<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CARRIER1 INTERNATIONAL S.A.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
LUXEMBOURG 4813 98-0199626
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
ROUTE D'ARLON 3
L-8009 STRASSEN, LUXEMBOURG
(011) (41-1) 297-2600
(Address, including ZIP code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------
KEES VAN OPHEM
VICE PRESIDENT, PURCHASE AND GENERAL COUNSEL
CARRIER1 INTERNATIONAL GMBH
MILITARSTRASSE 36
CH-8004 ZURICH, SWITZERLAND
(011) (41-1) 297-2600
(Name, address, including ZIP code, and telephone number,
including area code, of Registrant's agent for service)
------------------------------
WITH COPY TO:
DAVID A. BRITTENHAM, ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities of an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
13 1/4% Senior Dollar Notes Due 2009.............. $160,000,000 100% $160,000,000 $44,480.00
[Euro]85,000,000
13 1/4% Senior Euro Notes Due 2009................ ($92,803,000)(2) 100% $92,803,000 $25,800.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 promulgated under the Securities Act of 1933, as
amended.
(2) Euro amounts have been translated into U.S. Dollars at [Euro]1=$1.0918,
which was the noon buying rate in New York City for cable transfers in Euro
as certified for customs purposes by the Federal Reserve Bank of New York on
March 23, 1999.
------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 29, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
13 1/4% SENIOR DOLLAR NOTES DUE 2009 AND
13 1/4% SENIOR EURO NOTES DUE 2009
FOR
13 1/4% SENIOR DOLLAR NOTES DUE 2009 AND
13 1/4% SENIOR EURO NOTES DUE 2009
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OF
CARRIER1 INTERNATIONAL S.A.
We are offering to exchange (the "Exchange Offer") (i) all of our
outstanding 13 1/4% Senior Dollar Notes Due 2009 (the "Old Dollar Notes") for
our registered 13 1/4% Senior Dollar Notes Due 2009 (the "New Dollar Notes") and
(ii) all of our outstanding 13 1/4% Senior Euro Notes Due 2009 (the "Old Euro
Notes" and, together with the Old Dollar Notes, the "Old Notes") for our
registered 13 1/4% Senior Euro Notes Due 2009 (the "New Euro Notes" and,
together with the New Dollar Notes, the "New Notes"). The Old Notes and New
Notes are collectively referred to as the "Notes." The Old Notes were issued on
February 19, 1999. The terms of the New Notes are identical to the terms of the
relevant Old Notes except that the New Notes (i) are registered under the
Securities Act of 1933, as amended, and therefore will not contain restrictions
on transfer, (ii) will not contain certain provisions relating to additional
interest and (iii) will contain terms of an administrative nature that differ
from those of the Old Notes.
PLEASE CONSIDER THE FOLLOWING:
- YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS BEGINNING ON PAGE 20 OF THIS
PROSPECTUS.
- Our offer to exchange Old Notes for New Notes will be open until 5:00
p.m., New York City time, on , 1999, unless we extend the offer
with respect to one or both series.
- You should also carefully review the procedures for tendering the Old
Notes beginning on page 35 of this Prospectus.
- If you fail to tender your Old Notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected.
- No public market currently exists for the Notes.
INFORMATION ABOUT THE NOTES:
- The Notes will mature on February 15, 2009.
- We will pay interest on the Notes semi-annually on February 15 and August
15 of each year beginning August 15, 1999 at the rate of 13 1/4% per
annum.
- We may redeem the Notes on or after February 15, 2004 at certain rates set
forth on page 99 of this Prospectus.
- We also have the option until February 15, 2002, to redeem up to 35% of
the aggregate principal amount of either series of Notes with the net
proceeds of certain equity offerings.
- The Notes rank equally with our other unsubordinated unsecured
indebtedness and are junior to all of our secured indebtedness, except as
described under "Description of the Notes--Security," beginning on page
101 of this Prospectus.
- If we undergo a change of control, we may be required to offer to purchase
Notes from you.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Where You Can Find More Information........................................................................ 3
Certain Regulatory Issues.................................................................................. 4
Enforceability of Certain Civil Liabilities................................................................ 4
Presentation of Financial Information...................................................................... 5
Forward-Looking Statements................................................................................. 5
Summary.................................................................................................... 7
Risk Factors............................................................................................... 20
The Exchange Offer......................................................................................... 33
Use of Proceeds............................................................................................ 40
Dividend Policy............................................................................................ 41
Capitalization............................................................................................. 42
Unaudited Pro Forma Consolidated Financial Information..................................................... 43
Selected Consolidated Financial Data....................................................................... 47
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 49
Business................................................................................................... 56
Management................................................................................................. 82
Certain Relationships and Related Transactions............................................................. 90
Principal Security Holders................................................................................. 93
Description of the Notes................................................................................... 95
Taxation................................................................................................... 136
Plan of Distribution....................................................................................... 140
Legal Matters.............................................................................................. 140
Experts.................................................................................................... 140
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
------------------------
The Indentures pursuant to which the Notes are issued (the "Indentures")
require us to distribute to the holders of the Notes annual reports containing
our financial statements audited by our independent auditors and quarterly
reports containing unaudited condensed consolidated financial statements for the
first three quarters of each fiscal year. As used in this Prospectus, the words
"Carrier1 International" refer to the holding company Carrier1 International
S.A., the issuer of the Units, and the words "Company," "Carrier1," "we," "our,"
"ours" and "us" refer to Carrier1 International and its subsidiaries and their
predecessors, except where the context otherwise requires.
WHERE YOU CAN FIND MORE INFORMATION
Upon effectiveness of the Registration Statement of which this Prospectus is
a part, we will file annual and quarterly and other information with the
Securities and Exchange Commission (the "Commission"). You may read and copy any
reports, statements and other information we file at the Commission's public
reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois.
Please call 1-800-SEC-0330 for further information on the public reference
rooms. Our filings will also be available to the public from commercial document
retrieval services and at the web site maintained by the Commission at
http://www.sec.gov.
We have filed a Registration Statement on Form S-4 to register with the
Commission the New Notes to be issued in exchange for the Old Notes. This
Prospectus is part of that Registration Statement. As allowed by the
Commission's rules, this Prospectus does not contain all of the information you
can find in the Registration Statement or the exhibits to the Registration
Statement.
3
<PAGE>
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS ABOUT THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN
THOSE CONTAINED HEREIN. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS
ABOUT THESE MATTERS THAT IS NOT DISCUSSED, YOU MUST NOT RELY ON THAT
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT
PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS
PROSPECTUS OR THE NOTES OFFERED HEREBY DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN
THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF. IT ALSO
DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AFTER THIS
DATE.
CERTAIN REGULATORY ISSUES
Persons in the United Kingdom will be eligible to receive New Notes to be
issued in the Exchange Offer only if the ordinary activities of such persons
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which do not constitute an offer to the public in the United
Kingdom for purposes of the U.K. Public Offers of Securities Regulation 1995.
This Prospectus is being distributed on the basis that each person in the
United Kingdom to whom this Prospectus is issued is reasonably believed to be a
person falling within an exemption to section 57 of the Financial Services Act
1986, as amended, as set out in the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended by the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1997) and, accordingly,
by accepting delivery of this Prospectus the recipient warrants and acknowledges
that it is a person falling within any such exemption.
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
Carrier1 International is a societe anonyme organized under the laws of the
Grand Duchy of Luxembourg. Carrier1 International is a holding company that
conducts its operations primarily through other European companies. In addition,
certain members of our board and all our executive officers are residents of
countries other than the United States. A substantial portion of our assets and
the assets of such non-resident persons are located outside the United States.
As a result, it may not be possible for investors to:
- effect service of process within the United States upon us or such
persons; or
- enforce against us or such persons in U.S. courts judgments obtained in
such courts predicated upon civil liability provisions of the federal
securities laws of the United States.
We have been advised by our Luxembourg counsel that there is doubt as to
whether the courts of Luxembourg would recognize jurisdiction of the U.S. courts
in respect of judgments obtained in those courts in actions against us or such
directors and officers and as to whether Luxembourg courts would enforce
judgments of U.S. courts predicated upon the civil liability provisions of the
U.S. federal or state securities laws. We have also been advised that there is
doubt as to whether Luxembourg courts would admit original actions brought under
the U.S. securities laws. In addition, certain remedies available under the U.S.
federal or state laws may not be admitted or enforced by Luxembourg courts on
the basis of being contrary to Luxembourg's public policy. We cannot assure you
that you will be able to enforce any judgment against us, certain members of our
board or our executive officers, including judgments under the U.S. securities
laws.
4
<PAGE>
PRESENTATION OF FINANCIAL INFORMATION
We report our financial statements in U.S. dollars and prepare our financial
statements in accordance with generally accepted accounting principles in the
United States. The Company has adopted a fiscal year end of December 31.
In this Prospectus, except where otherwise indicated, references to (i) "$"
or "U.S. dollars" are to the lawful currency of the United States, (ii) "[Euro]"
or "Euro" are to the single currency at the start of the third stage of European
economic and monetary union on January 1, 1999, pursuant to the treaty
establishing the European Economic Community, as amended by the treaty on
European Union, signed at Maastricht on February 7, 1992, and (iii) "DM" are to
the lawful currency of Germany.
Given its recent introduction, there is insufficient historical exchange
rate data concerning the Euro for inclusion in this Prospectus. The ECU,
predecessor to the Euro, is a composite currency, consisting of specified
amounts of currencies of certain European Union member states. The ECU basket is
composed of specified amounts of the German mark, the British pound sterling,
the French franc, the Italian lira, the Dutch guilder, the Belgian franc, the
Luxembourg franc, the Danish kroner, the Irish punt, the Greek drachma, the
Spanish peseta and the Portuguese escudo. Changes in exchange rates of the
currencies of the member states of these European Communities, including
revaluations and devaluations, do not affect the fixed composition of the ECU
but may change the exchange rate of the ECU in subsequent trading.
Stage III of the European Economic and Monetary Union ("EMU") began on
January 1, 1999, and on that date the value of the ECU as against the currencies
of the member states participating in Stage III was irrevocably fixed and the
ECU became a currency in its own right. On June 17, 1997, the Council of the
European Union adopted Council Regulation (European Communities) No. 1103/97,
establishing the Euro and providing for the substitution of the Euro for the ECU
at the rate of one Euro for one ECU. On January 1, 1999, 11 of the 15 member
countries of the European Union (excluding Denmark, Greece, the United Kingdom
and Sweden, which may convert to the Euro at later dates) established fixed
conversion rates between their then existing sovereign currencies and the Euro
and adopted the Euro as their common legal currency on that date. These legacy
currencies are scheduled to remain legal tender in the participating countries
as denominations of the Euro until January 1, 2002. During the transition
period, public and private parties may pay for goods and services using either
the Euro or the participating countries' legacy currency.
FORWARD-LOOKING STATEMENTS
This Prospectus includes or incorporates forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
risks, uncertainties and assumptions including, among other things, those
discussed under "Risk Factors," as well as "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Examples of forward-looking
statements include all statements that are not historical in nature, including
statements regarding:
- operations and prospects,
- technical capabilities,
- funding needs and financing sources,
- network deployment plans,
- scheduled and future regulatory approvals,
- expected financial position,
- business and financing plans,
5
<PAGE>
- markets, including the future growth in the European telecommunications
market,
- expected characteristics of competing systems, and
- expected actions of third parties such as equipment suppliers and joint
venture partners.
Other matters set forth in this Prospectus may also cause actual results in
the future to differ materially from those described in the forward-looking
statements. We do not intend to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed
in this Prospectus might not occur.
6
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY, THE SECURITIES BEING SOLD AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.
THE COMPANY
Carrier1 is a rapidly expanding European facilities-based provider of long
distance voice and Internet Protocol ("IP") telecommunications services. We
offer these services on a wholesale basis primarily to competitive fixed-line
operators, other carriers, wireless operators, Internet Service Providers
("ISPs"), resellers and multi-national corporations ("MNCs"). In March 1998, our
experienced management team and Providence Equity Partners formed Carrier1 to
capitalize on the significant voice and IP opportunities that are emerging for
facilities-based carriers in Europe's rapidly liberalizing telecommunications
markets. By September 1998, we had deployed our initial network and commenced
selling wholesale services. As of December 31, 1998, we had executed 48
contracts with voice customers and 17 contracts with IP customers. Also in
December 1998, we signed a contract with one of the largest telecommunications
companies in Germany, and we expect to carry a substantial portion of its
international traffic. This contract has had a significant impact on our traffic
volumes since its recent implementation.
We are developing an extensive city-to-city European network linking key
population centers. We intend to continue rapidly expanding this network in a
cost-effective manner to serve the needs of our existing and potential
customers. We believe that our network will allow us to provide and price our
services in Europe on a city-to-city basis without regard to national borders.
This provisioning and pricing structure will put us at the forefront of a shift
beginning to occur in the European telecommunications market away from services
and pricing that distinguish between international and national long distance.
Currently, we have installed carrier-grade voice switches and IP routers in
Frankfurt, London, New York, Vienna and Zurich. We have stand-alone multiplexers
and IP routers in Geneva and Paris. By the end of 1999, we expect to have
installed voice switches or multiplexers and IP routers and to be providing long
distance voice and IP services in 21 cities in the following countries: Austria,
Belgium, Denmark, Germany, France, Ireland, Italy, The Netherlands, Sweden,
Switzerland, the United Kingdom, and the United States.
To rapidly deploy our network and offer services we are initially leasing
our European transmission capacity. However, we have entered into a Development
Agreement to build a 2,300 kilometer fiber network in Germany with Viatel Inc.
and Metromedia Fiber Network, Inc. This network will connect 14 principal cities
and pass a number of other major cities. It will also provide fiber capacity in
regions we believe are not covered or are underserved by existing and announced
fiber networks. The important advantages of the German Network are:
- DIRECT OWNERSHIP. We will own our own cable subduct (containing 72 fiber
strands) and access points.
- COST. By building with Viatel and Metromedia, we share the fixed costs of
construction and therefore acquire fiber capacity at a significantly lower
cost than if we constructed the network ourselves.
- FLEXIBILITY. We expect that the demand for fiber capacity in the regions
covered by the German Network will be sufficient to permit us to swap
excess capacity for fiber capacity on other networks in our target
markets. We would thereby be able to increase the amount of owned and
controlled capacity at a lower cost.
We expect that construction of the German Network will be completed by the
end of 1999 and that some segments will be operational in the third quarter of
1999. Our share of the development costs will be up to approximately $82
million, including the fiber deployed.
Stig Johansson, Chief Executive Officer, and our management team have
extensive experience in European telecommunications markets and long-standing
relationships with European wholesale
7
<PAGE>
customers and suppliers. Mr. Johansson was formerly the President of Unisource
Carrier Services AG, a large European wholesale carrier of international
traffic. Unisource Carrier Services carried over 400 million minutes of voice
traffic in 1997, the large majority of which was carried for wholesale customers
in the same markets that we are addressing. Our senior management comes from
Unisource Carrier Services, ACC Corp., AT&T-Unisource Communications Services,
Telia Norge AS, British Telecom and AT&T. Mr. Johansson and others in management
have also had significant experience with start-up ventures. See "Management."
We believe that management's experience and long-standing customer relationships
have been key to our launch of operations approximately six months after our
founding and contracting with a total of 65 customers through December 31, 1998.
EUROPEAN VOICE AND IP MARKET
In 1997, according to industry sources, the European international long
distance market for voice services was the largest in the world, with
approximately 35 billion minutes of use. According to industry sources, Europe's
volume of international minutes grew approximately 12% from 1996 to 1997.
Industry analysts project that global international telecommunications traffic
volume will grow at a compound annual growth rate of 12% to 18% from 1997 to
2001.
Industry sources estimate the European wholesale and retail market for all
Internet services was $1.9 billion in revenue for 1997. These sources project
that as demand for these services grows, industry revenues will grow at a
compound annual growth rate of approximately 40% to $7.3 billion in 2001, driven
primarily by rapid growth in the number of European Internet users and
corresponding demand for bandwidth.
We expect that, as occurred in the United States long distance market,
liberalization of the European telecommunications markets will attract new
entrants, whose competition will significantly erode the market share of the
incumbent public telephone operators ("ITOs") over time. A large number of new
telecommunications companies are already entering the market seeking to provide
a wide array of national and international telecommunications services.
According to industry sources, the number of authorized international carriers
in the United Kingdom was 144 in July 1998, compared to 35 in July 1995, and the
number of authorized international carriers in Germany was 32 in July 1998,
compared to 1 in July 1995. Many of these new entrants lack their own network or
only have a locally based network. We believe these new entrants, and other
providers, will demand competitively priced cross-border voice and IP wholesale
services and a level of customer support that is generally not available in the
European market today.
Decreasing prices caused by competition generated by new entrants, combined
with the introduction of new products, are resulting in increased volumes of
telecommunications traffic and increased demand for transmission capacity and
services. We believe there is an insufficient supply of cost-effective, cross-
border voice and IP telecommunications services to meet this increasing demand.
As a facilities-based provider of city-to-city wholesale network services, we
believe we are well positioned to capitalize on the opportunities these
circumstances present.
COMPETITIVE STRENGTHS
We believe that a number of factors give us a competitive advantage in the
European long distance voice and IP telecommunications markets:
- EXPERIENCED EUROPEAN MANAGEMENT with many years' experience in the largest
European telecommunications markets and with strong wholesale customer
relationships. We have a European perspective and, we believe, a strong
understanding of the European telecommunications markets.
- A FOCUSED WHOLESALE MARKETING STRATEGY, which allows us to service new
entrants without competing for their retail customers and to operate with
less overhead than carriers with retail operations.
- PRICING that disregards the existence of national borders and gives us
more flexibility than the ITOs to compete on the basis of price.
8
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- ADVANCED INFORMATION AND CONTROL SYSTEMS that allow us to optimize pricing
and network use on a real-time basis.
- PROVISION OF HIGH-QUALITY VOICE AND IP SERVICES expected by European
customers. We believe that our guarantees of high performance levels
distinguish us from our competitors.
- DELIVERY OF SUPERIOR CUSTOMER SUPPORT exceeding that provided in Europe
today. We offer rapid implementation and response times and locally based
customer-oriented sales and support personnel.
- LACK OF AFFILIATION WITH AN ITO, which allows us complete flexibility to
market our services broadly to our target customers, including carriers
who compete with ITOs.
BUSINESS STRATEGY
Our objective is to become a leading European wholesale provider of high
quality long distance voice and IP services, by capitalizing on the rapidly
increasing demand for city-to-city European voice and IP services. The key
elements of our strategy are:
- TARGET WHOLESALE MARKETS. We offer wholesale services primarily to
competitive fixed-line operators, other carriers, wireless operators,
ISPs, resellers and MNCs. In particular, we focus our marketing efforts on
competitive retail operators who lack international infrastructure. We
believe these new entrants prefer an independent supplier of wholesale
services to an ITO or other supplier with which they compete directly.
Concentrating on the wholesale market allows us to operate with less
overhead than other carriers with mass retail operations and to implement
operational support systems tailored to meet the needs of wholesale
customers. By focusing on the wholesale sector and making our main
business the selling of voice and IP services, we will take advantage of
our management's strong market-oriented skills, first-hand understanding
of the European telecommunications markets and long-standing wholesale
customer relationships.
- FOCUS ON CUSTOMER NEEDS. We believe that both high quality of service and
strong customer support are essential to capitalize successfully on market
opportunities.
QUALITY OF SERVICE: We believe that quality of service is critical to
obtaining and retaining customers. Our technologically advanced voice and
IP network and network management and information systems allow us to
offer our services at guaranteed minimum levels of order implementation,
response and repair time, and at a 99.9% network availability level. We
believe no other carrier in Europe offers a better minimum service level
for voice or IP services. Because we own our switches, multiplexers and
routers, we can control the quality and breadth of our service offerings.
SUPERIOR CUSTOMER SUPPORT: We believe that customer support levels in
the wholesale telecommunications market in Europe are generally lower
than those in the United States. We have designed our systems to provide
a level of customer support significantly higher than that generally
offered in the wholesale market in Europe. Key features of these systems
include: (i) decentralized sales, installation and basic support,
facilitating quick response to customer needs, (ii) a help desk operating
24 hours a day, 365 days a year, (iii) on-line order management and
provisioning, traffic reports, fault reports and repair information and
(iv) on-line customized billing.
- RAPID, COST-EFFECTIVE CITY-TO-CITY NETWORK DEPLOYMENT. We have developed a
cross-border network linking principal cities of Western Europe and will
continue to broaden the range of countries covered by the network and
deepen the extent of the network within particular countries. To
capitalize on our early entry into the market and to rapidly expand our
presence, we are pursuing an aggressive timetable for extending the scope
of our network, in part by leasing capacity and outsourcing certain
functions. Our longer term goal is to own or control key elements of our
network and to assume control of key outsourced functions. To establish
points of presence rapidly
9
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and cost-effectively in selected new markets, we are initially using
multiplexers. Multiplexers are less costly and easier to install than
switches, enhance our flexibility and service quality and help to reduce
our termination costs. As traffic increases, we may replace multiplexers
with switches and redeploy these multiplexers in new markets. Our
city-to-city network will (i) allow us to price our services within
Western Europe without regard to national borders, (ii) bring us closer to
a greater number of customers and (iii) reduce our termination costs.
- REDUCE TRANSMISSION COSTS. A key part of our strategy is to reduce the
costs of our transmission platform. We intend to reduce our transmission
costs by continually evaluating whether to build, buy or lease capacity or
swap excess capacity. While we hold indefeasible rights of use ("IRUs") in
two transatlantic cables (one of which is currently operational and one of
which we expect to become operational in April 1999), we are currently
leasing the rest of our transmission capacity because doing so enabled us
to commence offering services in our target markets rapidly. In addition,
construction of new capacity has been announced in many of our target
markets and we believe the cost of acquiring capacity in those regions is
decreasing and will continue to decrease. The German Network illustrates
an opportunity where we believe it is more cost-effective to build
capacity. As demand for voice and IP services in Europe increases and new
networks are constructed, we believe there will be significant
opportunities to add new and replace existing transmission capacity at
lower unit cost. We also intend, as soon as proven technology is
commercially available, to migrate to a single, IP-based transmission
platform for both voice and IP services. This platform would permit us to
increase the cost-effectiveness of our operations through more efficient
use of our transmission capacity.
