T's, as soon as practicable after consummation thereof;
(m) to determine that all endorsements, guarantees,
signatures, authorities, stock transfer taxes (if any) and such other
requirements are fulfilled in connection with any request for issuance
of the Exchange Consideration in a name other than that of the
registered owner of the FaciliCom Notes;
(n) to deliver to, or upon the order of, WAXS all FaciliCom
Notes received under the Exchange Offer, together with any related
assignment forms and other documents by first class mail, return
receipt requested under a blanket surety bond protecting the Agent and
WAXS from loss or liability arising out of the non-receipt or
non-delivery of such FaciliCom Notes or registered mail insured
separately for the replacement value of each such FaciliCom Notes; and
(o) subject to the other terms and conditions set forth in
this Agreement, to take all other actions reasonable and necessary in
the good faith judgment of the Agent to effect the foregoing matters.
The Agent shall:
(a) have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in
writing by you and WAXS;
(b) not be required to refer to any documents for the
performance of its obligations hereunder other than this Agreement,
the Exchange Offer Documents; other than such documents, the Agent
will not be responsible or liable for any terms, directions or
information in the Prospectus or any other document or agreement
unless the Agent specifically agrees thereto in writing;
(c) not be required to act on the directions of any person,
including the persons named above, unless WAXS provides a corporate
resolution to the Agent or other evidence satisfactory to the Agent of
the authority of such person;
(d) not be required to, and shall make no representations and
have no responsibilities as to, the validity, accuracy, value or
genuineness of (i) the Exchange Offer, (ii) any FaciliCom Notes, L/Ts
3
<PAGE> 4
or documents prepared by WAXS in connection with the Exchange Offer or
(iii) any signatures or endorsements, other than its own;
(e) not be obligated to take any legal action hereunder that
might, in its judgment, involve any expense or liability, unless it
has been furnished with reasonable indemnity by WAXS;
(f) be able to rely on and shall be protected in acting on
the written or oral instructions with respect to any matter relating
to its actions as Agent specifically covered by this Agreement, of any
Designated Officer of WAXS;
(g) be able to rely on and shall be protected in acting upon
any certificate, instrument, opinion, notice, letter, telegram or any
other document or security delivered to it and believed by it
reasonably and in good faith to be genuine and to have been signed by
the proper party or parties;
(h) not be responsible for, or liable in any respect on
account of, the identity, authority or rights of any person executing
or delivering or purporting to execute or deliver any document or
property under this Agreement and shall have no responsibility with
respect to the use or application of any property delivered by it
pursuant to the provisions hereof;
(i) be able to consult with counsel satisfactory to it
(including counsel for WAXS or staff counsel of the Agent), and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with advice
or opinion of such counsel;
(j) not be called on at any time to advise, and shall not
advise, any person delivering an L/T pursuant to the Exchange Offer as
to the value of the consideration to be received;
(k) not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own gross
negligence, willful misconduct or bad faith;
(l) not be bound by any notice or demand, or any waiver or
modification of this Agreement or any of the terms hereof, unless
evidenced by a writing delivered to the Agent signed by the proper
authority or authorities and, if the Agent's duties or rights are
affected, unless the Agent shall give its prior written consent
thereto;
(m) have no duty to enforce any obligation of any person to
make delivery, or to direct or cause any delivery to be made, or to
enforce any obligation of any person to perform any other act;
(n) have the right to assume, in the absence of written
notice to the contrary from the proper person or persons, that a fact
or an event by reason of which an action would or might be taken by
the Agent does not exist or has not occurred without incurring
liability for any action taken or omitted, or any action suffered by
the Agent to be taken or omitted, in good faith or in the exercise of
the Agent's best judgment, in reliance upon such assumption;
(o) not be authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other
persons or to engage or utilize any person to solicit tenders;
(p) waive any lien, encumbrance or right of set-off
whatsoever that the Agent may have with respect to funds deposited
with the Agent for the payment of transfer taxes by reason of amounts,
if
4
<PAGE> 5
any, borrowed by WAXS or any of its subsidiaries or affiliates
pursuant to any loan or credit agreement with the Agent or for
compensation owed to the Agent hereunder; and
(q) arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and file any appropriate reports with the
Internal Revenue Service. WAXS understands that the Agent is required
to deduct 31% on payments to holders who have not supplied their
correct Taxpayer Identification Number or required certification. Such
funds will be turned over to the Internal Revenue Service in
accordance with applicable regulations.
The Agent shall be entitled to compensation as set forth in Exhibit B
attached hereto.