- INTRODUCE NEW VALUE-ADDED SERVICES. We intend to expand our addressable
market to include additional wholesale customers, such as switchless
resellers, by offering the value-added services they require. These
services include capabilities for switched access, toll-free services and
prepaid phone cards. We plan to offer these wholesale capabilities in
selected countries as early as mid-1999.
- REDUCE COSTS THROUGH INTERCONNECTION AGREEMENTS AND PEERING. By
establishing interconnection arrangements with ITOs in liberalized markets
and direct operating agreements with ITOs in emerging markets, we can keep
our costs of terminating calls lower and exercise greater control over
quality and transmission capacity than we can using refile or resale
agreements. Similarly, entering into additional agreements for the
exchange of IP traffic free of charge ("peering") will minimize the cost
of terminating our IP traffic.
NETWORK
We carry traffic to any destination in the world. Voice traffic is carried
either directly or through "refile" or "resale" agreements with other carriers
who have a local switch or multiplexer and an interconnection agreement with the
relevant ITO. IP traffic is terminated either through peering or by exchanging
such traffic for a transit fee. The focus of our network strategy is to own key
components such as switches, multiplexers and routers and minimize resources
required to develop and deploy our network.
EXISTING NETWORK
- We have installed voice switches in Frankfurt, London, New York, Vienna
and Zurich. We have installed stand-alone multiplexers in Amsterdam,
Geneva and Paris. We are currently installing voice switches in Amsterdam,
Berlin, Dusseldorf, Hamburg and Paris.
- We have installed IP routers in Amsterdam, Frankfurt, Geneva, London, New
York, Paris, Vienna and Zurich. We are currently installing IP routers in
Berlin, Dusseldorf and Hamburg.
- We hold a transatlantic IRU connecting London and New York and we are
initially leasing our European transmission platform.
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- We have entered into interconnection arrangements to provide for the local
termination of our voice traffic with carriers in Austria, Denmark,
Germany, The Netherlands, Sweden, Switzerland, the United Kingdom and the
United States. We have implemented such arrangements in Austria, Germany,
Switzerland, the United Kingdom and the United States. Where we have not
yet implemented interconnection arrangements, we use refile or resale
arrangements to terminate voice traffic. For the termination of IP
traffic, we have either peering or transit arrangements with a number of
ISPs in Europe and the United States.
FUTURE NETWORK EXPANSION
- By December 1999, we intend to have installed additional voice switches or
multiplexers and routers in Brussels, Cologne, Copenhagen, Dublin,
Hamburg, Leipzig, Manchester, Milan, Munich, Stockholm, and Stuttgart.
- By mid-1999, we intend to have leased additional capacity and begin
replacing leased fiber with owned fiber or other low cost alternatives.
- We expect a transatlantic cable connecting Frankfurt, Amsterdam and New
York, in which we have purchased an IRU, to be operational by April 1999.
By the end of 2000, we expect a transatlantic cable connecting Amsterdam,
London and New York in which we have arranged to purchase a multiple
investment unit ("MIU") to be operational.
- In the first quarter of 2000, we expect the German Network to be in full
operation, connecting Berlin, Bremen, Cologne, Dortmund, Dresden,
Dusseldorf, Essen, Frankfurt, Hamburg, Leipzig, Mannheim, Munich,
Nuremberg and Stuttgart.
- We initiated interconnection negotiations with Belgacom in Belgium, Tele
Danmark in Denmark, France Telecom in France, Telecom Eireann in Ireland,
Telecom Italia in Italy and Telia in Sweden in early 1999. By December
1999, we intend to have implemented direct operating agreements with local
carriers for termination of voice traffic in a number of emerging markets
in which we do not have a switch or multiplexer. We will continue to seek
additional peering arrangements.
EQUITY SPONSORS AND BOARD OF DIRECTORS
Funds managed by Providence Equity Partners Inc. ("Providence") and Primus
Venture Partners, Inc. ("Primus") have invested $60 million to finance the
deployment of our network and to fund start-up operations (the "Equity
Investment"). After giving effect to this investment, the Providence funds
indirectly hold approximately 75%, and the Primus funds indirectly hold
approximately 15%, of the common stock of Carrier1 International, on a fully
diluted basis. Providence is a private investment firm that specializes in
equity investments in telecommunications and media companies in the United
States and abroad. The principals of Providence manage private equity funds with
total equity commitments of more than $1.7 billion and have sponsored
investments in companies including American Cellular Corporation, Brooks Fiber
Properties Inc., MetroNet Communications Corp., Verio Inc. and Western Wireless
Corp. Primus is a private investment firm that focuses on equity investments in
telecommunications and other high-technology industries. The principals of
Primus have sponsored investments in LCI International Inc. as well as in other
telecommunications companies.
In addition to representatives from Carrier1's management, Providence and
Primus, the board of directors of Carrier1 includes Victor A. Pelson, former
Chairman of Global Operations for AT&T, and Thomas J. Wynne, former President
and Chief Operating Officer of LCI International.
USE OF PROCEEDS
There will be no proceeds from the issuance of New Notes pursuant to the
Exchange Offer. The net proceeds from the Original Offering are approximately
$245 million (based on a conversion rate of Euro into U.S. dollars of
[Euro]0.90316 to $1.00), after deducting discounts and commissions and estimated
expenses
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<PAGE>
of the Original Offering payable by Carrier1 International. We intend to use the
net proceeds from the Original Offering primarily to finance the construction
and start-up costs of the German Network and the acquisition of transmission
capacity, switches, multiplexers, routers and other equipment. In addition, at
the closing of the Original Offering, we used approximately $49.2 million of the
net proceeds to purchase a portfolio of U.S. government securities and
approximately [Euro]26.9 million ($29.8 million) of the net proceeds to purchase
a portfolio of European government securities, and pledged these portfolios as
security for the benefit of the holders of the respective series of Notes to
secure and fund the first five interest payments. The balance of the proceeds
will be used for other capital expenditures and general corporate and working
capital purposes. We are also in the process of negotiating an accounts
receivable facility with a major commercial bank and are discussing equipment
financing facilities with major equipment suppliers. We believe that the net
proceeds of the Original Offering and the Equity Investment, together with
either (i) proceeds of possible sales of dark fiber on the German Network, (ii)
proceeds from an accounts receivable facility, if completed, or (iii) proceeds
from one or more equipment financing facilities, or a combination of these
sources, will be sufficient to fund the expansion of our business as planned and
to fund operations until we achieve positive cash flow from operations. See
"Risk Factors-- We Need Substantial Capital to Finance Our Business."
* * *
Carrier1 International is a holding company and renders its services
indirectly through subsidiaries primarily located in various Western European
countries. Its registered office is located at L-8009, Strassen, Route d'Arlon
3, Luxembourg. Executive offices of Carrier1 International GmbH, its principal
management services subsidiary, are located at Militarstrasse 36, CH-8004
Zurich, Switzerland. Its phone number is 011-41-1-297-2600.
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SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
We completed on February 19, 1999 the private offering (the "Original
Offering") of (i) $160,000,000 representing 160,000 Units, each such Dollar Unit
(a "Dollar Unit") consisting of one 13 1/4% Senior Dollar Note due 2009 and one
Dollar Warrant to purchase shares of common stock and (ii) [Euro]85,000,000
representing 85,000 Units, each such Euro Unit (a "Euro Unit") consisting of one
13 1/4% Senior Euro Note due 2009 and one Euro Warrant to purchase shares of
common stock. Such offering of Dollar Units and Euro Units is referred to herein
as the "Original Offering." We entered into a registration rights agreement with
the placement agents in the Original Offering in which we agreed, among other
things, to deliver to you this Prospectus and to use our best efforts to
complete an exchange offer for the Old Notes. You are entitled to exchange in
this exchange offer (the "Exchange Offer") Old Dollar Notes for New Dollar Notes
and Old Euro Notes for New Euro Notes. The terms of the New Notes are identical
to the terms of the relevant Old Notes except that the New Notes (i) are
registered under the Securities Act, and therefore will not contain restrictions
on transfer, (ii) will not contain certain provisions relating to additional
interest and (iii) will contain terms of an administrative nature that differ
from those of the Old Notes. If the Exchange Offer is not completed within six
months of the original issuance of the Old Notes, then the interest rates on Old
Notes will increase by 0.5% per annum until the Exchange Offer is consummated or
a shelf registration statement relating to the Old Notes is declared effective.
You should read the discussion under the headings "--Summary of the Terms of the
New Notes" and "Description of the Notes" for further information regarding the
New Notes.
We believe that the New Notes that will be issued in this Exchange Offer may
be resold by you without compliance with the registration and prospectus
delivery provisions of the Securities Act, subject to certain conditions. You
should read the discussion under the heading "The Exchange Offer" for further
information regarding the Exchange Offer and resale of the New Notes.
<TABLE>
<S> <C>
The Exchange Offer........... New Notes are being offered in exchange for an equal
principal amount of Old Notes of each series. As of the date
hereof, $160,000,000 aggregate principal amount of Old
Dollar Notes is outstanding and [Euro]85,000,000 aggregate
principal amount of Old Euro Notes is outstanding.
Resale of New Notes.......... Based on interpretations by the staff of the Commission as
set forth in no-action letters issued to certain third
parties unrelated to us, we believe that the New Notes
issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such
holder that is a broker-dealer or an "affiliate" of Carrier1
International within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act,
provided that (i) such New Notes are acquired in the
ordinary course of business, (ii) at the time of the
commencement of the Exchange Offer such holder has no
arrangement or understanding with any person to participate
in a distribution of the New Notes and (iii) such holder is
not engaged in, and does not intend to engage in, a
distribution of the New Notes. By tendering Old Notes in
exchange for New Notes, each holder will represent to us
that: (i) any New Notes received by such holder will be
acquired in the ordinary course of business, (ii) such
holder will have no arrangements or understandings with any
person to participate in the distribution of the New Notes
within the meaning of the Securities Act, and (iii) such
holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of Carrier1 International. If such holder is
a broker-dealer, it will also be deemed to represent that
the Old Notes were acquired as a result of market-making
activities or other trading activities and that it
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
will deliver a prospectus in connection with any resale of
New Notes. Each such holder, whether or not it is a
broker-dealer, will also be deemed to represent that it is
not acting on behalf of any person that could not truthfully
make any of the foregoing representations.
If a holder of Old Notes is unable to make the foregoing
representations, such holder may not rely on the applicable
interpretations of the staff of the Commission as set forth
in such no-action letters, and must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale
transaction.
Registration Rights
Agreement.................. We sold the Old Notes on February 19, 1999, in a private
placement in reliance on Section 4(2) of the Securities Act.
The Old Notes were resold by the initial purchasers in
reliance on Rule 144A and Regulation S under the Securities
Act. In connection with the sale to the initial purchasers,
we entered into a Registration Rights Agreement with the
initial purchasers (the "Registration Rights Agreement")
requiring us to use our best efforts to make the Exchange
Offer. The Registration Rights Agreement also requires us to
use our reasonable best efforts to consummate the Exchange
Offer not later than 60 days after the date on which this
Registration Statement is declared effective.
Under certain circumstances specified in the Registration
Rights Agreement, we may be required to file a "shelf"
registration statement for a continuous offering pursuant to
Rule 415 under the Securities Act in respect of the Old
Notes. See "Description of the Notes--Registration Rights."
Consequence of Failure to
Exchange Old Notes......... Upon consummation of the Exchange Offer, subject to certain
limited exceptions, holders of Old Notes who do not exchange
their Old Notes for New Notes in the Exchange Offer will no
longer be entitled to registration rights and will not be
able to offer or sell their Old Notes, unless such Old Notes
are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have
no obligation to do), except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and
applicable state securities laws. See "The Exchange
Offer--Terms of the Exchange Offer" and "--Consequences of
Failure to Exchange."
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1999 (at least 20 business days
following the commencement of the Exchange Offer), unless
the Exchange Offer is extended by us in our sole discretion,
in which case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is extended.
Interest on the New Notes.... The New Notes will accrue interest at a rate of 13 1/4% per
annum from February 19, 1999, the issue date of the Old
Notes (the "Issue Date"), or from the most recent date to
which interest has been paid or provided for on the Old
Notes. Interest on the New Notes is payable on February 15
and August 15 of each year, beginning on August 15, 1999. No
additional interest will be paid on Old Notes tendered and
accepted for exchange.
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Condition to the Exchange
Offer...................... The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange.
However, the Exchange Offer is subject to certain customary
conditions, which may be waived by us. See "The Exchange
Offer--Conditions."
Procedures for Tendering Old
Notes...................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a copy thereof, in accordance with the
instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such copy,
together with any other required documentation to the
Exchange Agent (as defined herein) at the address set forth
herein and effect a tender of Old Notes pursuant to the
procedures for book-entry transfer (or other applicable
procedures) as provided for herein. See "The Exchange
Offer--Procedures for Tendering," "--Book-Entry Transfer,"
and "--Guaranteed Delivery Procedures." Certain other
procedures may apply with respect to certain book-entry
transfers. See "The Exchange Offer--Exchanging Book-Entry
Notes."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old Notes and
who cannot deliver their Old Notes and a properly completed
Letter of Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights............ Tenders of Old Notes may be withdrawn to any time prior to
5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes, a written or facsimile
transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of New Notes...... Subject to certain conditions, any and all Old Notes that
are validly tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date will be
accepted for exchange. The New Notes issued pursuant to the
Exchange Offer will be delivered as soon as practicable
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Certain U.S. Tax
Consequences............... We believe that the exchange of Old Notes for New Notes will
not constitute a taxable exchange for U.S. federal income
tax purposes. See "Taxation."
Exchange Agent............... The Chase Manhattan Bank, the trustee under each of the
indentures governing the Notes (the "Trustee") is serving as
exchange agent (in such capacity the "Exchange Agent"), in
connection with the Exchange Offer.
Fees and Expenses............ Expenses incident to our consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will
be borne by us. See "The Exchange Offer--Fees and Expenses."
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
SUMMARY OF THE TERMS OF THE NEW NOTES
Notes Offered................ $160,000,000 principal amount of 13.25% Senior Dollar Notes
due 2009 and [Euro]85,000,000 principal amount of 13.25%
Senior Euro Notes due 2009.
Maturity..................... February 15, 2009.
Interest..................... Interest will be payable in cash on February 15 and August
15 of each year, beginning August 15, 1999.
Optional Redemption.......... We may redeem any of the Notes beginning on February 15,
2004. The initial redemption price is 106.625% of their
principal amount, plus accrued interest. The redemption
prices will decline each year after 2004 and will be 100% of
their principal amount, plus accrued interest, beginning on
February 15, 2007.
In addition, before February 15, 2002, we may redeem up to
35% of the aggregate amount of either series of Notes with
the proceeds of sales of certain kinds of our capital stock
at 113.25% of their principal amount. We may make such
redemption only if after any such redemption, an amount
equal to at least 65% of the aggregate principal amount of
such Notes originally issued remains outstanding.
Additional Amounts........... All payments on the Notes will be made without withholding
or deduction for taxes unless required by law. If required
by law, we will pay, subject to certain exceptions, the
additional amounts necessary so that the net amount received
by holders will not be less than the amount that they would
have received in the absence of any withholding or
deduction.
Tax Redemption............... In the event that we are obligated to pay any additional
amounts as a result of certain changes affecting withholding
tax laws and cannot reasonably arrange (without other
material adverse consequences to us) for another obligor to
make such payment to avoid paying such additional amounts,
then we may redeem all the Notes at 100% of their principal
amount, plus accrued interest.
Security..................... We have purchased a portfolio of U.S. government securities
and pledged this portfolio for the benefit of the holders of
the Dollar Notes to secure and fund the first five interest
payments on such Notes. We have purchased a portfolio of
European government securities and pledged this portfolio
for the benefit of the holders of the Euro Notes to secure
and fund the first five interest payments on such Notes.
Change of Control............ Upon a change of control (as defined under "Description of
the Notes"), we will be required to make an offer to
purchase the Notes. The purchase price will equal 101% of
their principal amount plus accrued interest. We may not
have sufficient funds available at the time of any change of
control to make any required debt payment (including
repurchases of the Notes).
Ranking...................... The Notes will rank equally with all Carrier1
International's other unsubordinated unsecured indebtedness
and will be junior to all Carrier1 International's secured
indebtedness except as described above under "--Security".
The Notes also will be junior to all liabilities of Carrier1
International's subsidiaries. At December 31, 1998, assuming
the Notes had been outstanding at that time, Carrier1
International would have had no indebtedness other than the
Notes and Carrier1 International's subsidiaries would have
had $32.2 million
</TABLE>
16
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<TABLE>
<S> <C>
of current liabilities. See Carrier1's consolidated balance
sheet included elsewhere in this Prospectus.
Certain Covenants............ The terms of the Notes will restrict our ability and the
ability of certain of our subsidiaries (as described in
"Description of the Notes") to:
- incur additional indebtedness,
- create liens,
- engage in sale-leaseback transactions,
- pay dividends or make distributions in respect of
capital stock,
- redeem capital stock,
- make investments or certain other restricted payments,
- sell assets,
- issue or sell stock of restricted subsidiaries,
- enter into transactions with stockholders or
affiliates, or
- effect a consolidation or merger.
However, these limitations will be subject to a number of
important qualifications and exceptions.
Trading...................... It is expected that application will be made to have the
Euro Notes included on the Regulated Unofficial Market
(Freiverkehr) of the Frankfurt Stock Exchange.
</TABLE>
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors relating to us, our business and an investment in the Notes.
17
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of
Carrier1 for the period from February 20, 1998 ("Inception") to December 31,
1998. The summary consolidated financial data as of and for the period from
Inception to December 31, 1998, were derived from the consolidated financial
statements of the Company which were audited by Deloitte & Touche Experta AG,
independent auditors. The information set forth below is not necessarily
indicative of the results of future operations and should be read in conjunction
with the consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
INCEPTION TO
DECEMBER 31,
1998
------------
(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues............................................................................................ $ 2,792
Cost of services.................................................................................... 11,669
Selling, general and administrative expenses........................................................ 8,977
Depreciation and amortization....................................................................... 1,409
------------
Loss from operations................................................................................ (19,263)
Interest income..................................................................................... 81
Other income (expense), net......................................................................... (53)
------------
Loss before income tax benefit...................................................................... (19,235)
Income tax benefit, net of valuation allowance...................................................... --
------------
Net loss............................................................................................ $ (19,235)
------------
------------
Net loss per share (basic).......................................................................... $ (2.61)
Net loss per share (diluted)(1)..................................................................... (2.61)
OTHER FINANCIAL DATA:
EBITDA(2)........................................................................................... $ (17,854)
Capital expenditures(3)............................................................................. 37,168
Ratio of earnings to fixed charges(4)............................................................... --
Net cash used in operating activities............................................................... (14,441)
Net cash used in investing activities............................................................... (19,866)
Net cash provided by financing activities........................................................... 37,770
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
--------------------------
ACTUAL AS ADJUSTED(5)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 4,184 $ 192,469(6)
Restricted cash.................................................................... 1,518 1,518
Restricted investments (7)......................................................... -- 78,936
Total assets (8)................................................................... 51,434 327,778(6)
Total debt (9)..................................................................... -- 251,810(6)
Shareholders' equity............................................................... 19,189 43,723
</TABLE>
- ------------------------
(1) Potential dilutive securities have been excluded from the computation for
the period from Inception to December 31, 1998 as their effect is
antidilutive.
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<PAGE>
(2) EBITDA represents net income (loss) before interest, income taxes,
depreciation and amortization and other income (expense). EBITDA is a
measure commonly used in the telecommunications industry to analyze
companies on the basis of operating performance and as a measure of debt
service ability. It is not a measure of financial performance under
generally accepted accounting principles.
(3) Consists of purchases of property and equipment and investment in joint
venture.
(4) The ratio of earnings to fixed charges is calculated as the sum of income
before taxes plus interest expense divided by fixed charges. Fixed charges
consist of the portion of rental expense deemed representative of interest.
Earnings were insufficient to cover fixed charges in the period from
Inception to December 31, 1998, by $19.3 million.
(5) Reflects the Equity Investment, the sale of Units pursuant to the Original
Offering, and the application of the net proceeds as described in "Use of
Proceeds."
(6) Assuming a conversion rate of Euro into U.S. dollars of [Euro]0.90316 per
$1.00.
(7) Reflects the portion of the net proceeds for the Original Offering used to
purchase U.S. government securities and European government securities to
secure and fund the first five scheduled interest payments on the Dollar
Notes and Euro Notes, respectively, assuming a conversion rate of Euro into
U.S. dollars of [Euro]0.90316 to $1.00. See "Description of the
Notes--Security."
(8) Includes capitalized financing costs of approximately $9.1 million.
(9) Of the $160.0 million gross proceeds from the issuance of the Dollar Units
and the [Euro]85.0 million gross proceeds from the issuance of Euro Units,
$158.6 million and [Euro]84.2 million ($93.3 million) have been allocated to
the principal amounts of the Dollar Notes and the Euro Notes, respectively,
and $1.4 million and [Euro]0.8 million ($0.9 million) have been allocated to
the issuance of the Dollar Warrants and Euro Warrants, respectively.
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<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW AND OTHER
INFORMATION IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. THE RISKS
AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING US. ADDITIONAL
RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE MAY CURRENTLY DEEM
IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS OR ABILITY TO PAY PRINCIPAL OR INTEREST ON THE
NOTES COULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT EVENT, YOU MAY LOSE ALL OR
PART OF YOUR INVESTMENT.
IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD
UNREGISTERED OLD NOTES AND YOUR ABILITY TO TRANSFER OLD NOTES WILL BE
ADVERSELY AFFECTED
We will only issue New Notes in exchange for Old Notes that are timely
tendered to the Exchange Agent together with all required documents, including a
properly completed and signed Letter of Transmittal. Therefore, you should allow
sufficient time to ensure timely delivery of the Old Notes and you should
carefully follow the instructions on how to tender your Old Notes. Neither we
nor the Exchange Agent are required to tell you of any defects or irregularities
with respect to your tender of the Old Notes. If you do not exchange your Old
Notes for New Notes pursuant to the Exchange Offer, the Old Notes you hold will
continue to be subject to the existing transfer restrictions. In general, the
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. We do not currently
anticipate that we will register Old Notes under the Securities Act.
After the Exchange Offer is consummated, if you continue to hold any Old
Notes of either series, you may have trouble selling them because there will be
less Old Notes of such series outstanding. In addition, if a large amount of Old
Notes of either series are not tendered or are tendered improperly, the limited
amount of New Notes of such series that would be issued and outstanding after we
consummate the Exchange Offer could lower the market price of such New Notes.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to certain third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any such holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business, such
holders have no agreement or understanding with any person to participate in the
distributions of such New Notes at the time of commencement of the Exchange
Offer and such holders are not engaged in, and do not intend to engage in,
distributions of the New Notes. However, the Commission has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each holder
must acknowledge that (i) any New Notes received by such holder will be acquired
in the ordinary course of business, (ii) such holder will have no arrangements
or understandings with any person to participate in the distribution of the New
Notes within the meaning of the Securities Act and (iii) such holder is not an
"affiliate," as defined in Rule 405 of the Securities Act, of Carrier1
International. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must also acknowledge that the Old Notes held by
it were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Notes. Each holder, whether or not it is a broker-dealer, must also
acknowledge that it is not acting on behalf of any person that could not
truthfully make any of the foregoing acknowledgements. With respect to
broker-dealers, the Letter of Transmittal states that by making the above
acknowledgements and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an
20
<PAGE>
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by certain
broker-dealers in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. For a period of 90 days
after the Expiration Date, the Company will make this Prospectus available to
any such broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
WE HAVE A LIMITED OPERATING HISTORY
We formed our business in March 1998, and we commenced commercial operations
on September 1, 1998. Accordingly, you have limited historical operating and
financial information on which to base your evaluation of our performance and an
investment in the Units.
WE EXPECT TO EXPERIENCE NET LOSSES AND NEGATIVE CASH FLOW
Our continued business development and network deployment will require that
we incur substantial capital expenditures. In general, we expect to incur net
losses and negative cash flow from operating activities through 2000. However,
our net losses and negative cash flow from operating activities are likely to
continue beyond that time if:
- we decide to build extensions to our network because we cannot otherwise
reduce our transmission costs;
- we do not establish a customer base that generates sufficient revenue;
- we do not reduce our termination costs by negotiating competitive
interconnection rates and peering arrangements as we expand our network;
- prices decline faster than we have anticipated;
- we do not attract and retain qualified personnel; or
- we do not obtain necessary governmental approvals and operator licenses.
Our ability to achieve these objectives is subject to financial,
competitive, regulatory, technical and other factors, many of which are beyond
our control. We cannot assure you that we will achieve profitability or positive
cash flow.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
At least initially, our revenues are dependent upon a relatively small
number of customers and contracts. The loss or addition of one or more customers
or contracts could cause significant fluctuations in our financial performance.
In addition, the significant expenses resulting from the expansion of our
network and services are likely to lead to operating results that vary
significantly from quarter to quarter.
WE NEED SUBSTANTIAL CAPITAL TO FINANCE OUR BUSINESS
As we continue to deploy our network and grow our business, we will require
significant capital to fund our capital expenditures and working capital needs,
as well as our debt service requirements and cash flow deficits.
We expect to incur significant capital expenditures in connection with the
expansion of our network, including building the German Network, and acquiring
additional switches, multiplexers, routers and transmission equipment. We
estimate that our aggregate capital requirements to fund the deployment and
operation of our network will total approximately $200 million through 1999.
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We believe that the net proceeds from the Original Offering and the Equity
Investment, together with proceeds of possible sales of dark fiber on the German
Network or from an accounts receivable facility or from one or more equipment
financing facilities, if completed, or a combination of these sources, will be
sufficient to fund the expansion of Carrier1's business as planned and to fund
operations until we achieve positive cash flow from operations. However, the
actual amounts and timing of our future capital requirements may vary
significantly from our estimates. The demand for our services, regulatory
developments and the competitive environment of the telecommunications industry
could cause our capital needs to exceed our current expectations. For example,
we may need to seek additional capital sooner than we expect if:
- our development plans (including our network deployment plans) or
projections change or prove to be inaccurate;
- we do not sell dark fiber on the German Network or enter into an accounts
receivable or equipment financing facility;
- we cannot expand our network at our target cost levels without building
new capacity;
- we cannot achieve a sufficient customer base and level of traffic;
- cost overruns occur in connection with the construction of the German
Network;
- we cannot obtain interconnection agreements as we expand our network;
- we cannot obtain additional peering arrangements, increasing IP
termination costs;
- competition reduces prices faster than we expect; or
- the technology for a single IP-based transmission platform only becomes
available after a significant portion of our network has been deployed.
Such additional financing may not be available on acceptable terms or at
all. Moreover, our substantial indebtedness as a result of the Original Offering
and other possible future debt financings may adversely affect our ability to
raise additional funds. A lack of financing may require us to delay or abandon
plans for deploying parts of our network.
WE HAVE SUBSTANTIAL INDEBTEDNESS, AND WE MAY INCUR MORE INDEBTEDNESS
We have significant indebtedness. The following table shows certain
important credit statistics and is presented assuming we had completed the
Original Offering and received the Equity Investment as of the date specified
below and applied the net proceeds as intended.
<TABLE>
<CAPTION>
DECEMBER 31,
1998
(AS ADJUSTED)
---------------
(IN MILLIONS)
<S> <C>
Total debt....................................................................................... $ 251.8
Shareholders' equity............................................................................. 43.7
Total debt as a percentage of total capitalization............................................... 85%
</TABLE>
Our deficiency of earnings to fixed charges for the period from Inception to
December 31, 1998 was $19.3 million, which does not give effect to the
completion of the Original Offering or receipt of the full Equity Investment.
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The Indentures limit, but do not prohibit, our incurrence of additional
indebtedness. Moreover, the Indentures permit us to incur an unlimited amount of
indebtedness to finance the acquisition of equipment, inventory and network
assets.
Our substantial indebtedness will have important consequences to you. For
example:
- The debt service requirements of any additional indebtedness could make it
more difficult for us to make payments on the Notes.
- Our ability to borrow additional money for working capital, capital
expenditures, debt service requirements or other purposes will be limited.
- A substantial portion of our future cash flow from operations, if any,
will be used to pay principal and interest on our indebtedness and other
obligations and will not be available for our business.
- Our flexibility in planning for, or reacting to changes in, our business
and our ability to take advantage of future business opportunities may be
restricted.
- We may have more indebtedness than certain of our competitors, which may
place us at a competitive disadvantage.
- We may be limited in our ability to react to changing market conditions,
changes in our industry, or economic downturns.
Our ability to pay interest on the Notes and meet our other debt service
obligations will depend on our future performance, which in turn depends on
successful implementation of our strategy and on financial, competitive,
regulatory, technical and other factors, many of which are beyond our control.
If we cannot generate sufficient cash flow from operations to meet our debt
service requirements, we may be required to refinance our indebtedness
(including the Notes). Our ability to obtain such financing will depend on our
financial condition at the time, the restrictions in the agreements governing
our indebtedness and other factors, including general market and economic
conditions. If such refinancing were not possible, we could be forced to dispose
of assets at unfavorable prices. In addition, we could default on our debt
obligations, including our obligation to make payments on the Notes.
OUR DEBT AGREEMENTS IMPOSE OPERATING AND FINANCIAL RESTRICTIONS
The Indentures impose significant operating and financial restrictions on
us. The terms of any other financings we may obtain may do so as well. These
restrictions may substantially limit or prohibit us from taking various actions
including incurring additional debt, making investments, paying dividends to our
shareholders, creating liens, selling assets, engaging in mergers and
consolidations, repurchasing or redeeming capital stock and capitalizing on
business opportunities. See "Description of the Notes."
Failure to comply with the covenants and restrictions in the Indentures or
other financing agreements could trigger defaults under such agreements even if
we are able to pay our debt. Such defaults could result in a default on the
Notes and could delay or preclude payment of principal of or interest on the
Notes.
WE NEED TO EXTEND OUR NETWORK
Our success will depend on our ability to continue to deploy our network on
a timely basis. We have contracted with Nortel Plc for the installation of our
switch system and with Cisco Systems International, B.V. for the installation of
our router system. A failure by either of these parties to continue to comply
with its contractual obligations could cause delays in the continued deployment
of our network. Furthermore, we and our joint venture partners have not yet
received all of the rights-of-way, wayleaves or government approvals for the
construction of the German Network and may not be able to obtain them in a
timely manner.
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If the German Network cannot be constructed within the anticipated time
frame or cost and quality specifications, we:
- will not benefit from expected lower transmission and termination costs as
we had planned and may be forced to rely more heavily on higher cost
refiling or reselling for terminating traffic, making it more difficult to
control the quality of our voice service,
- may not have sufficient capital remaining to fund other aspects of our
network expansion plan,
- will attract fewer customers and carry less traffic, and
- may not be able to lower the cost of our network expansion through the
swapping of excess capacity on the German Network for capacity on other
networks in Europe.
A number of other factors could hinder the deployment of our network. These
factors include cost overruns, the unavailability of additional capital,
strikes, shortages, delays in obtaining governmental or other third-party
approvals, natural disasters and other casualties, and other events that we
cannot foresee.
Delays in the continued deployment of our network could:
- limit the geographic scope of our services,
- prevent us from providing services on a cost-effective basis,
- reduce the number of customers we can attract and the volume of traffic we
carry,
- force us to rely more heavily on refiling or reselling for terminating our
traffic, increasing termination costs and making our quality control more
difficult, and
- affect our ability to obtain lower cost capacity on other networks by
swapping excess capacity.
Any one of these results could lower our operating revenues or adversely
impact gross margins.
WE RELY ON THIRD PARTIES FOR THE OPERATION OF CERTAIN ASPECTS OF THE NETWORK
Our success is dependent on the technical operation of our network and on
the management of traffic volumes and route selections over the network. We have
outsourced, on a turnkey basis, the technical operation and management of our
network, including network engineering, certain technical aspects of providing
service and maintenance and repair, to Nortel and Cisco. If either Nortel or
Cisco fails to perform these functions adequately or in a timely manner, our
network and our operations could be materially adversely affected. Furthermore,
we are dependent on parties from whom we have leased or acquired a right to use
transmission capacity for maintenance of certain of the network's circuits.
Shortfalls in maintenance by any of these parties could lead to transmission
failure. Our network is also subject to other risks outside our control, such as
the risk of damage from fire, power loss, natural disasters and general
transmission failures caused by these or other factors.
We intend to take over the full operation of our network by mid-1999. We may
not be able to operate and manage our network adequately once the turnkey
contracts have been terminated.
Multiple failures at different points in our network could cause
interruptions of service, and may require us to route traffic to circuits
controlled by other carriers. This alternative routing may be costly. It also
may result in a lower quality service, as we will not be able to control
performance standards. Any of the foregoing could damage our reputation or our
ability to retain or attract customers.
WE RELY ON KEY PERSONNEL
Our operations are managed by a small number of key executive officers,
including our Chief Executive Officer, Stig Johansson. The loss of any of these
individuals could have a material adverse effect on us. In addition, our success
depends on our ability to continue to attract, recruit and retain sufficient
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qualified personnel as we grow. Competition for qualified personnel in Europe is
intense, and there is generally a limited number of persons with the requisite
experience in the sectors in which we operate. We cannot assure you that we will
be able to retain senior management, integrate new managers or recruit qualified
personnel in the future.
OUR ABILITY TO ENTER INTO INTERCONNECTION AGREEMENTS AND PEERING ARRANGEMENTS
COULD AFFECT OUR BUSINESS
The most cost-effective way for a wholesale carrier to achieve termination
in a country in which it has a point of presence is to negotiate an
interconnection agreement with the national ITO. To the extent ITOs deny or
delay granting us interconnection or grant us interconnection for insufficient
capacity or in undesirable locations, we will have to terminate such traffic
through other carriers that have interconnection arrangements with those ITOs
(using refile or resale agreements). Termination through refile or resale
agreements is significantly more expensive than termination through our own
interconnection. As of December 31, 1998, we had entered into interconnection
arrangements in Austria, Germany, Switzerland, the United Kingdom and the United
States. We have implemented such arrangements in Austria, Germany, the
Netherlands, Switzerland, the United Kingdom and the United States. We currently
rely on refile or resale agreements to terminate traffic in countries in which
we have not implemented interconnection arrangements, including France. Failure
to implement adequate interconnection arrangements would cause us to continue to
incur high termination costs, which could have a material adverse effect on our
ability to compete with carriers that do have interconnection agreements.
Our ability to obtain peering arrangements with European and United States
ISPs will also affect our costs. The major United States ISPs require almost all
European ISPs and IP backbone providers, including us, to pay a transit fee to
exchange traffic. We also have to pay a transit fee to exchange traffic with
large European IP backbone providers until we have added a critical mass of
customers onto our IP backbone. See "Business--Services--Wholesale IP Service."
We have negotiated peering arrangements with several IP backbone providers, such
as Epoch Networks Inc., in which an affiliate of Providence holds a 21% equity
interest, and several European ISPs. However, there can be no assurance we will
be able to negotiate additional "peer" status with nationwide United States ISPs
or European IP backbone providers or that we will be able to terminate traffic
on their networks at favorable prices. Our inability to obtain peering
arrangements would keep our IP termination costs high and could limit our
ability to compete effectively with other European IP backbone providers that
have more peering arrangements than we do.
Recently, the Internet services industry has experienced increased merger
and consolidation activity among ISPs and IP backbone providers. This activity
is likely to increase the concentration of market power of IP backbone
providers, and may adversely affect our ability to obtain peering arrangements.
GOVERNMENT REGULATION SIGNIFICANTLY AFFECTS OUR BUSINESS
As a multinational telecommunications company, we are subject to varying
degrees of regulation in each of the jurisdictions in which we provide services.
Local laws and regulations, and the interpretation of such laws and regulations,
differ significantly among the jurisdictions in which we operate. Future
regulatory, judicial and legislative changes may have a material adverse effect
on the operation of our business.
The recent steps of the European Commission to implement full liberalization
of the telecommunications market, as well as the World Trade Organization Basic
Telecom Agreement, have significantly reduced the regulatory barriers to entry
in the markets in which we operate, or intend to operate. However, national
regulatory frameworks that are fully consistent with the policies and
requirements of the European Commission and the World Trade Organization have
only recently been, or are still being, put in place in many European Union
member states. These nations are in the early stages
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<PAGE>
of providing for and adapting to a liberalized telecommunications market. As a
result, in these markets, we and other new entrants may encounter more
protracted and difficult procedures to obtain licenses and negotiate
interconnection agreements.
Our operations are dependent on licenses that we acquire from governmental
authorities in each jurisdiction in which we operate. These licenses and
authorizations generally contain clauses pursuant to which we may be fined or
our license may be revoked in certain circumstances. Such revocation may be on
short notice, at times as short as 30 days' written notice to us. The revocation
of any of our licenses would force us to stop operating in the relevant country.
THE EUROPEAN TELECOMMUNICATIONS MARKET IS HIGHLY COMPETITIVE
The European telecommunications market is highly competitive, and
liberalization is rendering it increasingly more so. The opening of the market
to new service providers, combined with technological advances, has resulted in
significant reductions in retail and wholesale prices for voice services. Prices
declined significantly during 1998, and we expect prices to continue to decline.
While decreasing prices are fueling growing demand for bandwidth, they are also
narrowing gross profit margins on long distance voice traffic. Our ability to
compete successfully in this environment will significantly depend on our
ability to generate high traffic volumes from our customers while keeping our
costs of services low. We cannot assure you that we will be able to do so.
Prices for IP services remain relatively high in Europe. However, the United
States market for IP services has been experiencing downward pressure on prices,
and we expect comparable price decreases in the European IP market over the next
few years as competition increases. We cannot assure you that IP service prices
will not decline more quickly than our IP transmission or termination costs,
which could have a material adverse effect on our gross profit margins.
We compete with a number of ITOs. In many European countries, the ITO
controls access to local networks and has significant operational economies,
including a large national network, and existing operating agreements with other
ITOs. Moreover, ITOs generally have close ties with national regulatory
authorities, which have, in some instances, shown reluctance to adopt policies
and grant regulatory approvals that would result in increased competition for
the local ITO. In addition, many of our competitors are associated with ITOs,
and these ITOs may be more likely to provide transmission capacity on favorable
terms and direct excess traffic to their related carriers than to us.
In IP services, our main competitors have an established customer base and
either a significant infrastructure or strong connectivity to the United States
through various peering arrangements. We believe that, if the quality of the
service is consistently high, IP customers will typically renew their contracts
because it is costly and technically burdensome to switch carriers, which could
impede our ability to attract new customers.
We also compete with companies that have announced that they are building
European networks to the extent these companies offer wholesale services. These
companies include ITOs, Global Crossing Ltd., the KPN Telecom/Qwest
Communications International Inc. alliance, MCI WorldCom, Inc., STAR
Telecommunications, Inc., Viatel (one of our partners in building the German
Network), and Hermes Europe RailTel B.V. (which recently merged with Esprit
Telecom Group plc and which owns 75% of Ebone, a large European backbone
provider). Some of these companies have greater resources and more experience
operating a network than Carrier1 does. We may not be able to deploy a European
network as quickly or run it as efficiently as some or all of these competitors,
which could impair our ability to compete with them.
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Other factors contributing to the competitiveness of the wholesale carrier
market include the following:
- Basic voice carrier services are not highly differentiated, and switching
carriers is not costly. Voice customers can easily redirect their traffic
to another carrier, and certain customers may do so on the basis of even
small differences in price.
- Network buildout costs are high, creating an incentive for wholesale
carriers that have built their network to lower prices so as to increase
volume and maximize utilization rates.
- The new networks that are being built have significant excess capacity,
creating further downward pressure on prices.
Many of our competitors have greater financial resources and would be in a
better position than we would be to withstand the adverse effect on gross profit
margins caused by price decreases, particularly those competitors that already
own infrastructure and have interconnection or peering arrangements and thus
enjoy a lower cost base than we do. Unless and until we are able to reduce our
cost base, we may not be able to compete on the basis of price if market prices
are reduced below a certain level. Inability to price services competitively may
in turn cause us to lose customers.
WE DEPEND ON FACILITIES PROVIDERS FOR TRANSMISSION CAPACITY
We lease or have purchased rights to use our current transmission capacity
from other facilities-based operators, and we are therefore dependent on these
operators for much of our transmission capacity. We believe that there is a
shortage in the supply of cost-effective transmission capacity. We cannot assure
you that we will always be able to obtain capacity where and when we need it at
an acceptable price or at all. Any failure to obtain such capacity could delay
our ability to penetrate certain markets or to carry a higher volume of traffic
in the markets in which we already operate. Furthermore, to the extent some of
our capacity suppliers begin to compete with us in the provision of wholesale
telecommunications services, those suppliers may no longer be willing to provide
us with capacity.
Until the German Network is operational, we will need to lease or purchase
additional capacity as we extend our network. It is unlikely that we will be
able to obtain such capacity at our target cost levels. We will therefore, in
the short term, continue to have transmission costs that are higher than our
target cost levels and higher than the costs of our competitors who own
transmission infrastructure. Although a substantial amount of transmission
capacity construction has been announced in Europe, we cannot assure you that
the cost of leasing capacity will decrease, or that more IRUs or MIUs will
become available. In addition, if the German Network is not completed on a
timely basis, we will need to rely to a greater extent than currently
anticipated on leased lines. If we cannot obtain leases, MIUs or IRUs at our
target cost levels for the future capacity we will require beyond that capacity
we own, we will need to build or purchase (if available) that additional
capacity. To build additional capacity, we would need to incur additional
capital expenditures.
We rely on other carriers to provide certain termination services.
Negotiation of refile or resale agreements with such carriers involves making
estimates of the future calling patterns and traffic levels of our customers.
Underestimation of traffic levels or failure to estimate calling patterns
correctly could lead to:
- a shortage of capacity, requiring us to either lease more capacity or
reroute calls to other carriers at a higher termination cost,
- higher termination costs, as we may have to use additional, higher priced,
refilers or resellers, and
- a possibly lower quality of service, as we may not be carrying the traffic
over our own network.
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Our leased capacity costs are fixed monthly payments based on the capacity
made available to us. If our traffic volumes decrease, or do not grow as
expected, the resulting idle capacity will increase our per unit costs.
WE DEPEND ON SOPHISTICATED BILLING, CUSTOMER AND INFORMATION SYSTEMS
Sophisticated information systems are vital to our growth and our ability
to:
- manage and monitor traffic along our network,
- track service provisioning, traffic faults and repairs,
- effect least cost routing,
- achieve operating efficiencies,
- monitor costs,
- bill and receive payments from customers, and
- reduce credit exposure.
We have outsourced to International Computers Limited the running of our
billing system program. Errors or problems with International Computers
Limited's computer systems could delay our ability to send bills to our
customers or to provide billing information on-line. We plan to take over the
full operation of our billing system by June 1999. We cannot assure you that
this transition will not cause delays or interruptions in our monitoring and
billing activities.
The billing and information systems we have acquired will require
enhancements and ongoing investments, particularly as traffic volume increases.
We may encounter difficulties in enhancing our systems or integrating new
technology into our systems in a timely and cost-effective manner. Such
difficulties could have a material adverse effect on our ability to operate
efficiently and to provide adequate customer service.
THE TELECOMMUNICATIONS INDUSTRY AND ITS TECHNOLOGIES ARE CHANGING RAPIDLY
The European telecommunications industry is changing rapidly due to, among
other things:
- market liberalization,
- significant technological advancements,
- introductions of new products and services utilizing new technologies,
- increased availability of transmission capacity,
- expansion of telecommunications infrastructure, and
- increased use of the Internet for voice and data transmission.
If the growth we anticipate in the demand for voice and IP services were not
to occur or we were precluded from servicing this demand, we might not be able
to generate sufficient revenues in the next few years to fund our working
capital requirements.
To compete effectively, we must anticipate and adapt to rapid technological
changes and offer, on a timely basis, competitively priced services that meet
evolving industry standards and customer preferences. We may choose new
technologies that prove to be inadequate or incompatible with technologies of
our customers, providers of transmission capacity or other carriers. As new
technologies develop, we may be forced to implement such new technologies at
substantial cost to remain competitive. In addition, competitors may implement
new technologies before we do, allowing such competitors to provide lower
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priced or enhanced services and superior quality compared to those we provide.
Such a development could have a material adverse effect on our ability to
compete, particularly because we seek to distinguish ourselves on the basis of
the quality of our services.
WHOLESALE CUSTOMERS ARE PRICE SENSITIVE; WE RELY ON A SMALL NUMBER OF
SIGNIFICANT CUSTOMERS
Voice customers often maintain relationships with a number of
telecommunications providers, and our contracts with our wholesale voice
customers generally do not impose on customers minimum or maximum usage
requirements. Furthermore, basic voice services are not highly differentiated.
As a result, most customers are price sensitive and certain customers may divert
their traffic to another carrier based solely on small price changes. These
diversions can result in large and abrupt fluctuations in revenues. The majority
of our IP contracts to date have been usage-based, with no minimum volume
commitment by the customer. We will seek to retain our wholesale customers by
providing high quality service and customer care. There can be no assurance that
small variations between our prices and those of other carriers will not cause
our voice customers to divert their traffic.
We currently depend on a small number of significant customers for our
revenues. From our formation to December 31, 1998, we earned 69% of our revenues
from three major customers, the most significant of which accounted for 46% of
total revenues for the period. One new customer may account for up to 50% of our
revenues in the near term. The loss of any single customer could therefore have
a material adverse effect on us. In addition, certain wholesale customers may be
unprofitable or only marginally profitable, resulting in a higher risk of
delinquency or nonpayment. Recently, the Internet services industry has
experienced increased merger and consolidation activity among ISPs and IP
backbone providers. The consolidation of ISPs may reduce the customer base for
our IP services.
Our contracts with our wholesale customers require us to carry their voice
traffic at a contractually fixed price per minute that can only be changed upon
seven or thirty days' notice. Similarly, we have contracted with some IP
customers to carry their IP traffic at a fixed monthly rate that can only be
changed upon six or twelve months' notice. If we were forced to carry voice or
IP traffic over a higher-cost route due to capacity and quality constraints, our
gross profit margins would be reduced.
WE MUST ADEQUATELY MANAGE RAPID GROWTH
We expect our business to continue to grow rapidly, which may significantly
strain our customer support, sales and marketing and administrative resources
and network operation and management and billing systems. Such a strain on our
operational and administrative capabilities could adversely affect the quality
of our services and our ability to collect revenues. To manage our growth
effectively, we will have to further enhance the efficiency of our operational
support and other back office systems, and of our financial systems and
controls. We will also have to expand and train our employee base to handle the
increased volume and complexities of our business. We cannot assure you that we
will maintain adequate internal operating, administrative and financial systems,
procedures and controls, or obtain, train and adequately manage sufficient
personnel to keep pace with our growth.
In addition, if we fail to project traffic volume and routing preferences
correctly, or to determine the optimal means of expanding the network, we could
lose customers, make inefficient use of the network, and have higher costs and
lower profit margins.
OUR ABILITY TO SERVICE THE NOTES DEPENDS ON OUR ABILITY TO GET CASH FROM OUR
SUBSIDIARIES
Carrier1 International, the issuer of the Units, is a holding company with
few assets of significance other than the stock of its subsidiaries. Carrier1
International intends to loan or contribute all or a portion of the proceeds of
the Original Offering to its subsidiaries. The cash flow and consequent ability
of Carrier1 International to service its debt obligations, including the Notes,
are dependent upon the ability of Carrier1 International to receive cash from
its subsidiaries. These subsidiaries are separate legal entities
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and have no obligations to pay amounts due under the Notes or to make funds
available for such payment. In addition, applicable law of the jurisdictions in
which these subsidiaries are organized or contractual or other obligations to
which they are subject may limit their ability to pay dividends or make payments
on intercompany loans, including those made with the proceeds of the Original
Offering. Furthermore, the payment of interest and principal on intercompany
loans and advances as well as the payment of dividends by these subsidiaries may
be subject to taxes. Claims of creditors of these subsidiaries will generally
have priority as to the assets of such subsidiaries over the claims of the
holders of Carrier1 International's debt, including the Notes, except under
certain circumstances to the extent that Carrier1 International is also a
creditor of any subsidiary. Accordingly, the Notes will be effectively
subordinated to the liabilities of these subsidiaries.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT
The Notes will not be secured by any of our assets except the pledged
securities as described under "Description of the Notes--Security." We expect to
incur future indebtedness which may be secured, particularly through equipment,
network or working capital financings. If we default on our other secured
indebtedness, or in the event of our bankruptcy, liquidation or reorganization,
our assets would be available to pay our obligations on the Notes only after we
had made all payments on such secured debt. To the extent that the value of such
assets was insufficient to repay our secured debt, holders of such secured debt
would be entitled to share in any of our remaining assets on parity with you and
other unsecured creditors.
WE WILL ENGAGE IN JOINT VENTURES, WHICH ARE ACCOMPANIED BY INHERENT RISKS
We plan to construct the German Network with Viatel and Metromedia. We may
enter into future joint ventures with other companies. All joint ventures are
accompanied by risks. These risks include:
- the lack of complete control over the relevant project,
- diversion of our resources and management time,
- inconsistent economic, business or legal interests or objectives among
joint venture partners,
- the possibility that a joint venture partner will default in connection
with a capital contribution or other obligation, thereby forcing us to
fulfill such obligation, and
- difficulty maintaining uniform standards, controls, procedures and
policies.
WE WILL BE CONTROLLED BY PARTIES WHOSE INTERESTS MAY NOT BE ALIGNED WITH YOURS
Funds managed by Providence and Primus together indirectly hold
approximately 90%, and the Providence funds alone indirectly hold approximately
75%, of the equity of Carrier1 International. Therefore, the Providence funds
alone, and the Providence and Primus funds together, indirectly control us. Such
ownership may present conflicts of interest between the Providence or Primus
funds and you if we encounter financial difficulties or the Providence and
Primus funds cause us to pursue transactions that could enhance their equity
investment while involving risks to your interests.
Providence and Primus, or their affiliates, currently have significant
investments in other telecommunications companies, including investments by
Providence affiliates in Epoch Networks and Tele1 Europe AB, and may in the
future invest in other entities engaged in the telecommunications business, some
of which may compete with us. Providence and Primus are under no obligation to
bring us any investment or business opportunities of which they are aware, even
if opportunities are within our scope and objectives. Conflicts may also arise
in the negotiation or enforcement of arrangements we may enter into with
entities in which Providence or Primus, or their affiliates, have an interest.
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WE MAY BE AFFECTED BY YEAR 2000 ISSUES
Computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000, which could result in
miscalculations or a major system failure. As we have developed and implemented
our network, operational support systems, and computer systems, we have
conducted an evaluation for Year 2000 compliance. Based on such evaluation, we
believe that our information technology ("IT") systems and our non-IT systems,
such as our network transmission equipment and Nortel and Cisco network
operating systems, are Year 2000 compliant. In addition, we have received
written assurances from Cisco, Nortel and International Computers Limited that
the systems they have provided the Company are Year 2000 compliant. Until the
year 2000 occurs, however, we cannot assure you that all systems will then
function adequately. A failure of our computer systems could have a material
adverse effect on us. We are also still evaluating whether the systems of our
vendors, suppliers or customers are or will be Year 2000 compliant. Any failure
of their computer systems could materially and adversely affect our ability to
operate our network and retain customers and could impose significant costs on
us. We are, therefore, still in the process of developing plans, including a
contingency plan to assess the likelihood of and address worst-case scenarios,
to deal with potential Year 2000 problems caused by a failure of our vendors,
suppliers or customers to be Year 2000 compliant. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Impact of Year
2000."
WE MAY BE AFFECTED BY CONVERSION TO THE EURO
On January 1, 1999, 11 of the European Union member countries (the
"participating countries") adopted the Euro as their common legal currency.
However, four of the European Union member countries, Denmark, Greece, Sweden
and the United Kingdom, have not agreed to participate in the EMU and there can
be no assurance that these four countries will join the EMU. Any final decision
made by these countries not to convert their respective individual currencies to
the Euro could have an adverse effect on the future viability and survival of
the EMU. Any reversion from the Euro currency system to a system of individual
country floating currencies could subject us to increased currency exchange
risk.
From January 1, 1999, until January 1, 2002 (the "transition period"), the
Euro will exist in electronic form only and the participating countries'
individual currencies will persist in tangible form as legal tender. During the
transition period, we and our third party vendors, joint venture partners and
customers, must manage transactions in both the Euro and the participating
countries' respective individual currencies. This may cause significant
logistical problems. We may incur increased operational costs and may have to
modify or upgrade our information systems in order to:
- convert individual currencies to Euro,
- convert individual currencies of participating countries into each other,
- execute conversion calculations utilizing six-digit exchange rates and
other prescribed requirements,
- accommodate the new Euro currency symbol, and
- permit pricing, advertising, billing, accounting, internal financial
calculations, sales and other transactions or practices to be effected
simultaneously in Euro and the participating countries' respective
individual currencies.
We have selected our computer and operational systems in an attempt to
ensure that our ability to transact business will not be impaired by
complications resulting from the introduction of the Euro. While we believe that
our systems have not been adversely impacted by the Euro conversion, there can
be no assurance that we will be able to avoid the accounting, billing and
logistical difficulties that might result from the introduction of the Euro. In
addition, there can be no assurance that our third-party suppliers and customers
will be able to successfully implement the necessary protocols.
31
<PAGE>
THE INTERNATIONAL SCOPE OF OUR OPERATIONS MAY AFFECT OUR BUSINESS
We may face certain risks because we conduct an international business
including:
- regulatory restrictions or prohibitions on the provision of our services,
- tariffs and other trade barriers,
- longer payment cycles,
- problems in collecting accounts receivable,
- political risks, and
- potentially adverse tax consequences of operating in multiple
jurisdictions.
In addition, an adverse change in laws or administrative practices in
countries within which we operate could have a material adverse effect on us.
We are exposed to fluctuations in foreign currencies, as our revenues,
costs, assets and liabilities are denominated in multiple local currencies. Our
payment obligations with respect to the Notes are denominated in U.S. dollars,
but our revenues are denominated in other currencies as well. Any appreciation
in the value of the U.S. dollar relative to such other currencies could have a
material adverse effect on us.
ENFORCING JUDGMENTS AGAINST US MAY REQUIRE COMPLIANCE WITH NON-U.S. LAW
Most assets of Carrier1 International and its subsidiaries are located
outside the United States. You will need to comply with foreign laws to enforce
judgments obtained in a U.S. court against our assets, including to foreclose
upon such assets. In addition, it may not be possible for you to effect service
of process within the United States upon us, or to enforce against us U.S. court
judgments predicated upon U.S. federal securities laws.
THERE WILL BE NO PUBLIC TRADING MARKET FOR THE NEW NOTES
The New Notes are a new issue of securities with no established trading
market. The New Dollar Notes will not be listed on any securities exchange.
Although we expect that application will be made to have the New Euro Notes
included on the Regulated Unofficial Market (Freiverkehr) of the Frankfurt Stock
Exchange, we cannot assure you that the New Euro Notes will be so included. The
liquidity of the trading market in the New Notes, and the market price quoted
for the New Notes, may be adversely affected by changes in the overall market
for high yield securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry generally. As a
result, you cannot be sure that an active trading market will develop for the
New Notes.
32
<PAGE>
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Where You Can Find More Information."
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the issuance of the Old Notes pursuant to a Placement
Agreement, dated as of February 12, 1999, between Carrier1 International and the
Placement Agents, the Placement Agents and their respective assignees became
entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Company has agreed (i) to use
its best efforts to cause to be filed with the Commission the Registration
Statement of which this Prospectus is a part with respect to a registered offer
to exchange the Old Notes for the New Notes and (ii) to use its reasonable best
efforts to consummate the Exchange Offer within 60 calendar days after the date
on which the Registration Statement is declared effective. The Company will keep
the Exchange Offer open for not less than 20 business days after the date notice
of the Exchange Offer is mailed to holders of the Old Notes. The Exchange Offer
being made hereby, if consummated within six months after the initial issuance
of the Old Notes, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letters of Transmittal, all Old Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be
accepted for exchange. New Notes of the relevant series will be issued in
exchange for an equal principal amount of outstanding Old Notes of such series
accepted in the Exchange Offer. Old Notes may be tendered only in integral
multiples of $1,000 or [Euro]1,000, as applicable. This Prospectus, together
with the Letters of Transmittal, is being sent to all registered holders as of
, 1999. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the
obligation to accept Old Notes for exchange pursuant to the Exchange Offer is
subject to certain customary conditions as set forth herein under
"--Conditions."
Old Notes shall be deemed to have been accepted as validly tendered when, as
and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving the New Notes and delivering New Notes to
such holders.
Based on interpretations by the Staff of the Commission as set forth in
no-action letters issued to third parties (including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), K-III Communications Corporation (available May 14,
1993) and Shearman & Sterling (available July 2, 1993)), the Company believes
that the New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that (i) such New Notes are acquired in the ordinary course of business, (ii) at
the time of the commencement of the Exchange Offer such holder has no
arrangement or understanding with any person to participate in a distribution of
such New Notes and (iii) such holder is not engaged in, and does not intend to
engage in, a distribution of such New Notes. The Company has not sought, and
does not intend to seek, a no-action letter from the Commission with respect to
the effects of the Exchange Offer, and there can be no assurance that the Staff
would make a similar determination with respect to the New Notes as it has in
such no-action letters.
33
<PAGE>
By tendering Old Notes in exchange for New Notes and executing the Letter of
Transmittal, each holder will represent to the Company that: (i) any New Notes
to be received by it will be acquired in the ordinary course of business, (ii)
it has no arrangements or understandings with any person to participate in the
distribution of the Old Notes or New Notes within the meaning of the Securities
Act, and (iii) it is not an "affiliate," as defined in Rule 405 under the
Securities Act, of Carrier1 International. If such holder is a broker-dealer, it
will also be required to represent that the Old Notes were acquired as a result
of market-making activities or other trading activities and that it will deliver
a prospectus in connection with any resale of New Notes. See "Plan of
Distribution." Each holder, whether or not it is a broker-dealer, shall also
represent that it is not acting on behalf of any person that could not
truthfully make any of the foregoing representations contained in this
paragraph. If a holder of Old Notes is unable to make the foregoing
representations, such holder may not rely on the applicable interpretations of
the staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction unless such sale is made pursuant to an exemption from such
requirements.
Upon consummation of the Exchange Offer, subject to certain limited
exceptions, holders of Old Notes who do not exchange their Old Notes for New
Notes in the Exchange Offer will no longer be entitled to registration rights
and will not be able to offer or sell their Old Notes, unless such Old Notes are
subsequently registered under the Securities Act (which, subject to certain
limited exceptions, the Company will have no obligation to do), except pursuant
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean , 1999 (at least 20 business
days following the commencement of the Exchange Offer), unless Carrier1
International, in its sole discretion, extends the Exchange Offer with respect
to one or both series of Old Notes, in which case the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended with respect
to the relevant series.
To extend the Expiration Date, Carrier1 International will notify the
Exchange Agent of any extension by oral or written notice and will notify the
holders of the relevant series of Old Notes by means of a press release or other
public announcement prior to 9:00 A.M., New York City time, on the next business
day after the previously scheduled Expiration Date. Such announcement may state
that Carrier1 International is extending the Exchange Offer for a specified
period of time.
Carrier1 International reserves the right (i) to delay acceptance of any Old
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not
permit acceptance of Old Notes not previously accepted if any of the conditions
set forth herein under "--Conditions" shall have occurred and shall not have
been waived by Carrier1 International prior to the Expiration Date, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, or (ii) to amend the terms of the Exchange Offer in any manner deemed by
it to be advantageous to the holders of the Old Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
34
<PAGE>
INTEREST ON THE NEW NOTES
The New Notes will accrue interest at the rate of 13 1/4% per annum from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor, or, if no interest has been paid on such
Existing Note, from the Issue Date, PROVIDED, that if an Old Note is surrendered
for exchange on or after a record date for an interest payment date that will
occur on or after the date of such exchange and as to which interest will be
paid, interest on the New Note received in exchange therefor will accrue from
the date of such interest payment date. Interest on the New Notes is payable on
February 15 and August 15 of each year, commencing August 15, 1999. No
additional interest will be paid on Old Notes tendered and accepted for
exchange.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
applicable Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
any other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i) certificates of such
Old Notes must be received by the Exchange Agent along with the applicable
Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company, in the case
of Old Dollar Notes, or at Euroclear and Cedel, in the case of Old Euro Notes
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date with the applicable Letter of Transmittal, or (iii) the holder
must comply with the guaranteed delivery procedures described below. THE METHOD
OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. 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
ASSURE TIMELY DELIVERY. NO OLD NOTES, LETTERS OF TRANSMITTAL OR OTHER REQUIRED
DOCUMENTS SHOULD BE SENT TO THE COMPANY. Delivery of all Old Notes (if
applicable), Letters of Transmittal and other documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Any beneficial
owner whose Old Notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact
such registered holder promptly and instruct such registered holder to tender on
his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any 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 Exchange Act (each an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered for the account of an Eligible
Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such person should so indicate
when signing, and unless waived by the Company, evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
35
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes which, if accepted, would, in the opinion of
counsel for the Company, be unlawful. The Company also reserves the absolute
right to waive any irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letters of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that is not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion, subject
to the provisions of the Indenture, (i) to purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under "--Conditions," to terminate the Exchange Offer, (ii) to redeem Old Notes
as a whole or in part at any time and from time to time, as set forth under
"Description of the Notes--Optional Redemption" and (iii) to the extent
permitted by applicable law, to purchase Old Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted promptly after the Expiration
Date, and the New Notes will be issued promptly after acceptance of the Old
Notes. See "--Conditions." For purposes of the Exchange Offer, Old Notes shall
be deemed to have been accepted as validly tendered for exchange when, as and if
the Company has given written notice thereof to the Exchange Agent. For each Old
Note of a series accepted for exchange, the holder of such Old Note will receive
a New Note of the relevant series having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the applicable Book-Entry Transfer Facility, (ii) a properly completed and duly
executed Letter of Transmittal and (iii) all other required documents. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer, such unaccepted or such nonexchanged Old Notes
will be returned without expense to the tendering holder thereof (if in
certificated form) or credited to an account maintained with such Book-Entry
Transfer Facility as promptly as practicable after the expiration or termination
of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the applicable Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus.
Any financial institution that is a participant in such Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
applicable Book-Entry Transfer Facility, the
36
<PAGE>
Letter of Transmittal or facsimile thereof with any required signature
guarantees and any other required documents must, in any case, be transmitted to
and received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
EXCHANGING BOOK-ENTRY NOTES
The Exchange Agent and the Book-Entry Transfer Facility have confirmed that
any financial institution that is a participant in the Book-Entry Transfer
Facility may utilize the Book-Entry Transfer Facility Automated Tender Offer
Program ("ATOP") procedures to tender Old Notes.
Any participant in the applicable Book-Entry Transfer Facility may make
book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account in accordance with
such Book-Entry Transfer Facility's ATOP procedures for transfer. However, the
exchange for the Old Notes so tendered will only be made after a Book-Entry
Confirmation of such book-entry transfer of Old Notes into the Exchange Agent's
account, and timely receipt by the Exchange Agent of an Agent's Message (as such
term is defined in the next sentence) and any other documents required by the
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by the Book-Entry Transfer Facility and received by the Exchange Agent and
forming part of a Book-Entry Confirmation, which states that the Book-Entry
Transfer Facility has received an express acknowledgment from a participant
tendering Old Notes that are the subject of such Book-Entry Confirmation that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal, and that the Company may enforce such agreement against such
participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by facsimile transmission,
mail or hand delivery), setting forth the name and address of the holder of Old
Notes and the amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically-tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, 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 (iii) a Book-Entry Confirmation
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes of a series may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date with respect to such series.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date with respect to such series at one of the addresses set forth
below under "--Exchange Agent." Any such notice of withdrawal must (i) specify
the name of the persons having tendered the Old Notes to be withdrawn, (ii)
identify the Old Notes to be withdrawn (including the principal amount of such
Old Notes) and (iii) in the case of physically-tendered Old Notes, specify the
name in which such Old Notes are registered or, in the case of Old Notes
tendered by book-entry transfer, specify the number of the account at the
Book-Entry Transfer Facility from which the Old Notes were tendered and specify
the name and number of the account at the Book-Entry Transfer
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<PAGE>
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notice will be determined by the
Company, whose determination shall be final and binding on all parties. Any Old
Notes so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
tendering holder therof without cost to such holder, in the case of physically-
tendered Old Notes, or credited to an account maintained with the applicable
Book-Entry Transfer Facility for the Old Notes as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" and "--Book-Entry Transfer" above
at any time on or prior to 5:00 p.m., New York City time, on the Expiration
Date.
CONDITIONS
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes, the Company determines that the
Exchange Offer violates applicable law, any applicable interpretation of the
staff of the Commission or any order of any governmental agency or court of
competent jurisdiction.