WAXS covenants and agrees to reimburse the Agent for, indemnify it
against, and hold it harmless from any and all reasonable costs and expenses
(including reasonable fees and expenses of one firm of counsel and allocated
cost of staff counsel) that may be paid or incurred or suffered by it or to
which it may become subject without gross negligence, willful misconduct or bad
faith on its part by reason of or as a result of its compliance with the
instructions set forth herein or with any additional or supplemental written or
oral instructions delivered to it pursuant hereto, or which may arise out of or
in connection with the administration and performance of its duties under this
Agreement. WAXS agrees to promptly notify the Agent of any extension of the
Expiration Date.
This Agreement shall be construed and enforced in accordance with the laws
of the State of Georgia and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of the parties
hereto. The parties agree to submit to the exclusive jurisdiction of the
federal or state courts located in the State of Georgia, Fulton County.
Unless otherwise expressly provided herein, all notices, requests, demands
and other communications hereunder shall be in writing, shall be delivered by
hand or reputable overnight courier, facsimile or by First Class Mail, postage
prepaid, shall be deemed given when received and shall be addressed to the
Agent and WAXS at the respective addresses listed below or to such other
addresses as they shall designate from time to time in writing, forwarded in
like manner.
If to the Agent, to:
First Union National Bank
1100 First Union Plaza
999 Peachtree Street
Attention: Mr. Brian Justice
Telephone: (404) 827-7352
If to WAXS, to:
World Access, Inc.
945 East Paces Ferry Road, Suite 2200
Atlanta, Georgia 30326
Attention: Mark A. Gergel
Telephone: (404) 231-2025
5
<PAGE> 6
with copies to:
(which shall not
constitute notice)
Long Aldridge & Norman LLP
303 Peachtree Street, Suite 5300
Atlanta, Georgia 30308
Attention: Leonard A. Silverstein, Esq.
Telephone: (404) 527-4390
Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
the indemnification and compensation provisions of this Agreement shall survive
the termination of this Agreement. Upon any termination of this Agreement, the
Agent shall promptly deliver to WAXS any certificates for Securities, funds or
property then held by the Exchange Agent under this Agreement.
This Agreement shall be binding and effective as of the date hereof.
(Signatures begin on following page)
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized, all as
of the day and year first above written.
"AGENT:"
FIRST UNION NATIONAL BANK
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
[CORPORATE SEAL]
"WAXS:"
WORLD ACCESS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
[CORPORATE SEAL]
7
<PAGE> 8
EXHIBIT A
SAMPLE REPORT
Date:
-------------------------------------------
Report Number:
----------------------------------
As of Date:
-------------------------------------
Ladies & Gentlemen:
As Exchange Agent for the Exchange Offer dated ____________________,
1999, we hereby render the following report:
Principal Amount previously received:
Principal Amount received today:
Principal Amount received against Guaranteed Deliveries:
Principal Amount withdrawn today:
TOTAL PRINCIPAL AMOUNT RECEIVED TO DATE:
Very truly yours,
Corporate Trust Dept.
E-1
<PAGE> 9
EXHIBIT B
COMPENSATION
The Agent, for serving as the Exchange Agent pursuant to this
Agreement, shall receive a fee of [$ ], payable upon commencement of the
Exchange Offer, and reimbursement of the Agent's out-of-pocket expenses
incurred in connection with completing its duties pursuant to this Agreement.
E-2
<PAGE> 1
EXHIBIT 99.4
WORLD ACCESS, INC.
OFFER FOR ANY AND ALL OF THE OUTSTANDING
10 1/2% SERIES B SENIOR NOTES DUE 2008
OF
FACILICOM INTERNATIONAL, INC.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Enclosed for your consideration is a prospectus and consent solicitation,
dated November 5, 1999 (the "Prospectus"), and a Letter of Transmittal (the
"Letter of Transmittal") relating to the consent solicitation and offer (the
"Exchange Offer") by World Access, Inc. ("WAXS") to exchange for up to
$300,000,000 aggregate principal amount of FaciliCom International, Inc.
("FaciliCom") 10 1/2% Series B Senior Notes due 2008 (the "FaciliCom Notes") the
following consideration (the "Exchange Consideration"): (ii) an equal aggregate
principal amount of its 13.25% Senior Notes due 2008 (the "Exchange Notes"),
(ii) shares of WAXS common stock, par value $0.01 per share, having a market
value of $50 for each $1,000 principal amount of FaciliCom Notes tendered and
accepted for exchange (the "Exchange Shares") and (iii) a payment of $10 in cash
for each $1,000 principal amount of FaciliCom Notes tendered and accepted for
exchange (the "Cash Payment"), upon the terms and subject to the conditions set
forth in the Prospectus and the Letter of Transmittal.