The foregoing conditions are for the sole benefit of Carrier1 International
and may be asserted by Carrier1 International regardless of the circumstances
giving rise to any such condition or may be waived by Carrier1 International in
whole or in part at any time and from time to time in its sole discretion. The
failure by Carrier1 International at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
In addition, Carrier1 International will not accept for exchange any Old
Notes tendered, and no New Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of either Indenture under the Trust Indenture Act of
1939, as amended. Carrier1 International is required to use every reasonable
effort to obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible moment.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letters of Transmittal should be
directed to the Exchange Agent addressed as follows:
If tendering a Dollar Note or requesting information with respect to the
exchange of a Dollar Note:
<TABLE>
<S> <C>
BY MAIL, HAND DELIVERY OR FOR INFORMATION CALL:
OVERNIGHT CARRIER: (212) 946-3172
The Chase Manhattan Bank FACSIMILE TRANSMISSION NUMBER:
Capital Markets Fiduciary Services (212) 946-8177/78
450 West 33rd Street CONFIRM BY TELEPHONE:
15th Floor (212) 946-3172
New York, NY 10001
Attention: William Potes
</TABLE>
38
<PAGE>
If tendering a Euro Note or requesting information with respect to the
exchange of a Euro Note:
<TABLE>
<S> <C>
BY MAIL, HAND DELIVERY OR FOR INFORMATION CALL:
OVERNIGHT CARRIER: (44-171) 777-5414
The Chase Manhattan Bank FACSIMILE TRANSMISSION NUMBER:
Capital Markets Fiduciary Services (44-171) 777-5410
9 Thomas Moore Street CONFIRM BY TELEPHONE:
London E19YT (44-171) 777-5414
United Kingdom
Attention: Chris Greene
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred by the Company in connection with the Exchange
Offer will be paid by the Company, including fees and expenses of the Exchange
Agent and Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, New Notes or Old Notes
for principal amounts not tendered or accepted for exchange are to be registered
or issued in the name of any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Old Notes pursuant to
the Exchange Offer, then 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 with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Carrier1 International does not currently
anticipate that it will register the Old Notes under the Securities Act. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
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<PAGE>
USE OF PROCEEDS
There will be no proceeds from the issuance of New Notes pursuant to the
Exchange Offer. The net proceeds from the Original Offering are approximately
$245 million (based on a conversion rate of Euro into U.S. dollars of
[Euro]0.90316 per $1.00), after deducting discounts and commissions and
estimated expenses of the Original Offering payable by Carrier1 International.
Carrier1 intends to use the net proceeds from the Original Offering primarily to
finance the construction and start-up costs of the German Network and the
acquisition of transmission capacity, switches, multiplexers, routers and other
equipment. In addition, at the closing of the Original Offering, Carrier1 used
approximately $49.2 million of the net proceeds to purchase a portfolio of U.S.
government securities and approximately [Euro]26.9 million ($29.8 million) of
the net proceeds to purchase a portfolio of European government securities, and
pledged these portfolios for the benefit of the holders of the respective series
of Notes to secure and fund the first five interest payments. The relevant
Trustee will hold the pledged securities pursuant to a pledge agreement pending
disbursement. The balance of the proceeds will be used for other capital
expenditures and general corporate and working capital purposes.
Pending utilization of the net proceeds of the Original Offering, Carrier1
has invested such proceeds in short-term investment grade securities and other
financial instruments for the purpose of capital preservation and liquidity.
Carrier1 is also in the process of negotiating an accounts receivable facility
with a major commercial bank and is discussing equipment financing facilities
with major equipment suppliers. Carrier1 believes that the net proceeds of the
Original Offering and the Equity Investment, together with either (i) proceeds
of possible sales of dark fiber on the German Network, (ii) proceeds from an
accounts receivable facility, if completed, or (iii) proceeds from one or more
equipment financing facilities, or a combination of these sources, will be
sufficient to fund the expansion of Carrier1's business as planned and to fund
operations until Carrier1 achieves positive cash flow from operations. However,
in the event Carrier1's plans or assumptions change or prove to be inaccurate or
the net proceeds of the Original Offering and the Equity Investment prove to be
insufficient to fund Carrier1's growth in the manner and at the rate currently
anticipated, Carrier1 may be required to delay or abandon some or all of its
development and expansion plans or Carrier1 may be required to seek additional
sources of financing earlier than currently anticipated. See "Risk Factors--We
Need Substantial Capital to Finance Our Business."
40
<PAGE>
DIVIDEND POLICY
Carrier1 International has never declared or paid any cash dividends on its
shares of common stock and does not expect to do so in the foreseeable future.
Carrier1 International does not expect to generate any net income in the
foreseeable future, but anticipates that future earnings generated from
operations, if any, will be retained to finance the expansion and continued
development of its business. Decisions to pay dividends may only be taken by the
shareholders acting at a shareholders' meeting (subject to the declaration of
interim dividends by the Board of Directors). Any future determination with
respect to the payment of dividends on Carrier1 International's shares will
depend upon, among other things, Carrier1 International's earnings, capital
requirements, the terms of the existing indebtedness, applicable requirements of
Luxembourg corporate law, general economic conditions and such other factors
considered relevant by Carrier1 International's Board of Directors. In addition,
Carrier1 International's ability to pay cash dividends will be restricted under
the terms of the Indentures.
41
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents
and total capitalization of Carrier1 at December 31, 1998, and as adjusted to
reflect the Equity Investment, the issuance of the Units pursuant to the
Original Offering and the application of the net proceeds as described under
"Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents..................................................... $ 4,184 $ 192,469(1)
---------- -----------
---------- -----------
Restricted cash............................................................... $ 1,518 $ 1,518
---------- -----------
---------- -----------
Restricted investments(2)..................................................... $ -- $ 78,936
---------- -----------
---------- -----------
Dollar Notes(3)............................................................... $ -- $ 158,557
Euro Notes(3)................................................................. -- 93,253(1)
---------- -----------
Total long term debt.................................................... -- 251,810
Shareholders' equity:
Common Stock, $2 par value, 30,000,000 shares authorized, 18,885,207 shares
issued and outstanding, actual; 30,000,000 shares authorized, issued and
outstanding, as adjusted(4)............................................... 37,770 60,000
Additional paid-in capital (Warrants)....................................... -- 2,304
Accumulated deficit......................................................... (19,235) (19,235)
Accumulated other comprehensive income...................................... 654 654
---------- -----------
Total shareholders' equity.............................................. 19,189 43,723
---------- -----------
Total capitalization.................................................. $ 19,189 $ 295,533
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Assumes a conversion rate of Euro into U.S. dollars of [Euro]0.90316 per
$1.00.
(2) Reflects the portion of the net proceeds from the Original Offering used to
purchase U.S. government securities and European government securities to
secure and fund the first five scheduled interest payments on the Dollar
Notes and Euro Notes, respectively, assuming a conversion rate of Euro into
U.S. dollars of [Euro]0.90316 to $1.00. See "Description of the
Notes--Security."
(3) Of the $160.0 million gross proceeds from the issuance of the Dollar Units
and the [Euro]85.0 million gross proceeds from the issuance of the Euro
Units, $158.6 million and [Euro]84.2 million ($93.3 million) have been
allocated to the principal amounts of the Dollar Notes and the Euro Notes,
respectively, and $1.4 million and [Euro]0.8 million ($0.9 million) have
been allocated to the issuance of the Dollar Warrants and Euro Warrants,
respectively.
(4) Subsequent to December 31, 1998, Carrier1 International authorized options
to purchase up to 2,222,222 shares under the 1999 Share Option Plan and is
in the procees of granting 2,197,218 options. Carrier1 International also
intends to offer options to certain directors. See "Management--Stock Option
Grants" and "Certain Relationships and Related Transactions--Equity Investor
Agreements."
42
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information of the
Company has been derived by the application of pro forma adjustments to the
Company's historical consolidated financial statements for the period from
Inception to December 31, 1998. The pro forma consolidated statements of
operations give effect to the issuance of the Notes and related transactions as
if such transactions had been consummated on February 20, 1998 (Inception). The
pro forma consolidated balance sheet gives effect to the issuance of the Notes
and related transactions as if such transactions had occurred as of December 31,
1998. The adjustments necessary to fairly present this pro forma consolidated
financial information have been made based on available information and in the
opinion of management are reasonable and are described in the accompanying
notes. The pro forma consolidated financial information should not be considered
indicative of actual results that would have been achieved had the issuance of
the Notes and related transactions been consummated on the respective dates
indicated and do not purport to indicate balance sheet data or results of
operations as of any future date or for any future period. You should read the
pro forma consolidated financial statements together with the information set
forth in "Use of Proceeds" and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Consolidated Historical
Financial Statements and the notes thereto, and other financial information
included elsewhere in this Prospectus.
The pro forma adjustments were applied to the respective historical
consolidated financial statements to reflect and account for the issuance of the
Notes. As a result, such adjustments will have no impact on the historical basis
of either the Company's assets and liabilities. Accordingly, the issuance of the
Notes have not impacted the historical basis of the Company's assets and
liabilities.
The unaudited consolidated pro forma financial statements do not include pro
forma adjustments relating to the effects of foreign currency exchange gains or
losses resulting from the translation of Euro-denominated amounts into U.S.
dollars. Euro-denominated amounts have been translated into U.S. dollars using
an assumed conversion rate of [Euro]0.90316 to $1.00. Potential dilutive
securities have been excluded from the computation of diluted earnings (loss)
per share as their effect is antidilutive.
43
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Revenues................................................................... $ 2,792 $ 2,792
Operating expenses:
Cost of services......................................................... 11,669 11,669
Selling, general and administrative...................................... 8,977 8,977
Depreciation and amortization............................................ 1,409 1,409
---------- ----------- ----------
Total operating expenses............................................... 22,055 -- 22,055
---------- ----------- ----------
Loss from operations....................................................... (19,263) -- (19,263)
Other income (expense):
Interest income.......................................................... 81 81
Interest expense......................................................... (29,882)(a) (29,882)
Other, net............................................................... (53) (53)
---------- ----------- ----------
Total other income (expense)........................................... 28 (29,882) (29,854)
---------- ----------- ----------
Loss before income tax benefit............................................. (19,235) (29,882) (49,117)
Income tax benefit--net of valuation allowance.............................
---------- ----------- ----------
Net loss................................................................... $ (19,235) $ (29,882) $ (49,117)
---------- ----------- ----------
---------- ----------- ----------
Earnings (loss) per share
Loss from operations:
Basic.................................................................. $ (2.61) $ (2.61)
---------- ----------
---------- ----------
Diluted................................................................ $ (2.61) $ (2.61)
---------- ----------
---------- ----------
Net loss:
Basic.................................................................. $ (2.61) $ (6.67)
---------- ----------
---------- ----------
Diluted................................................................ $ (2.61) $ (6.67)
---------- ----------
---------- ----------
Total number of shares used to compute basic earnings
(loss) per share......................................................... 7,367,000 7,367,000
---------- ----------
---------- ----------
</TABLE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(a) This adjustment represents the recording of interest expense for the
period from Inception to December 31, 1998 and reflects the following:
<TABLE>
<CAPTION>
AMOUNTS IN
THOUSANDS
-----------
<S> <C>
Interest expense on the Notes.................................................... $ 28,994
Amortization of debt issuance costs.............................................. 786
Amortization of debt discount.................................................... 102
-----------
$ 29,882
-----------
-----------
</TABLE>
44
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 4,184 166,055(a) $ 192,469
22,230(c)
Restricted cash....................................................... 1,518 1,518
Restricted investments held in escrow................................. 15,223(a) 15,223
Accounts receivable................................................... 1,217 1,217
Unbilled receivables.................................................. 1,645 1,645
Other receivables..................................................... 3,014 3,014
Prepaid expenses and other current assets............................. 3,179 3,179
---------- ----------- -----------
Total current assets................................................ 14,757 203,508 218,265
Restricted investments held in escrow................................... 63,713(a) 63,713
Property and equipment - net............................................ 31,091 31,091
Investment in joint venture............................................. 4,675 4,675
Other assets............................................................ 911 9,123(a) 10,034
---------- ----------- -----------
Total................................................................... $ 51,434 $ 276,344 $ 327,778
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................................ $ 27,602 $ 27,602
Accrued liabilities................................................... 4,643 4,643
---------- ----------- -----------
Total current liabilities........................................... 32,245 32,245
Long-term debt.......................................................... 254,114(a) 251,810
(2,304)(b)
Shareholders' equity:
Common stock.......................................................... 37,770 22,230(c) 60,000
Additional paid-in capital............................................ 2,304(b) 2,304
Accumulated deficit................................................... (19,235) (19,235)
Accumulated other comprehensive income................................ 654 654
---------- ----------- -----------
Total shareholders' equity.......................................... 19,189 24,534 43,723
---------- ----------- -----------
Total................................................................... $ 51,434 $ 276,344 $ 327,778
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
45
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) This adjustment represents the recording of the issuance of the Notes as
follows:
<TABLE>
<CAPTION>
AMOUNTS IN
THOUSANDS
-----------
<S> <C>
Gross proceeds from issuance of Notes............................................ $ 254,114
Amounts deposited in Escrow - current............................................ (15,223)
Amounts deposited in Escrow - long-term.......................................... (63,713)
Debt issuance costs.............................................................. (9,123)
-----------
Net proceeds from issuance of Notes.............................................. $ 166,055
-----------
-----------
</TABLE>
(b) This adjustment represents the allocation of a portion of the debt
proceeds to additional paid-in capital to reflect the estimated fair
market value of the Warrants issued.
(c) This adjustment represents additional equity contributions made by the
major investors subsequent to December 31, 1998, which were required as a
condition of the issuance of the Notes.
46
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
Carrier1 for the period from Inception to December 31, 1998. The selected
consolidated financial data as of and for the period from Inception to December
31, 1998, were derived from the consolidated financial statements of the Company
which were audited by Deloitte & Touche Experta AG, independent auditors. The
information set forth below is not necessarily indicative of the results of
future operations and should be read in conjunction with the consolidated
financial statements and the related notes thereto included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
INCEPTION TO
DECEMBER 31,
1998
------------
(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues............................................................................................ $ 2,792
Cost of services.................................................................................... 11,669
Selling, general and administrative expenses........................................................ 8,977
Depreciation and amortization....................................................................... 1,409
------------
Loss from operations................................................................................ (19,263)
Interest income..................................................................................... 81
Other income (expense), net......................................................................... (53)
------------
Loss before income tax benefit...................................................................... (19,235)
Income tax benefit, net of valuation allowance...................................................... --
------------
Net loss............................................................................................ $ (19,235)
------------
------------
Net loss per share (basic).......................................................................... $ (2.61)
Net loss per share (diluted)(1)..................................................................... (2.61)
OTHER FINANCIAL DATA:
EBITDA(2)........................................................................................... $ (17,854)
Capital expenditures(3)............................................................................. 37,168
Ratio of earnings to fixed charges(4)............................................................... --
Net cash used in operating activities............................................................... (14,441)
Net cash used in investing activities............................................................... (19,866)
Net cash provided by financing activities........................................................... 37,770
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
-----------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................................... $ 4,184
Restricted cash................................................................................ 1,518
Total assets................................................................................... 51,434
Total debt..................................................................................... --
Shareholders' equity........................................................................... 19,189
</TABLE>
- ------------------------
(1) Potential dilutive securities have been excluded from the computation for
the period from Inception to December 31, 1998 as their effect is
antidilutive.
(2) EBITDA represents net income (loss) before interest, income taxes,
depreciation and amortization and other income (expense). EBITDA is a
measure commonly used in the telecommunications industry to analyze
companies on the basis of operating performance and as a measure of debt
service ability. It is not a measure of financial performance under
generally accepted accounting principles.
(3) Consists of purchases of property and equipment and investment in joint
venture.
(4) The ratio of earnings to fixed charges is calculated as the sum of income
before taxes plus interest expense divided by fixed charges. Fixed charges
consist of the portion of rental expense deemed representative of interest.
Earnings were insufficient to cover fixed charges in the period from
Inception to December 31, 1998, by $19.3 million.
48
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF CARRIER1'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO CONTAINED ELSEWHERE IN THIS
PROSPECTUS. CERTAIN INFORMATION CONTAINED IN THE DISCUSSION AND ANALYSIS OR SET
FORTH ELSEWHERE IN THIS PROSPECTUS, INCLUDING INFORMATION WITH RESPECT TO
CARRIER1'S PLANS AND STRATEGY FOR ITS BUSINESS AND RELATED FINANCING, INCLUDES
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK AND UNCERTAINTIES. SEE "RISK
FACTORS" FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE RESULTS DESCRIBED IN OR IMPLIED BY THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
OVERVIEW
Carrier1 is a rapidly expanding European facilities-based provider of long
distance voice and IP telecommunications services. Carrier1 offers these
services on a wholesale basis primarily to competitive fixed-line operators,
other carriers, wireless operators, ISPs, resellers and MNCs. In March 1998,
Carrier1's experienced management team and Providence Equity Partners formed
Carrier1 to capitalize on the significant voice and IP opportunities that are
emerging for facilities-based carriers in Europe's rapidly liberalizing
telecommunications markets. By September 1998, Carrier1 had deployed its initial
network and commenced selling wholesale services. As of December 31, 1998,
Carrier1 had executed 48 contracts with voice customers and 17 contracts with IP
customers. Also in December 1998, Carrier1 signed a contract with one of the
largest telecommunications companies in Germany, and it expects to carry a
substantial portion of this operator's international traffic. This contract has
had a significant impact on Carrier1's traffic volumes since its recent
implementation.
Carrier1 is developing an extensive city-to-city European network linking
key population centers. Carrier1 intends to continue rapidly expanding this
network in a cost-effective manner to serve the needs of its existing and
potential customers. Carrier1 believes that its network will allow it to provide
and price its services in Europe on a city-to-city basis without regard to
national borders. This provisioning and pricing structure will put Carrier1 at
the forefront of a shift beginning to occur in the European telecommunications
market away from services and pricing that distinguish between international and
national long distance.
To date, Carrier1 has experienced net losses and negative cash flow from
operating activities. From Inception to September 1998, Carrier1's principal
activities included developing its business plans, obtaining governmental
authorizations and licenses, acquiring equipment and facilities, designing and
implementing its voice and IP networks, hiring management and other key
personnel, developing, acquiring and integrating information and operational
support systems and operational procedures, negotiating interconnection
agreements and negotiating and executing customer service agreements. In
September 1998, Carrier1 commenced the roll-out of its services. Carrier1
expects to continue to generate net losses and negative cash flow as it expands
its operations and does not expect to generate positive cash flow from operating
activities through 2000. Whether or when Carrier1 will generate positive cash
flow from operating activities will depend on a number of factors. See "Risk
Factors--We Have a Limited Operating History" and "--We Expect to Experience Net
Losses and Negative Cash Flow."
Although Carrier1's management is highly experienced in the wholesale
telecommunications business, Carrier1 itself has a limited operating history.
Prospective investors therefore have limited operating and financial information
about Carrier1 upon which to base an evaluation of Carrier1's performance and an
investment in the Carrier1's Securities.
Carrier1's consolidated financial statements are prepared in accordance with
U.S. generally accepted accounting principles. Carrier1 will be reporting on a
calendar quarterly basis in the future.
49
<PAGE>
FACTORS AFFECTING FUTURE OPERATIONS
REVENUES
Carrier1 expects to generate most of its revenues through the sale of
wholesale long distance voice and IP services to competitive fixed-line
operators, other carriers, wireless operators, ISPs, resellers and MNCs.
Carrier1 expects to expand the scope of its wholesale market by adding
value-added services for customers such as switchless resellers. Carrier1
records revenues from the sale of voice and IP services at the time of customer
usage. Carrier1's agreements with its voice customers are typically for an
initial term of twelve months and will be renewed automatically unless
cancelled. They employ usage-based pricing and do not provide for minimum volume
commitments by the customer. Carrier1 expects to generate a steady stream of
voice traffic by providing high-quality service and superior customer support.
Carrier1's IP services are charged, depending on service type, either at a flat
monthly rate, regardless of usage, based on the line speed and level of
performance made available to the customer, or on a usage basis, with no minimum
volume commitment by the customer. The majority of IP contracts to date have
been usage-based. Carrier1's agreements with its IP customers are generally for
a minimum term of twelve months, although Carrier1 may seek minimum terms of two
years or more for agreements providing for higher line speeds. Carrier1 believes
that, if the quality of the service is consistently high, IP customers will
typically renew their contracts because it is costly and technically burdensome
to switch carriers.
Currently, voice and IP services are both priced competitively and Carrier1
emphasizes quality and customer support, rather than offering the lowest prices
in the market. The rates charged to voice and IP customers are subject to change
from time to time. Carrier1 will also vary pricing on its routes as a traffic
management tool. Carrier1 initially priced its IP services at an introductory
discount to its competitors to build rapidly its customer base. Carrier1 expects
to experience declining revenue per billable minute for voice traffic and
declining revenue per Mb for IP traffic, in part as a result of increasing
competition. Carrier1 believes, however, that the impact on its results of
operations from such price decreases will be at least partially offset by
decreases in its cost of providing services and increases in its voice and IP
traffic volumes.
Carrier1's focus on the wholesale international and national long distance
markets will result in its having substantially fewer customers than a carrier
in the mass retail sector. As a result, a shift in the traffic pattern of any
one customer, especially in the near term and on one of Carrier1's high volume
routes, could have a material impact, positive or negative, on Carrier1's
revenues. One customer, whose contract was recently implemented, may account for
up to 50% of Carrier1's revenues in the near term. Furthermore, most wholesale
customers of voice services tend to be price sensitive and, assuming the quality
of service is equivalent, certain customers may switch suppliers for certain
routes on the basis of small price differentials. In contrast, IP customers tend
to use fewer suppliers than voice customers, cannot switch suppliers as easily
and, Carrier1 believes, are more sensitive to service quality than to price.
COST OF SERVICES
Cost of services are classified into three general categories: access costs,
transmission costs and termination costs. Carrier1 has minimal access costs as
its wholesale customers are typically responsible for the cost of accessing its
network. Carrier1 intends to target switchless resellers and, for those
services, Carrier1 will have access costs payable to the originating local
provider, usually the ITO. These costs will vary based on calling volume and the
distance between the caller and Carrier1's point of presence.
TRANSMISSION COSTS. Initially, Carrier1's transmission costs for voice and
IP traffic will consist primarily of leased capacity charges and switch and
router facilities costs. As a result of Carrier1's objective to enter the market
early, its initial European transmission platform consists of leased capacity.
Leased capacity charges are fixed monthly payments based on capacity provided
and are typically higher than a "dark fiber cost level," which is Carrier1's
target cost level and represents the lowest possible per unit cost. Dark fiber
cost level is the per unit cost of high-capacity fiber that has been laid and
readied for use. Dark
50
<PAGE>
fiber cost levels can be achieved not only through owned facilities, but also
may be possible through other mechanisms such as MIUs.
As part of Carrier1's strategy to lower its cost base over time, it will
seek dark fiber cost levels for its entire transmission platform, either through
building, acquiring or swapping capacity. Carrier1 will seek to further minimize
its transmission costs by optimizing the routing of its voice traffic and
increasing volumes on its fixed-cost leased and owned lines, thereby spreading
the allocation of fixed costs over a larger number of voice minutes or larger
volume of IP traffic, as applicable. To the extent Carrier1 overestimates
anticipated traffic volume, however, per unit costs will increase. As Carrier1
continues to develop its owned network and relies less on leased capacity, per
unit voice transmission costs will decrease substantially, offset partially by
an increase in depreciation and amortization expense. Carrier1 also expects to
experience declining transmission costs per billable minute or per Mb, as
applicable, as a result of decreasing cost of leased transmission capacity,
increasing availability of more competitively priced IRUs and MIUs and
increasing traffic volumes.
VOICE TERMINATION COSTS. Termination costs represent the costs Carrier1 is
required to pay to other carriers from the point of exit from Carrier1's network
to the final point of destination. Generally, at least one-half of the total
costs associated with a call, from receipt to completion, are
termination-related costs. Voice termination costs per unit are generally
variable based on distance, quality, geographical location of the termination
point and the degree of competition in the country in which the call is being
terminated.
If a call is terminated in a city in which Carrier1 has a point of presence
and an interconnection agreement with the national ITO, the call will be
transferred to the public switched telephone network (the "PSTN") for local
termination. This is the least costly mode of terminating a call. If the call is
to a location in which Carrier1 does not have a point of presence, or has a
point of presence but does not have an interconnection agreement giving it
access to the PSTN, then the call must be transferred to, and refiled with,
another carrier that has access to the relevant PSTN for local termination.
Carrier1 pays this carrier a refile fee for terminating its traffic. Most
refilers currently operate out of London or New York, so that the refiled
traffic is rerouted to London or New York and from there is carried to its
termination point. Refile agreements provide for fluctuating rates with rate
change notice periods typically of one or four weeks. To the extent Carrier1 has
to rely heavily on refiling to terminate certain traffic, especially into large
markets such as France, Carrier1's margins on such voice traffic will be
materially adversely affected. Carrier1 will seek to reduce its refile costs by
utilizing least cost routing. In those countries where Carrier1 has a point of
presence but does not have an interconnection agreement implemented yet, it has
implemented one or more "resale" agreements whereby a local carrier that has an
interconnection agreement with the ITO "resells" or shares this interconnection
right with Carrier1 for a fee. Termination through resale agreements is
significantly less expensive than through refile agreements (since the traffic
does not need to be rerouted to another country, as is done with refiling), but
is more expensive than through interconnection agreements. In countries where it
has not been directly authorized to provide services, Carrier1 will negotiate to
obtain direct operating agreements with correspondent telecommunications
operators where such agreements will result in lower termination costs than
might be possible through refile arrangements. See "Risk Factors--Our Ability to
Enter into Interconnection Agreements and Peering Arrangements Could Affect Our
Business." Carrier1 believes its refile and resale agreements are competitively
priced. If Carrier1's traffic volumes are higher than expected, it may have to
divert excess traffic onto another carrier's network, which would also increase
its termination costs. Carrier1 believes, however, that it has sufficient
capacity and could, if necessary, lease more. In addition, its technologically
advanced daily traffic monitoring capabilities allow Carrier1 to identify
changes in volume and termination cost patterns as they begin to develop,
thereby permitting it to respond in a cost-efficient manner.
Carrier1 believes that its termination costs per unit should decrease as it
extends its network and increases transmission capacity, adds additional
switches and interconnects with more ITOs. Carrier1 also believes that
continuing liberalization in Europe will lead to decreases in termination costs
as new telecommunications service providers emerge, offering alternatives to the
ITOs for local termination, and
51
<PAGE>
as European Union member states implement and enforce regulations requiring ITOs
to establish rates which are set on the basis of forward-looking, long run
economic costs that would be incurred by an efficient provider using advanced
technology. There can be no assurance, however, regarding the extent or timing
of such decreases in termination costs.
IP TERMINATION COSTS. Termination costs represent costs Carrier1 is
required to pay to other IP backbone providers from the point of exit of
Carrier1's network. IP termination is effected through peering and transit
arrangements. Peering arrangements provide for the exchange of IP traffic
free-of-charge. Carrier1 has entered into peering arrangements with several ISPs
in the United States and Europe. There can be no assurance that Carrier1 will be
able to negotiate additional peering arrangements or that it will be able to
terminate traffic on their networks at favorable prices. Under transit
arrangements Carrier1 is required to pay a fee to exchange traffic. That fee has
a variable and a fixed component. The variable component is based on monthly
traffic volumes. The fixed component is based on the minimum Mb amount charged
to Carrier1 by its transit partners. The major United States ISPs require almost
all European ISPs and IP backbone providers, including Carrier1, to pay a
transit fee to exchange traffic. See "Business--Services--Wholesale IP Service."
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Carrier1's wholesale strategy allows it to maintain lower selling, general
and administrative expenses than companies providing services to the mass retail
market. Carrier1's selling, general and administrative expenses consist
primarily of personnel costs, information technology costs, office costs,
travel, commissions, billing, professional fees and advertising and promotion
expenses. Carrier1 employs a direct sales force located in the major markets in
which it offers services. To attract and retain a highly qualified sales force,
Carrier1 offers its sales personnel a compensation package emphasizing
performance based commissions and stock options. Carrier1 expects to incur
significant selling and marketing costs in advance of anticipated related
revenue as it continues to expand its operations. Carrier1's selling, general
and administrative expenses are expected to decrease as a percentage of
revenues, however, once it has established its operations in targeted markets
and expanded its customer base.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense includes charges relating to
depreciation of property and equipment, which will consist principally of
equipment (such as switches, multiplexers and routers), IRUs, MIUs, furniture
and equipment. Depreciation and amortization will also include the amortization
of interest capitalized during the construction of the German Network. Carrier1
depreciates its network over periods ranging from 5 to 15 years and amortizes
its intangible assets over a period of 5 years. Carrier1 depreciates its IRU and
MIU investments over their estimated useful lives of not more than 15 years.
Carrier1 expects depreciation and amortization expense to increase significantly
as Carrier1 expands its owned network, including the development of the German
Network.
RESULTS OF OPERATIONS
Carrier1 commercially introduced its services in September 1998. Revenues
for the period from Inception to December 31, 1998 were approximately $2.8
million, primarily relating to voice services. Cost of services for the period
from Inception to December 31, 1998 was approximately $11.7 million. These costs
consisted of operation of the network, leases for transmission capacity, and
termination expenses including refiling.
Depreciation and amortization for the period from Inception to December 31,
1998 was approximately $1.4 million and consisted primarily of depreciation
costs for network equipment, IRUs, and other furniture and equipment. Selling,
general and administrative expenses were approximately $9.0
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million for the period from Inception to December 31, 1998 and consisted
primarily of start-up expenses, personnel costs, information technology costs,
office costs, professional fees and promotion expenses.
Interest income consists of interest earned from investing the proceeds of
the issuance of equity. Interest income totaled approximately $81,000 for the
period from Inception to December 31, 1998. No interest expense was incurred for
the period from Inception to December 31, 1998. Interest expense is expected to
increase significantly as a result of the issuance of the Notes, as well as any
future debt financings.
LIQUIDITY AND CAPITAL RESOURCES
From Inception through December 31, 1998, Carrier1 financed its operations
through equity contributions. The further development of Carrier1's business and
deployment of its network will require significant capital to fund capital
expenditures, working capital, cash flow deficits and any debt service.
Carrier1's principal capital expenditure requirements include the expansion of
its network, including construction of the German Network and the acquisition of
switches, multiplexers, routers and transmission equipment. Additional capital
will be required for office space, switch site buildout and corporate overhead
and personnel.
Carrier1 estimates it will incur capital expenditures of approximately
$200.0 million from Inception through 1999. By the end of 1999, Carrier1 plans
to complete construction of the German Network and to purchase additional
switches, multiplexers and routers. As of December 31, 1998, Carrier1 had
incurred capital expenditures of approximately $37.2 million since Inception,
including amounts related to the German Network. Carrier1 estimates, based on
its current business plan, that its aggregate funding requirements (including
requirements to fund capital expenditures, working capital, debt service and
cash flow deficits) for the deployment and operation of its network will total
approximately $280.0 million through 1999.
As of December 31, 1998 funds managed by Providence and Primus had invested
a total of approximately $37.8 million to fund start-up operations. As of
February 19, 1999, such funds had completed their aggregate equity investment
totaling $60 million in equity contributions to Carrier1. Carrier1 is also in
the process of negotiating an accounts receivable facility with a major
commercial bank and is discussing equipment financing facilities with major
equipment suppliers. Carrier1 believes, based on its current business plan, that
the net proceeds from the Original Offering and the Equity Investment, together
with either (i) proceeds of possible sales of dark fiber on the German Network,
(ii) proceeds from an accounts receivable facility, if completed, or (iii)
proceeds from one or more equipment financing facilities, or a combination of
these sources, will be sufficient to fund the expansion of Carrier1's business
as planned and to fund operations until Carrier1 achieves positive cash flow
from operations. The actual amount and timing of Carrier1's future capital
requirements may differ materially from Carrier1's estimates as a result of,
among other things, the demand for Carrier1's services and regulatory,
technological and competitive developments. Sources of additional financing, if
available on acceptable terms or at all, may include commercial bank borrowings,
equipment financing or accounts receivable financing, or the private or public
sale of equity or debt securities. See "Risk Factors--We Need Substantial
Capital to Finance Our Business," "--We Will Have Substantial Indebtedness, and
We May Incur More Indebtedness" and "--We Expect to Experience Net Losses and
Negative Cash Flow."
On February 18, 1999, Carrier1 entered into an agreement to purchase fiber
optic cable for the German Network during 1999 for $20,286,000 plus value-added
tax. The seller will either provide financing for the entire amount of the
purchase with the contract value to be repaid over three years in equal annual
installments beginning on December 31, 2001 together with interest, or will
allow Carrier1 to make payment in full by December 31, 2000 without interest.
The loan, if provided, will bear interest at the U.S. dollar Libor rate plus 4%
per annum. If a loan is not provided, the seller is obligated to provide certain
additional equipment to Carrier1 without charge.
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FOREIGN CURRENCY
Carrier1's reporting currency is the U.S. dollar, and interest and principal
payments on the Notes will be in U.S. dollars and Euro. However, the majority of
Carrier1's revenues and operating costs will be derived from sales and
operations outside the United States and will be incurred in a number of
different currencies. Accordingly, fluctuations in currency exchange rates may
have a significant effect on Carrier1's results of operations and balance sheet
data. The Euro has eliminated exchange rate fluctuations among the 11
participating European Union member states. Adoption of the Euro has therefore
reduced the degree of intra-Western European currency fluctuations to which
Carrier1 is subject. Carrier1 will, however, continue to incur revenues and
operating costs in non-Euro denominated currencies, such as pounds sterling.
Although Carrier1 does not currently engage in exchange rate hedging strategies,
it may attempt to limit foreign exchange exposure by purchasing forward foreign
exchange contracts or engaging in other similar hedging strategies. See "Risk
Factors--We May Be Affected by Conversion to the Euro."
INFLATION
Carrier1 does not believe that inflation will have a material effect on its
results of operations.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. This standard is effective
for the Company's fiscal year ending December 31, 2000. Management has not yet
completed its analysis of this new accounting standard and, therefore, has not
determined whether this standard will have a material effect on the Company's
financial statements.
IMPACT OF YEAR 2000
"Year 2000" generally refers to the various problems that may result from
the improper processing of dates and date-sensitive calculations by computers
and other equipment as a result of computer hardware and software using two
digits, rather than four digits, to define the applicable year. If a computer
program or other piece of equipment fails to properly process dates including
and after the Year 2000, date-sensitive calculations may be inaccurate or a
major system failure may occur. Any such miscalculations or system failures may
cause disruptions in operations including, among other things, a temporary
inability to process transactions, send invoices or engage in other routine
business activities. A failure of Carrier1's computer systems could have a
material adverse effect on its operations, including its ability to make
payments on the Notes, and on the value of the Warrants.
STATE OF READINESS
As Carrier1 has developed and implemented its network, operational support
systems, and computer systems, it has conducted an evaluation for Year 2000
compliance. Based on such evaluation, Carrier1 believes that its information
technology ("IT") systems and its non-IT systems, such as its network
transmission equipment and the Nortel and Cisco network operating systems, are
Year 2000 compliant. In addition, Carrier1 has received written assurances from
Cisco, Nortel, and International Computers
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Limited that the systems they have provided Carrier1 are Year 2000 compliant.
Carrier1, therefore, does not expect to have to remedy any of its IT or non-IT
systems to be Year 2000 compliant. Carrier1 does not know whether the systems of
its vendors, service or capacity suppliers or customers are or will be Year 2000
compliant. Carrier1 plans to contact its principal vendors, service or capacity
suppliers and customers to help it evaluate these parties' efforts to prepare
for the Year 2000 and the degree of its corresponding exposure if such efforts
are inadequate.
RISKS OF YEAR 2000 ISSUES
Any failure of the computer systems of Carrier1's vendors, service or
capacity suppliers or customers as a result of not being Year 2000 compliant
could materially and adversely affect Carrier1's ability to operate its network
and retain customers. As noted above, Carrier1 plans to contact its principal
vendors, service or capacity suppliers and customers to evaluate Carrier1's
risks associated with their noncompliance.
CONTINGENCY PLANS AND COSTS TO ADDRESS YEAR 2000 ISSUES
Carrier1 is still in the early stages of the process of developing plans,
including a contingency plan to assess the likelihood of and address worst-case
scenarios, to deal with potential Year 2000 problems caused by a failure of its
vendors, service or capacity suppliers or customers to be Year 2000 compliant.
Carrier1 has not incurred any significant costs associated with Year 2000
compliance and does not anticipate incurring significant costs in the future.
Carrier1 may, however, have to bear costs and expenses in connection with the
failure of its vendors, suppliers or customers to be Year 2000 compliant on a
timely basis. Because no material Year 2000 issues have yet been identified in
connection with external sources, Carrier1 cannot reasonably estimate costs
which may be required for remediation or for implementation of contingency
plans.
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BUSINESS
OVERVIEW
Carrier1 is a rapidly expanding European facilities-based provider of long
distance voice and IP telecommunications services. Carrier1 offers these
services on a wholesale basis primarily to competitive fixed-line operators,
other carriers, wireless operators, ISPs, resellers and MNCs. In March 1998,
Carrier1's experienced management team and Providence Equity Partners formed
Carrier1 to capitalize on the significant voice and IP opportunities that are
emerging for facilities-based carriers in Europe's rapidly liberalizing
telecommunications markets. By September 1998, Carrier1 had deployed its initial
network and commenced selling wholesale services. As of December 31, 1998,
Carrier1 had executed 48 contracts with voice customers and 17 contracts with IP
customers. Also in December 1998, Carrier1 signed a contract with one of the
largest telecommunications companies in Germany, and it expects to carry a
substantial portion of this operator's international traffic. This contract has
had a significant impact on Carrier1's traffic volumes since its recent
implementation.
Carrier1 is developing an extensive city-to-city European network linking
key population centers. Carrier1 intends to continue rapidly expanding this
network in a cost-effective manner to serve the needs of its existing and
potential customers. Carrier1 believes that its network will allow it to provide
and price its services in Europe on a city-to-city basis without regard to
national borders. This provisioning and pricing structure will put Carrier1 at
the forefront of a shift beginning to occur in the European telecommunications
market away from services and pricing that distinguish between international and
national long distance. Currently, Carrier1 has installed carrier-grade voice
switches and IP routers in Frankfurt, London, New York, Vienna and Zurich.
Carrier1 has stand-alone multiplexers and IP routers in Amsterdam, Geneva and
Paris. By the end of 1999, Carrier1 expects to have installed voice switches or
multiplexers and IP routers and to be providing long distance voice and IP
services in 21 cities in the following countries: Austria, Belgium, Denmark,
Germany, France, Ireland, Italy, The Netherlands, Sweden, Switzerland, the
United Kingdom and the United States.
To rapidly deploy its network and offer services Carrier1 is initially
leasing its European transmission capacity. However, Carrier1 has entered into a
Development Agreement to build a 2,300 kilometer fiber network in Germany with
Viatel and Metromedia. This network will connect 14 principal cities and pass a
number of other major cities. It will also provide fiber capacity in regions
Carrier1 believes are not covered or are underserved by existing and announced
fiber networks. The important advantages of the German Network are:
- DIRECT OWNERSHIP. Carrier1 will own its own cable subduct (containing 72
fiber strands) and access points.
- COST. By building with Viatel and Metromedia, Carrier1 shares the fixed
costs of construction and therefore acquires fiber capacity at a
significantly lower cost than if it constructed the network itself.
- FLEXIBILITY. Carrier1 expects that the demand for fiber capacity in the
regions covered by the German Network will be sufficient to permit it to
swap excess capacity for fiber capacity on other networks in its target
markets. Carrier1 would thereby be able to increase the amount of owned
and controlled capacity at a lower cost.
Carrier1 expects that construction of the German Network will be completed
by the end of 1999 and that some segments will be operational in the third
quarter of 1999. Carrier1's share of the development costs will be up to
approximately $82 million, including the fiber deployed.
Stig Johansson, Chief Executive Officer, and Carrier1's management team have
extensive experience in European telecommunications markets and longstanding
relationships with European wholesale customers and suppliers. Mr. Johansson was
formerly the President of Unisource Carrier Services AG, a large European
wholesale carrier of international traffic. Unisource Carrier Services carried
over
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400 million minutes of voice traffic in 1997, the large majority of which was
carried for wholesale customers in the same markets that Carrier1 is addressing.
Carrier1's senior management comes from Unisource Carrier Services, ACC Corp.,
AT&T-Unisource Communications Services, Telia Norge AS, British Telecom and
AT&T. Mr. Johansson and others in management have also had significant
experience with start-up ventures. See "Management." Carrier1 believes that
management's experience and long-standing customer relationships have been key
to its launch of operations approximately six months after its founding and
contracting with a total of 65 customers through December 31, 1998.
Carrier1 International is a holding company and renders its services
indirectly through subsidiaries primarily located in various Western European
countries. Its registered office is located at L-8009, Strassen, Route d'Arlon
3, Luxembourg. Executive offices of Carrier1 International GmbH, its principal
management services subsidiary, are located at Militarstrasse 36, CH-8004
Zurich, Switzerland. Its phone number is 011-41-1-297-2600.
EUROPEAN VOICE AND IP MARKET
OVERVIEW
In 1997, according to industry sources, the European international long
distance market for voice services was the largest in the world, with
approximately 35 billion minutes of use. According to industry sources, Europe's
volume of international minutes grew approximately 12% from 1996 to 1997.
Industry analysts project that global international telecommunications traffic
volume will grow at a compound annual growth rate of 12% to 18% from 1997 to
2001.
Industry sources estimate the European wholesale and retail market for all
Internet services was $1.9 billion in revenue for 1997. These sources project
that as demand for these services grows, industry revenues will grow at a
compound annual growth rate of approximately 40% to $7.3 billion in 2001, driven
primarily by rapid growth in the number of European Internet users and
corresponding demand for bandwidth.
Carrier1 believes that key factors fueling the ongoing growth in the
European long distance telecommunications market include (i) significant recent
regulatory changes in the international and national long distance market,
resulting in the entry of new telecommunications service providers, (ii)
increasing demand for IP services and (iii) technological advances, which have
substantially increased the transmission capacity and reduced the cost of fiber
optic capacity.
LIBERALIZATION AND NEEDS OF NEW ENTRANTS
The European telecommunications market has historically been dominated by
ITOs that have owned and controlled circuits exclusively within their national
boundaries. Cross-border traffic is passed from one ITO to another at national
borders. Tariffs for this cross-border traffic are determined by a series of
bilateral settlement agreements between ITOs known as the accounting rate
mechanism (the "ARM"). This system has historically kept the price of
cross-border calls in Europe at levels significantly higher than the underlying
cost of transporting and terminating the calls.
Liberalization of the European market began in the United Kingdom in 1993.
In March 1996, the European Commission adopted the "Full Competition Directive,"
requiring the complete liberalization of all telecommunications services in most
European Union member states by January 1, 1998. In effect, ITOs are now
required to provide interconnection to their network, for both transmission and
termination, to all carriers at certain benchmark prices, and may not
discriminate among carriers. Carrier1 expects that the actual implementation of
the Full Competition Directive in the various European Union member states will
be a gradual process. However, the market liberalization that has taken place
thus far (both within the European Union and in Switzerland and Norway) has
permitted the entry of new competitors seeking to provide a wide array of
international and national telecommunications services. According to
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industry sources, the number of authorized international carriers in the United
Kingdom was 144 in July 1998, compared to 35 in July 1995, and the number of
authorized international carriers in Germany was 32 in July 1998, compared to 1
in July 1995. Carrier1 believes that, as occurred in the United States after
liberalization of its telecommunications industry, the increased competition
triggered by European market liberalization will lead to further decreases in
prices, increases in international and national long distance traffic, a growing
number of new entrants in the market, a significant decrease in the market share
of ITOs over time, and increasing demand for the provision of a greater number
of services at a higher level of quality.