In connection with the Exchange Offer, WAXS is soliciting consents to
certain amendments to the indenture under which the FaciliCom Notes were issued
(the "Proposed Amendments"). A holder of FaciliCom Notes who tenders such
FaciliCom Notes in the Exchange Offer will also be consenting to the Proposed
Amendments.
We are asking you to contact your clients for whom you hold FaciliCom Notes
registered in your name or in the name of your nominee. WAXS will pay all
transfer taxes, if any, applicable to the tender of FaciliCom Notes, except as
otherwise provided in the Prospectus and the Letter of Transmittal. Enclosed is
a copy of each of the following documents for forwarding to your clients:
1. The Prospectus.
2. A Blue Letter of Transmittal, including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9, for your use in
connection with the tender of FaciliCom Notes by record holders and for
the information of your clients.
3. A Yellow form of letter addressed "To Our Clients" that may be sent to
your clients for whose accounts you hold FaciliCom Notes registered in
your name or the name of your nominee, with space provided for obtaining
the clients' instructions with regard to the Exchange Offer.
4. A Pink Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for FaciliCom Notes are not lost but not
immediately available, or if the procedure for book-entry transfer
cannot be completed on or prior to the Expiration Date.
5. A return envelope addressed to First Union National Bank, as Exchange
Agent (the "Exchange Agent").
Your prompt action is requested. The Exchange Offer will expire at 12:00
p.m., New York City time, on December 7, 1999, unless extended by WAXS (the
"Expiration Date"). FaciliCom Notes tendered pursuant to the Exchange Offer may
be validly withdrawn, subject to the procedures described in the Prospectus, at
any time prior to the Expiration Date.
DTC Participants will be able to execute tenders through the DTC Automated
Tender Offer Program.
Please refer to the section of the Prospectus entitled "The Exchange
Offer -- Procedures for Tendering" for a description of the procedures which
must be followed to tender FaciliCom Notes in the Exchange Offer.
3
<PAGE> 2
Any questions or requests for additional copies of the enclosed materials
should be directed to the Exchange Agent at its address and telephone number set
forth on the front of the Letter of Transmittal.
Very truly yours,
WORLD ACCESS,
INC.
/s/ John D. Phillips
John D. Phillips
Chairman,
President
and Chief
Executive Officer
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF WAXS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE
EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE
LETTER OF TRANSMITTAL.
4
<PAGE> 1
EXHIBIT 99.5
WORLD ACCESS, INC.
OFFER FOR ANY AND ALL OF THE OUTSTANDING
10 1/2% SERIES B SENIOR NOTES DUE 2008
OF
FACILICOM INTERNATIONAL, INC.
To our clients:
Enclosed for your consideration is a prospectus and consent solicitation,
dated November 5, 1999 (the "Prospectus"), and the related Letter of Transmittal
(the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") by
World Access, Inc. ("WAXS"), to exchange for up to $300,000,000 aggregate
principal amount of FaciliCom International, Inc. ("FaciliCom") 10 1/2% Series B
Senior Notes due 2008 (the "FaciliCom Notes") the following consideration (the
"Exchange Consideration"): (i) an equal aggregate principal amount of its 13.25%
Senior Notes due 2008 (the "Exchange Notes"), (ii) shares of WAXS common stock,
par value $0.01 per share, having a market value of $50 for each $1,000
principal amount of FaciliCom Notes tendered and accepted for exchange (the
"Exchange Shares"), and (iii) a payment of $10 in cash for each $1,000 principal
amount of FaciliCom Notes tendered and accepted for exchange (the "Cash
Payment"), upon the terms and subject to the conditions set forth in the
Prospectus and the Letter of Transmittal.
In connection with the Exchange Offer, WAXS is soliciting consents to
certain amendments to the indenture under which the FaciliCom Notes were issued
(the "Proposed Amendments"). If you tender your FaciliCom Notes in the Exchange
Offer, you will also be consenting to the Proposed Amendments.
This material is being forwarded to you as the beneficial owner of
FaciliCom Notes carried by us for your account or benefit but not registered in
your name. A tender of any FaciliCom Notes may only be made by us as the
registered holder and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to tender
any or all such FaciliCom Notes held by us for your account or benefit pursuant
to the terms and conditions set forth in the Prospectus and the Letter of
Transmittal. We urge you to read carefully the Prospectus and the Letter of
Transmittal before instructing us to tender your FaciliCom Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender the FaciliCom Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
12:00 p.m., New York City time, on December 7, 1999, unless extended by WAXS
(the "Expiration Date"). FaciliCom Notes tendered pursuant to the Exchange Offer
may be validly withdrawn, subject to the procedures described in the Prospectus,
at any time prior to the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all outstanding FaciliCom Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section entitled "The Exchange Offer -- Conditions to
the Exchange Offer."
3. The Exchange Offer will expire on the Expiration Date.
4. Any transfer taxes incident to the transfer of FaciliCom Notes from the
tendering holder to WAXS will be paid by WAXS, except as provided in the
Prospectus and the instructions to the Letter of Transmittal.
5. The tender of your FaciliCom Notes in the Exchange Offer will also
constitute your consent to the Proposed Amendments.
If you wish to have us tender any or all of your FaciliCom Notes held by us
for your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. If you authorize the
tender of your FaciliCom Notes, all such FaciliCom Notes will be tendered unless
otherwise specified below. The Letter
5
<PAGE> 2
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender FaciliCom Notes held by us and registered in our name
for your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer.
This will instruct you to tender the FaciliCom Notes indicated below held
by you for the account or benefit of the undersigned pursuant to the terms of
and conditions set forth in the Prospectus and the Letter of Transmittal.
Box 1 [ ] Please tender ALL my FaciliCom Notes held by you for my account
or benefit.
Box 2 [ ] Please tender LESS than all my FaciliCom Notes. I wish to tender
$
------------------------ principal amount of FaciliCom Notes.
Box 3 [ ] Please do not tender any FaciliCom Notes held by you for my
account or benefit.
Date:
- ------------, 1999
Signature(s)
- ------------------------------------------------------
- ------------------------------------------------------
Please print name(s) here
- ------------------------------------------------------
- ------------------------------------------------------
Account No.:
- ---------------------------------------
Tax Identification Number or
Social Security Number:
- -------------------------
Address:
- --------------------------------------------
Telephone No.:
- -------------------------------------
UNLESS A SPECIFIC CONTRARY INSTRUCTION IS GIVEN, YOUR SIGNATURE(S) HEREON SHALL
CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL OF YOUR FACILICOM NOTES.
6
<PAGE> 1
EXHIBIT 99.6
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I Walter J. Burmeister, hereby consent to be named as a person about to
become a director of World Access, Inc. in the Registration Statement on Form
S-4 (File No. 333-89479) of World Access, Inc.
/s/ Walter J. Burmeister
----------------------------
Walter J. Burmeister
Dated: November 4, 1999
<PAGE> 1
EXHIBIT 99.7
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I Kirby J. Campbell, hereby consent to be named as a person about to
become a director of World Access, Inc. in the Registration Statement on Form
S-4 (File No. 333-89479) of World Access, Inc.
/s/ Kirby J. Campbell
-----------------------
Kirby J. Campbell
Dated: November 3, 1999
<PAGE> 1
EXHIBIT 99.8
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I Bryan Cipoletti, hereby consent to be named as a person about to
become a director of World Access, Inc. in the Registration Statement on Form
S-4 (File No. 333-89479) of World Access, Inc.
/s/ Bryan Cipoletti
---------------------
Bryan Cipoletti
Dated: November 3, 1999
<PAGE> 1
EXHIBIT 99.9
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I Massimo Prelz Oltramonti, hereby consent to be named as a person
about to become a director of World Access, Inc. in the Registration Statement
on Form S-4 (File No. 333-89479) of World Access, Inc.
/s/ Massimo Prelz Oltramonti
-----------------------------
Massimo Prelz Oltramonti
Dated: November 4, 1999
<PAGE> 1
EXHIBIT 99.10
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I John P. Rigas, hereby consent to be named as a person about to become
a director of World Access, Inc. in the Registration Statement on Form S-4 (File
No. 333-89479) of World Access, Inc.
/s/ John P. Rigas
--------------------
John P. Rigas
Dated: November 3, 1999
<PAGE> 1
EXHIBIT 99.11
CONSENT OF PERSON NAMED
AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I Dru A. Sedwick, hereby consent to be named as a person about to
become a director of World Access, Inc. in the Registration Statement on Form
S-4 (File No. 333-89479) of World Access, Inc.
/s/ Dru A. Sedwick
---------------------
Dru A. Sedwick
Dated: November 3, 1999