Another effect of liberalization has been the deployment of European
networks by certain new entrants such as Carrier1, second and third operators,
and infrastructure providers. Cross-border transmission capacity allows new
entrants to offer European telecommunications services priced on a city-to-city
basis without regard to national borders and more closely based on actual costs.
New entrants' prices are lower than the ARM tariffs to which the ITOs adhere.
Although an ITO has low transmission costs within its own country's borders, it
cannot compete with the lower international prices charged by new entrants
without straining the ARM system which has traditionally been an important
source of revenues for the ITOs. Furthermore, as long as an ITO's counterparts
adhere to the ARM, a reduction by one ITO of its long distance prices may not be
matched by a reduction in its termination costs with other ITOs and would
therefore have a negative impact on its margins. The ITOs are also burdened by
high overhead costs which are difficult to reduce as quickly as prices are
declining in competitive markets.
Carrier1 believes there is an insufficient supply of cost-effective,
cross-border voice services to meet the increasing demand of new entrants, many
of whom are not facilities-based carriers or only have a locally based network.
Carrier1 believes the ITOs are not meeting this demand for a number of reasons:
(i) they lack cross-border capabilities and charge high access costs, based on
the ARM system, (ii) their focus has traditionally been on the retail sector,
(iii) they do not consider it in their short term interest to provide
cost-effective wholesale services to competitors, and (iv) the billing, support
and back-office systems of the ITOs are not designed to address adequately the
particular needs of new entrants. As a result, there is an increasing demand by
new entrants for alternative providers of lower cost, high-quality, European and
transatlantic voice services. Carrier1 believes the deficiencies in the supply
of cross-border IP services are even more pronounced than those in the supply of
voice services. The ITOs' networks are oriented towards voice traffic and are
not designed to have the flexibility to provide the amounts of capacity that an
ISP is likely to require given the current and projected growth in the volume of
European Internet-related traffic. Therefore, ISPs and other data service
providers operating in the European market are seeking alternative providers of
European and transatlantic IP services.
INCREASING DEMAND FOR IP SERVICES
The Internet is a complex, interconnected collection of telecommunications
networks. These networks all use a common suite of protocols, known as TCP/IP,
that facilitate communication with each other. End users connect to the Internet
through dial-up or permanent connections to a network owned by an ISP. ISP
networks are connected to the Internet at network access points ("NAPs") or by
dedicated connections to other ISP networks. Each NAP is connected to other NAPs
via high capacity telecommunications lines or backbone facilities.
Telecommunications carriers provide the dedicated lines connecting the ISPs'
networks to each other and to the NAPs, as well as the backbone between the
NAPs. The provision of these services by these carriers comprises wholesale IP
services.
The European Internet market is, according to industry sources, several
years behind the market in the United States in terms of overall penetration of
IP services. Although there can be no assurance that trends in Europe will
follow those in the United States, Carrier1 believes that the historical trends
in Internet growth in the United States market with respect to web-users, the
number of Internet host computers through which IP services are provided
("hosts") and backbone capabilities are broadly indicative of what can be
expected to occur in Europe.
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Industry sources estimate that the penetration rate of web users in the
United States was approximately 12% of the U.S. population in 1997 and is
expected to increase to 38% of the population by 2001. The penetration rate of
web users in Western Europe varies across the region but was estimated on
average to be 4% of the population of Western Europe in 1997. Industry sources
forecast that this will more than triple to 15% by 2001. From June 1992 to June
1998, according to RIPE NCC (the Official Europe Internet Registry), the number
of hosts in Europe increased from approximately 200,000 to 6.8 million,
representing a compound annual growth rate of 80%.
As the number of Internet web users and hosts increases, demand for backbone
capacity to support growing Internet use is expected to increase
correspondingly. Carrier1 believes European capacity will need to be expanded
significantly over the next few years as European IP traffic continues to grow.
As the supply of backbone capacity in Europe increases, the prices of
transmission capacity are expected to decrease significantly. Carrier1 believes
such price decreases will in turn fuel further increases in IP service demand.
TECHNOLOGICAL ADVANCES
Advances in technology are greatly increasing the transmission carrying
capacity, or bandwidth, of fiber optic cables, while significantly reducing the
incremental cost of this increased capacity. Although building infrastructure
still requires substantial capital expenditures, this increased capacity at
reduced cost made possible by new technology, together with the market
opportunities created by liberalization and growth in IP demand, are encouraging
non-ITO telecommunications companies to build high-quality European networks.
Carrier1 expects that completion of these alternative cross-border networks will
result in increased amounts of high-quality, lower cost network capacity
becoming available through IRUs or long-term leases.
COMPETITIVE STRENGTHS
Carrier1 believes that a number of factors give it a competitive advantage
in the European long distance voice and IP telecommunications markets:
- EXPERIENCED EUROPEAN MANAGEMENT with many years' experience in the largest
European telecommunications markets and with strong wholesale customer
relationships. Carrier1 has a European perspective and, it believes, a
strong understanding of the European telecommunications markets.
- A FOCUSED WHOLESALE MARKETING STRATEGY, which allows Carrier1 to service
new entrants without competing for their retail customers and to operate
with less overhead than carriers with retail operations.
- PRICING that disregards the existence of national borders and gives
Carrier1 more flexibility than the ITOs to compete on the basis of price.
- ADVANCED INFORMATION AND CONTROL SYSTEMS that allow Carrier1 to optimize
pricing and network use on a real-time basis.
- PROVISION OF HIGH-QUALITY VOICE AND IP SERVICES expected by European
customers. Carrier1 believes that its guarantees of high performance
levels distinguish it from its competitors.
- DELIVERY OF SUPERIOR CUSTOMER SUPPORT exceeding that provided in Europe
today. Carrier1 offers rapid implementation and response times and locally
based customer-oriented sales and support personnel.
- LACK OF AFFILIATION WITH AN ITO, which allows Carrier1 complete
flexibility to market its services broadly to its target customers,
including carriers who compete with ITOs.
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BUSINESS STRATEGY
Carrier1's objective is to become a leading European wholesale provider of
high quality long distance voice and IP services, by capitalizing on the rapidly
increasing demand for city-to-city European voice and IP services. The key
elements of Carrier1's strategy are:
- TARGET WHOLESALE MARKETS. Carrier1 offers wholesale services primarily to
competitive fixed-line operators, other carriers, wireless operators,
ISPs, resellers and MNCs. In particular, Carrier1 focuses its marketing
efforts on competitive retail operators who lack international
infrastructure. Carrier1 believes these new entrants prefer an independent
supplier of wholesale services to an ITO or other supplier with which they
compete directly. Concentrating on the wholesale market allows Carrier1 to
operate with less overhead than other carriers with mass retail operations
and to implement operational support systems tailored to meet the needs of
wholesale customers. By focusing on the wholesale sector and making its
main business the selling of voice and IP services, Carrier1 will take
advantage of its management's strong market-oriented skills, first-hand
understanding of the European telecommunications markets and long-standing
wholesale customer relationships.
- FOCUS ON CUSTOMER NEEDS. Carrier1 believes that both high quality of
service and strong customer support are essential to capitalize
successfully on market opportunities.
QUALITY OF SERVICE: Carrier1 believes that quality of service is critical
to obtaining and retaining customers. Carrier1's technologically advanced
voice and IP network and network management and information systems allow
it to offer its services at guaranteed minimum levels of order
implementation, response and repair time, and at a 99.9% network
availability level. Carrier1 believes no other carrier in Europe offers a
better minimum service level for voice or IP services. Because it owns
its switches, multiplexers and routers, Carrier1 can control the quality
and breadth of its service offerings.
SUPERIOR CUSTOMER SUPPORT: Carrier1 believes that customer support levels
in the wholesale telecommunications market in Europe are generally lower
than those in the United States. Carrier1 has designed its systems to
provide a level of customer support significantly higher than that
generally offered in the wholesale market in Europe. Key features of
these systems include: (i) decentralized sales, installation and basic
support, facilitating quick response to customer needs, (ii) a help desk
operating 24 hours a day, 365 days a year, (iii) on-line order management
and provisioning, traffic reports, fault reports and repair information
and (iv) on-line customized billing.
- RAPID, COST-EFFECTIVE CITY-TO-CITY NETWORK DEPLOYMENT. Carrier1 has
developed a cross-border network linking principal cities of Western
Europe and will continue to broaden the range of countries covered by the
network and deepen the extent of the network within particular countries.
To capitalize on its early entry into the market and to rapidly expand its
presence, Carrier1 is pursuing an aggressive timetable for extending the
scope of its network, in part by leasing capacity and outsourcing certain
functions. Carrier1's longer term goal is to own or control key elements
of its network and to assume control of key outsourced functions. To
establish points of presence rapidly and cost-effectively in selected new
markets, Carrier1 is initially using multiplexers. Multiplexers are less
costly and easier to install than switches, enhance Carrier1's flexibility
and service quality and help to reduce its termination costs. As traffic
increases, Carrier1 may replace multiplexers with switches and redeploy
these multiplexers in new markets. Carrier1's city-to-city network will
(i) allow it to price its services within Western Europe without regard to
national borders, (ii) bring it closer to a greater number of customers
and (iii) reduce its termination costs.
- REDUCE TRANSMISSION COSTS. A key part of Carrier1's strategy is to reduce
the costs of its transmission platform. Carrier1 intends to reduce its
transmission costs by continually evaluating whether to
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build, buy or lease capacity or swap excess capacity. While it holds two
transatlantic IRUs (one of which is currently operational and one of which
we expect to become operational in April 1999), Carrier1 is currently
leasing the rest of its transmission capacity because doing so enabled
Carrier1 to commence offering services in its target markets rapidly. In
addition, construction of new capacity has been announced in many of
Carrier1's target markets and Carrier1 believes the cost of acquiring
capacity in those regions is decreasing and will continue to decrease. The
German Network illustrates an opportunity where Carrier1 believes it is
more cost effective to build capacity. As demand for voice and IP services
in Europe increases and new networks are constructed, Carrier1 believes
there will be significant opportunities to add new and replace existing
transmission capacity at lower unit cost. Carrier1 also intends, as soon
as proven technology is commercially available, to migrate to a single,
IP-based transmission platform for both voice and IP services. This
platform would permit Carrier1 to increase the cost effectiveness of its
operations through more efficient use of its transmission capacity.
- INTRODUCE NEW VALUE-ADDED SERVICES. Carrier1 intends to expand its
addressable market to include additional wholesale customers, such as
switchless resellers, by offering the value-added services they require.
These services include capabilities for switched access, toll-free
services and prepaid phone cards. Carrier1 plans to offer these wholesale
capabilities in selected countries as early as mid-1999.
- REDUCE COSTS THROUGH INTERCONNECTION AGREEMENTS AND PEERING. By
establishing interconnection arrangements with ITOs in liberalized markets
and direct operating agreements with ITOs in emerging markets, Carrier1
can keep its costs of terminating calls lower and exercise greater control
over quality and transmission capacity than we can using refile or resale
agreements. Similarly, entering into additional peering agreements will
minimize the cost of terminating Carrier1's IP traffic.
SERVICES
Carrier1 is focusing on providing long distance voice and IP services on a
wholesale basis at the high level of quality expected by European customers. It
provides these services primarily to competitive fixed-line operators, other
carriers, wireless network operators, ISPs, resellers and MNCs. In September
1998, Carrier1 launched its European and transatlantic international long
distance voice and IP services. It expects to begin providing national long
distance services in the first half of 1999 inside the United Kingdom and
Germany. Carrier1 intends, by the end of 1999, to be a broadly based European
provider of voice and IP services, able to provide and price its services on a
city-to-city basis without regard to national borders. Carrier1 intends to
provide in the future other wholesale telecommunications services, such as
managed bandwidth and voice-over-IP services.
WHOLESALE VOICE SERVICE
Carrier1's wholesale voice service involves city-to-city transport from
Carrier1's network points of presence located in strategic European cities and
New York for termination anywhere in the world. Carrier1 terminates calls either
through interconnection or direct operating agreements with the relevant
national ITO or through refile or resale agreements with other carriers that
have interconnection agreements in place with that ITO. See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations--Factors Affecting Future Operations--Cost of Services--Voice
Termination Costs." When Carrier1 does use refile or resale agreements to
terminate traffic it seeks to do so with carriers who provide voice service
comparable in quality to Carrier1's. Carrier1's customers generally will arrange
for transmission of their traffic to one of Carrier1's points of presence at
their own cost, although Carrier1 may provide service from the customer's site
if traffic volume is sufficient. Carrier1's voice service contracts guarantee
99.9% availability on the network and certain minimum connection response and
repair times.
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WHOLESALE IP SERVICE
Carrier1 seeks to be a major European IP backbone provider. It offers two
types of wholesale IP transport service, "Global Transit Services" and "Internet
Exchange Connect Services."
GLOBAL TRANSIT SERVICE. Carrier1's Global Transit Service provides
customers with high-speed, high-quality IP connectivity to IP domain addresses
world-wide. This backbone service interconnects Carrier1's customers with
selected IP exchanges and other international IP backbone providers. Customers
connected to the Global Transit Service backbone have any-to-any IP connectivity
geared to providing the best IP reach and connectivity. Although Carrier1
anticipates that most of its IP customers will bring their traffic to Carrier1's
routers, Carrier1 will consider, on a case by case basis, alternative
arrangements.
Carrier1 offers two levels of Global Transit Service: "Premium" and "Basic."
Both packages guarantee certain minimum connection, response and repair times.
The Premium Transit package guarantees certain additional performance parameters
and will be given priority within the network. A Premium Transit user's
guaranteed service levels include round trip packet delay of less than 100
milliseconds, packet loss of less than 0.2%, 99.9% availability on the network
(initially in Carrier1's domain, with the goal of extending that guaranteed
availability into peering domains) and the highest level of traffic
prioritization. At peak traffic hours, the Premium user's traffic has priority
over the Basic user's traffic. Carrier1 has designed its network, however, to
minimize the likelihood of congestion requiring such prioritization of traffic.
Both the Basic and Premium packages offer customers newsfeed services and
secondary domain name server services (i.e., a backup to the customer's primary
Internet address).
Carrier1's Global Transit Service is interconnected in Europe to Ebone, a
subsidiary of Hermes Europe RailTel B.V. ("Hermes"), that has what Carrier1
believes is a large European customer base. Carrier1 initially will pay a
transit fee for access to the Ebone IP backbone. Carrier1 will also actively
seek to enter into peering arrangements with smaller European backbone
providers. As its volume of IP traffic increases, Carrier1 expects it will be in
a position to negotiate peering with Ebone and other major European backbone
providers. In the United States, where almost all European backbone providers
must pay to access the backbones of the major United States IP backbone
providers, Carrier1 has transit agreements with UUNet Technologies, Inc., an MCI
WorldCom subsidiary ("UUNet"), and GTE Internetworking, a unit of GTE
Corporation. See "Risk Factors--Our Ability to Enter into Interconnection
Agreements and Peering Arrangements Could Affect Our Business" and "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations--Factors Affecting Future Operations--Cost of Services--IP
Termination Costs." In the United States, Carrier1 has peering arrangements with
Epoch Networks and PSINet. In Europe, Carrier1 has peering arrangements with a
number of ISPs. Carrier1 believes its Global Transit Service offers connectivity
to a greater number of United States IP backbone providers than other European
IP services. Carrier1 will also interconnect Global Transit Service customers to
each other, which, as the customer base of its backbone grows, will increase the
attractiveness to customers of Carrier1's IP backbone.
INTERNET EXCHANGE CONNECT SERVICE. Carrier1's Internet Exchange Connect
Service (the "IX Connect") is a point-to-point option for customers who want to
transit solely to a specific IP exchange or to a specific partner. It offers
one-to-one connectivity to a select number of destinations through main IP
exchanges in Europe and the United States. Carrier1 currently offers IX Connect
connectivity to LINX in London, AMS-IX in Amsterdam, DE-CIX in Frankfurt, CIPX
in Geneva, PARIX in Paris and several IP backbone providers in New York. As its
network expands, Carrier1 expects to offer connectivity to additional NAPs.
Carrier1 believes it is the only European IP service provider currently offering
this type of service. The service is targeted to large ISPs who prefer to
organize their own presence and peerings in the key IP exchanges for technical
or commercial reasons. The principal guaranteed parameters of IX Connect are
dedicated reserved capacity (utilizing "IP tunneling"), access speed ranging
from 2 Mb to 155 Mb and the announcement of the customer's Internet domain at
the remote location. Carrier1 will also guarantee certain minimum connection,
response and repair times.
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A large number of customers are significant to Carrier1's IP backbone
because (i) it increases the cost-efficient use of the network by lowering per
unit costs, (ii) it facilitates obtaining lower per unit transit fees or peering
with other ISPs and (iii) it augments the value of the backbone which, in turn,
draws more customers.
Both types of IP services include a centralized help desk and network
management on a 24-hours-a-day, 365-days-a-year basis, Web site reporting and
service information, on-line statistics per customer on a secure basis and Web
site diagnostic tools.
OTHER SERVICES
Carrier1 intends to expand its addressable market to include additional
wholesale customers, such as switchless resellers, by offering the value-added
services they require. These services include capabilities for switched access,
toll-free services and prepaid phone cards. Carrier1 plans to offer these
wholesale capabilities in selected countries as early as mid-1999.
Carrier1 also intends to offer Voice-over-IP ("VoIP"), or voice traffic
transmitted over an IP-based network. Carrier1 plans, after a trial phase
expected to be completed by mid-1999, to offer VoIP to IP customers that, for
example, wish to offer personal computer-to-phone connectivity to their end
users. Carrier1 also plans to offer other value-added IP services, such as
server co-location facilities for its current and future customers.
As Carrier1 extends its network and adds transmission capacity, it expects
that it will be able to sell excess bandwidth.
NETWORK
Carrier1 believes it is critical to own or control key elements of its
network in order to become a high-quality, low-cost provider. Carrier1 is
following a flexible, phased approach to deploying its network that will permit
it to optimize the use of its network and take advantage of low-cost
opportunities for expanding the network. Carrier1 has commenced operations
primarily on a leased fiber optic transmission platform to enable its early
entry into the market. Over time, Carrier1 will expand its network in a phased
approach, adding capacity to meet expected increases in demand. To reduce its
cost base, however, Carrier1 will seek to obtain additional transmission
capacity at dark fiber cost levels, either through building new capacity,
acquiring capacity through purchases or swaps of excess capacity or leasing
capacity. In all cases, Carrier1 intends to own its switches and routers.
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The table below sets forth the location of each switch, multiplexer and
router owned by Carrier1 and in service, and the location and expected
in-service dates of switches, multiplexers and routers planned to be installed
through the end of 1999. However, the timing, location and number of switches,
multiplexers and routers may change depending on changes in customer demand or
regulatory conditions in any particular jurisdiction, or the availability of a
single IP-based transmission platform.
<TABLE>
<CAPTION>
INSTALLED NETWORK COMPONENTS
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VOICE IP
- ------------------------------------------------------- ---------------------------
<CAPTION>
SWITCHES MULTIPLEXERS ROUTERS
- -------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Frankfurt Amsterdam Amsterdam
London Geneva Frankfurt
New York Paris Geneva
Vienna London
Zurich New York
Paris
Vienna
Zurich
<CAPTION>
PLANNED NETWORK INSTALLATIONS BY YEAR END 1999
- ------------------------------------------------------------------------------------
VOICE IP
- ------------------------------------------------------- ---------------------------
SWITCHES MULTIPLEXERS ROUTERS
- -------------------------- --------------------------- ---------------------------
EXPECTED EXPECTED EXPECTED
IN-SERVICE IN-SERVICE IN-SERVICE
LOCATION DATE LOCATION DATE LOCATION DATE
- ------------- ----------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Amsterdam 2Q '99 Stockholm 3Q '99 Berlin 2Q '99
Berlin 2Q '99 Cologne 3Q '99 Brussels 2Q '99
Dusseldorf 2Q '99 Copenhagen 3Q '99 Dusseldorf 2Q '99
Hamburg 2Q '99 Dublin 3Q '99 Hamburg 2Q '99
Paris 2Q '99 Stuttgart 3Q '99 Stockholm 3Q '99
Brussels 3Q '99 Leipzig 4Q '99 Milan 3Q '99
Manchester 3Q '99 Munich 4Q '99 Cologne 3Q '99
Milan 3Q '99 Copenhagen 3Q '99
Dublin 3Q '99
Manchester 3Q '99
Stockholm 3Q '99
Stuttgart 3Q '99
Leipzig 4Q '99
Munich 4Q '99
</TABLE>
EXISTING NETWORK
Carrier1 believes that entering the liberalizing European international and
national long distance markets early and establishing its position quickly with
a technologically advanced voice and IP network will give Carrier1 a competitive
advantage in such markets. To begin operations in September 1998, approximately
six months after being founded, and to keep its overhead costs as low as
possible, Carrier1 outsourced to Nortel and Cisco, on a turnkey basis, the
design, installation, technical operation and maintenance of its initial
network. Carrier1 expects to assume control of technical operations of the
network by mid-1999. By applying its operational knowledge and expertise to the
deployment process, management believes it has succeeded in putting in place one
of the most advanced voice and IP networks in Europe.
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TRANSMISSION CAPACITY. Carrier1's traffic is transmitted over: (i) an STM 1
(155Mb) circuit on the Gemini fiber optic cable, acquired from Telemonde under
an IRU, linking London and New York, (ii) an STM-1 (155Mb equivalent) circuit
leased from Hermes (the "Hermes Ring") connecting Amsterdam, Frankfurt, Geneva,
London and Paris and (iii) a 155Mb leased circuit linking Frankfurt to Vienna.
NETWORK MANAGEMENT CAPABILITIES. Carrier1 has installed Synchronous Digital
Hierarchy ("SDH") equipment at each network point of presence that will provide
it with information relating to the status and performance of all elements of
its network, including the transmission capacity provided to it by various third
parties. This SDH layer will also provide Carrier1 with flexibility to connect
new providers of transmission capacity (including direct connection to dark
fiber) and to configure this capacity in a flexible manner.
VOICE TRAFFIC. Carrier1 purchased from Nortel, and Nortel installed and is
operating on a turnkey basis, five international gateway GSP switches in
Frankfurt, London, New York, Vienna and Zurich. Carrier1 selected these cities
because the United States, Germany and the United Kingdom represented either the
source or termination points for 20 of the top 25 traffic routes in the world in
1996. Carrier1's switches and switching system are the most advanced Nortel
currently supplies and its main transmission lines are redundant. In addition,
Carrier1 has installed multiplexers in Amsterdam, Geneva and Paris.
IP TRAFFIC. Carrier1 purchased from Cisco, and Cisco installed and is
operating on a turnkey basis, high-capacity routers in Amsterdam, Frankfurt,
Geneva, London, New York, Paris, Vienna and Zurich. Carrier1 selected these
cities because they represent important sites of European IP traffic origination
or termination.
Carrier1 has configured its routers and leased circuits into a ring and
believes it is one of the first carriers in Europe to provide IP services on a
ring structure. This technologically advanced ring architecture, enhanced by SDH
equipment, provides inherent redundancy. Upon any single failure on the ring,
traffic will automatically be re-routed to another part of the ring, avoiding
transmission failure. Carrier1 believes it has one of the most advanced IP
networks in Europe.
PLANNED NETWORK DEPLOYMENT
Carrier1 is continuing to pursue an aggressive timetable for extending the
scope of its network, thereby rapidly expanding its presence in its target
markets. Carrier1 is installing a cross-border network linking the principal
cities of several Western European countries and will continue to broaden the
range of countries covered by the network and deepen the extent of the network
within particular countries. With a city-to-city cross-border network in place,
Carrier1 will be able to provide and price its services without regard to
national boundaries.
VOICE TRAFFIC. Carrier1's deployment schedule through the end of 1999
contemplates the acquisition and installation of multiplexers or Nortel GSP
switches in Amsterdam, Berlin, Brussels, Cologne, Copenhagen, Dublin,
Dusseldorf, Hamburg, Leipzig, Manchester, Milan, Munich, Paris, Stockholm and
Stuttgart. In addition Carrier1 will replace a multiplexer in Paris with a
Nortel GSP switch. These sites, together with Carrier1's existing sites, serve
large population centers and points of traffic concentration in France, Germany
and the United Kingdom. By expanding the range of its network within these
countries Carrier1 will gain closer access to a larger number of customers and
will reduce its interconnection and other termination-related costs. In
considering similar network penetration levels in other European countries,
Carrier1 will weigh the benefits of increased access to customers and lower
termination costs against the increased transmission costs incurred.
The timing of installation and location of each of the switches above may
change in response to changes in customer demand, the availability of a single
IP-based transmission platform, or changes in regulatory conditions in any
particular jurisdiction. See "Risk Factors--Government Regulation Significantly
Affects Our Business."
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IP TRAFFIC. Carrier1's deployment schedule through the end of 1999
contemplates the installation of routers in Berlin, Brussels, Cologne,
Copenhagen, Dublin, Dusseldorf, Hamburg, Leipzig, Manchester, Milan, Munich,
Stockholm and Stuttgart.
The timing of installation and location of each of the routers listed above
may change in response to changes in customer demand or the availability of a
single IP-based transmission platform.
THE GERMAN NETWORK. Carrier1 has entered into a Development Agreement to
build the German Network with affiliates of Viatel and Metromedia, targeting
routes it believes are currently underserved by existing and announced fiber
networks. The German Network will be an advanced, high-capacity, bi-directional
self-healing 2,300 kilometer fiber optic ring utilizing advanced SDH and dense
wave division multiplexing technologies. The German Network will initially
connect Berlin, Bremen, Cologne, Dortmund, Dresden, Dusseldorf, Essen,
Frankfurt, Hamburg, Leipzig, Mannheim, Munich, Nuremberg, and Stuttgart. The
German Network will also pass a number of other major cities. When the German
Network is completed, Carrier1 will own its own cable subduct (containing 72
strands of fiber) and access points. Carrier1 expects that construction of the
German Network will be completed by the end of 1999 and that some segments will
be operational in the third quarter of 1999. Carrier1's share of the development
costs will be up to approximately $82 million, including the fiber deployed.
Carrier1 has decided to commence building an extension of its network in
Germany because (i) Germany is the largest telecommunications market in Europe
and a major center for traffic within Europe, (ii) there is limited availability
of cost-effective transmission capacity in Germany, (iii) leased transmission
costs are currently very high in Germany and Carrier1 desires to lower its cost
base in such a large market, (iv) Germany's population is widely and relatively
evenly dispersed among many cities, requiring the installation of a number of
switches and routers throughout the country to effectively access the full range
of potential customers, (v) installing multiple points of presence in Germany
will reduce Carrier1's termination costs, and (vi) Germany's central location
within Europe provides a good base from which to connect the German Network to
other parts of Europe. The German Network will also provide fiber capacity in
regions Carrier1 believes are not covered or are underserved by existing and
announced fiber networks. Carrier1 also believes that excess capacity on the
German Network will be useful as a valuable "currency" to swap for capacity on
other networks.
Pursuant to the Development Agreement, Carrier1 and Metromedia each have a
24.995% interest and Viatel has a 50.01% interest in the development company.
Viatel, as a result of its majority interest, will control all but certain major
decisions relating to the development of the German Network which will require
unanimous consent. Costs of construction will be borne pro rata by Viatel,
Carrier1 and Metromedia, and the development company will be indemnified for
certain liabilities, costs and expenses by each of the parties. In addition,
Viatel will receive a developer's fee of 3% of certain construction costs, 25%
of which will be paid by Carrier1.
Viatel and Metromedia are each required to provide the development company
with a letter of credit. The development company may draw on the letter of
credit of a party that does not meet its funding obligations. Carrier1 has
provided a letter of credit in the amount of approximately DM 110 million (or
approximately $64.8 million).
OTHER PLANNED TRANSMISSION CAPACITY. During the year 2000 Carrier1 also
expects TAT-14, a transatlantic cable connecting Amsterdam, London and New York
in which it has arranged to purchase an MIU, to become operational. By that
time, Carrier1 also expects to have replaced some leased capacity with owned
capacity and to have leased or purchased additional capacity for geographic and
volume expansions. By April 1999, Carrier1 expects to have implemented
additional transmission capacity under an IRU in a transatlantic cable
connecting Frankfurt, Amsterdam and New York.
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FURTHER NETWORK EXTENSIONS AND DEVELOPMENTS
Carrier1 will consider extending its network within Europe beyond its
current deployment plans through 1999. Due to the rapidly evolving dynamics of
the European telecommunications market, Carrier1 will continually reassess the
most cost-effective means of network expansion. Future increases in the supply
of fiber optic cable may make variable or fixed-rate lease arrangements, the
purchase of transmission rights (e.g., IRUs or MIUs) or the swapping of
transmission capacity more favorable options, in economic terms, than building
new capacity.
Carrier1 has worked closely with Nortel and Cisco to create a
technologically advanced network system that is flexible and will facilitate
Carrier1's migration to a single integrated IP-based transmission platform for
both voice and IP traffic when proven technology becomes commercially available.
EXISTING AND PLANNED TRAFFIC TERMINATION ARRANGEMENTS
VOICE TRAFFIC. Carrier1 carries voice traffic to any destination in the
world, either directly or through "refile" or "resale" agreements with other
carriers who have a local point of presence and an interconnection agreement
with the relevant ITO.
If a call is terminated in a city in which Carrier1 has a point of presence
and an interconnection arrangement with the national ITO, the call will be
transferred to the PSTN for local termination. This is the least costly mode of
terminating a call. Carrier1 has entered into interconnection arrangements to
provide for the local termination of its voice traffic with carriers in Austria,
Denmark, Germany, The Netherlands, Sweden, Switzerland, the United Kingdom, and
the United States. Carrier1 has implemented interconnection arrangements in
Austria, Germany, Switzerland, the United Kingdom and the United States and is
in the process of implementing these arrangements in these other countries.
Carrier1 initiated interconnection negotiations with Belgacom in Belgium, Tele
Danmark in Denmark, France Telecom in France, Telecom Eireann in Ireland,
Telecom Italia in Italy and Telia in Sweden in early 1999. By December 1999,
Carrier1 intends to have implemented direct operating agreements with local
carriers for termination of voice traffic in a number of emerging markets.
If a call is to a location in which Carrier1 does not have a point of
presence, or has a point of presence but does not have an interconnection
agreement giving it access to the PSTN, then the call must be transferred to,
and refiled with, another carrier that has access to the relevant PSTN for local
termination. Most refilers currently operate out of London or New York, so that
the refiled traffic is rerouted to London or New York and from there is carried
to its termination point. In those countries where Carrier1 has a point of
presence but does not have an interconnection agreement implemented yet, it has
implemented one or more "resale" agreements whereby a local carrier that has an
interconnection agreement with the ITO "resells" or shares this interconnection
right with Carrier1 for a fee. Carrier1 has resale agreements in Austria,
France, Germany, The Netherlands and Switzerland. Termination through resale
agreements is significantly less expensive than through refile agreements (since
the traffic does not need to be rerouted to another country, as is done with
refiling), but is more expensive than through interconnection agreements.
IP TERMINATION. IP termination is effected through peering and transit
arrangements. Peering arrangements provide for the exchange of IP traffic
free-of-charge. Under transit arrangements, Carrier1 is required to pay a fee to
exchange traffic. The major United States ISPs require almost all European ISPs
and IP backbone providers, including Carrier1, to pay a transit fee to exchange
traffic. In the United States, Carrier1 has peering arrangements with Epoch
Networks and PSINet, and has transit agreements with UUNet and GTE
Internetworking. In Europe, Carrier1 has peering arrangements with a number of
ISPs and a transit agreement with Ebone. Carrier1 will continue to seek
additional peering arrangements.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations-- Factors Affecting Future Operations--Cost of Services--IP
Termination Costs," and "Risk Factors--Our Ability to Enter into Interconnection
Agreements and Peering Arrangements Could Affect Our Business."
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OPERATIONS
NETWORK IMPLEMENTATION AND OPERATION
Network engineering, technical operation and maintenance and repair are
currently handled exclusively by Nortel in connection with the voice overlay of
the network, and Cisco in connection with the IP overlay of the network. Both
Nortel and Cisco are working on a turnkey operational basis. Carrier1 will
continue to work closely with Nortel and Cisco to ensure future implementation
milestones are met, and that the quality and performance of the network meet
certain Carrier1-established benchmarks. The initial outsourcing of the design,
installation and technical operation of its network has allowed Carrier1 to
maintain low overhead costs during the initial operations period.
The voice and IP network operating systems allow Carrier1 to use advanced
software to maximize the efficient operation of the network, including managing
the flow of voice and IP traffic on a real-time basis and identifying the
precise location of faults. These systems are also sufficiently flexible to
allow Carrier1 to migrate to more advanced technological applications as they
become commercially feasible.
Carrier1 intends to assume the technical operation of the network (other
than basic equipment servicing) from Nortel and Cisco by mid-1999, so that it
can control all the customer-related functions of the business. Until then,
Carrier1's personnel will work side by side with Nortel and Cisco personnel to
receive on-site training. Carrier1 expects that this training will permit a
smooth transition from outsourcing to insourcing of the network's operational
functions and reduce the risks of disruption due to the shift in
responsibilities. Carrier1 expects to continue to contract with Nortel and Cisco
for the design and installation of switches and routers. A small team of
operations staff will manage the future planning and architecture of the
network.
Carrier1 has a Network Operations Center ("NOC") in London from which it
operates the voice and IP network. Carrier1 believes that a centralized NOC
enables it to identify overloaded or malfunctioning circuits and reroute traffic
much more quickly than if the network were controlled by separate NOCs operated
in different countries.
THIRD-PARTY TURNKEY CONTRACTS
THE NORTEL CONTRACT. Carrier1 entered into a turnkey agreement with Nortel
in May 1998, under which Nortel has responsibility for the design, installation,
technical operation, maintenance and repair of its voice network switches,
including the provisioning of equipment, software and services. Nortel has
committed to a 12-month warranty of any defective equipment or software it may
provide. Nortel has also agreed to supply replacement parts for equipment and
software support (including upgrades) for a period of ten years following the
date of delivery of such equipment or software. Carrier1, in turn, has agreed to
purchase a certain volume of services and equipment from Nortel, and is subject
to surcharges if it fails to meet such volume thresholds for reasons other than
Nortel's material breach. Carrier1 has agreed to continue to use Nortel's
network operation and management services up to July 1999, by which time
Carrier1 will assume full operational control of these functions. The turnkey
contract contains limitations on Nortel's total liability.
THE CISCO CONTRACT. Carrier1 entered into a turnkey agreement with Cisco
(the "Cisco Agreement") in June 1998, for the design, installation, operation,
maintenance and repair of its IP network routers. Cisco has provided a 90-day
warranty on the software and hardware it provides to Carrier1. Cisco will
provide technical support for its standard software for a period of three years
following the latest revision of that software. Cisco's liability under the
agreement (other than for personal injury) is limited to the amounts paid under
the agreement to Cisco in the six-month period prior to the event giving rise to
the liability.
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CUSTOMER SUPPORT
An essential component of Carrier1's business strategy is to provide a level
of customer support above that which is currently available in the wholesale
telecommunications markets of Europe.
All customer service orders received by the local sales forces are reported
to the central order desk at the NOC which then logs the order into Carrier1's
computer system and directs the order to the voice or IP team, as applicable.
The central order desk also tracks the status of an order during implementation.
Carrier1 has automated its operational workflows so that the status of customer
order implementation, traffic faults, repair histories and other
customer-related information is accessible, on-line, by any employee of Carrier1
at any time. Carrier1 believes that the internal visibility created by the
on-line availability to any Carrier1 employee of all customer-related
information enhances the general monitoring and management of the customer
relationship and facilitates informed and timely responses to customers' service
needs or problems. Furthermore, by tracking on-line all aspects of a customer's
history from the customer's first call through the term of the relationship,
Carrier1 optimizes its ability to provide follow-up and proactive advice to its
customers.
The voice and IP operations teams at the NOC and the in-country operations
support team manage the local point of presence locations, local installation
and local support, and work together to implement a customer's order. The
in-country operations and sales teams provide a customer with local language
support and quick access and response to customer orders and other service
needs. A help desk in London serves as the first place to which customer
inquiries are directed. The help desk is open 24 hours a day, 365 days a year.
It not only manages customer inquiries but is the first place to which customer
problems are reported and, from there, internally directed for resolution.
Customers may call the help desk at any time to receive a status report
regarding their request or problem.
In addition to the minimum service level guarantees contained in Carrier1's
voice and IP service contracts, Carrier1 also guarantees response times to
customer requests within hours, and repair times within one day of the fault
being reported.
INFORMATION AND BILLING SYSTEMS
Unburdened by legacy systems, Carrier1 has obtained and installed advanced
IT systems tailored to providing wholesale voice and IP services. Carrier1 has
developed its own system to enable it to determine least cost routing on a
real-time basis, allowing it to maximize margins within the constraints of the
network. In order to identify the least cost route for voice traffic at any
given time, the system takes into account all costs on a given route, refile or
resale possibilities and their constraints, transmission costs and constraints
per route, as well as other cost elements. Routing information is updated daily
and takes into account the prior day's actual costs rather than hypothetical
forward costs. Among other things Carrier1's systems are designed to facilitate
on a real-time basis (i) swift and efficient order management, (ii) service
provisioning, (iii) customer-responsive traffic fault management, (iv) billing,
(v) general management of the customer service process and (vi) compliance with
Carrier1's performance level guarantees.
Carrier1 currently uses software programs developed by third parties as its
primary office and information management systems. These programs have been
tailored, however, to Carrier1's particular specifications.
As part of its strategy of focusing on the specific needs of new entrants
into the European telecommunications market, Carrier1's billing system
emphasizes flexibility and customization. Customers may be billed in the
currency of their choice, and may have their bills broken down by country, site,
or other call detail records. Carrier1 uses International Computers Limited's
("ICL") SIMS and Prospero billing systems software. The Company initially
outsourced the running of such billing programs to ICL, but expects to bring the
running of such programs in-house by June 1999. Carrier1's billing system
analyzes Carrier1's traffic, revenues and margins by customer and by route,
which is an important cost management
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tool for Carrier1. Carrier1 expects that by April 1999 its customers will be
able to obtain call detail records
and other information through an on-line billing information inquiry function.
Carrier1 plans to maintain separate billing modules for voice and IP services,
although customers utilizing both services may be billed on one invoice if
desired.
CUSTOMERS
Focusing primarily on European customers and North American customers with
European connectivity needs, Carrier1 targets the following categories of
customers:
- COMPETITIVE FIXED-LINE OPERATORS. This category includes fixed-line
operators that compete with the ITOs. These operators typically desire to
outsource their international and, from time to time, their national long
distance traffic.
- OTHER NON-ITO CARRIERS. This category includes operators with
international infrastructure, who select Carrier1 to carry overflow excess
traffic and to carry traffic to select, low-price destinations.
- WIRELESS OPERATORS. Wireless operators frequently outsource much of their
international and national long distance traffic.
- ISPS AND REGIONAL AND SPECIALIST PROVIDERS. As demand for Internet
services grows in Europe, ISPs (many of whom do not own or operate their
own transmission capacity) are increasingly requiring low-cost
transmission and interconnection capabilities from wholesale carriers.
Cable television companies, satellite resellers and metropolitan area
network providers are also demanding increasing amounts of low-cost IP
services.
- RESELLERS. This category includes switchless resellers, a group that has
been rapidly growing in the United Kingdom and Germany in recent years.
Resellers generally outsource their international and, from time to time,
national long distance traffic.
- CONSORTIA. A number of groups have formed buying consortia to pool traffic
volume in order to obtain higher discounts from carriers. For example, a
group of European multinational entities have combined to form the
European VPN Users Association's Ventures Group to acquire voice services
and currently split their traffic among ITOs and ITO alliances. Carrier1
will target buying consortia and will also seek to provide its services to
research consortia. The research consortia represent an important part of
the IP market.
- MNCS. Increasingly, MNCs are seeking wholesale telecommunications services
to reduce their costs or as a component of their own value-added services
such as frame relay. Although MNCs are not a primary customer group for
Carrier1 due to their relatively high customer service demands, Carrier1
offers capacity to MNCs on a wholesale basis.
- INCUMBENTS AND THEIR ALLIANCES. A number of ITOs and their affiliated
alliances use wholesale carriers to carry excess traffic generated by
bottlenecks in their network or to terminate traffic to certain locations
at lower rates than their negotiated settlement rates.
Carrier1 uses a credit screening process to evaluate potential new
customers. In performing its credit analysis, Carrier1 relies primarily on
internal assessments of its exposure, based on the costs of terminating
international traffic in certain countries and the capacity requested by the
proposed carrier or service provider, as well as references provided by the
potential customer. Carrier1 currently depends on a small number of significant
customers for its revenues. During the period from Inception to December 31,
1998, Carrier1 earned 69% of its revenues from three major customers. These
three customers, Interoute
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Telecommunications (UK) Limited, WorldCom Telecommunications Services GmbH and
STAR Telecommunications Deutschland GmbH, accounted for 46%, 13% and 10%,
respectively, of Carrier1's total revenues during that period. One new customer,
Mobilcom AG, may account for up to 50% of Carrier1's revenues in the near term.
See "Risk Factors--Wholesale Customers Are Price Sensitive; We Rely on a Small
Number of Significant Customers."
SALES
Carrier1 has an internal sales force focused on marketing services to
wholesale customers. Carrier1 currently has sales representatives in Amsterdam,
Frankfurt, London, New York, Paris and Zurich. The heads of these sales offices
have extensive telecommunications-related marketing and sales experience, as
well as strong customer relationships, in the geographic markets in which they
are located. Carrier1 intends to hire additional sales executives as it
increases the number of its offices and expands its existing sales efforts.
Carrier1 will continue to seek personnel with a high degree of experience in and
knowledge of the local telecommunications markets in which they will be working.
Currently, the Frankfurt sales office functions as the regional head office
covering German-speaking Europe and Eastern Europe; the Paris sales office
functions as the regional head office for Southern Europe; New York functions as
the regional sales center for North America; the London sales office functions
as the regional head office for all English-speaking countries in Europe; and
the Amsterdam sales office functions as the regional head office for Scandinavia
and the Benelux countries. Customers who do not, for one reason or another, fit
within a particular region are covered by the Zurich sales office. Carrier1 also
intends to open sales offices in Scandinavia and Southern Europe in 1999.
Carrier1 expects its regional strategy will permit it to keep operating costs
down until traffic volumes in various other locations in Europe are large enough
to justify establishing sales offices in such locations.
Carrier1 also has sales people specializing in IP who work out of the
London, Frankfurt, Paris and Amsterdam sales offices. These IP specialists focus
on marketing to ISPs and other customers whose needs are primarily or
exclusively IP-oriented. They also work with other members of the sales force in
marketing a package of voice and IP services as required by customer demand.
Carrier1 currently has a limited number of customers, enabling it to provide
each prospective or actual customer with personalized account management.
Furthermore, in comparison to the mass retail market, the wholesale
telecommunications market has a relatively small number of customers. Carrier1
expects that this market characteristic will permit it to continue to provide
personalized account management even as the number of its customers continues to
grow.
PRICING
Carrier1's agreements with its voice customers are typically for an initial
term of twelve months and will be renewed automatically unless cancelled. They
employ usage-based pricing and do not provide for minimum volume commitments by
the customer. Carrier1 expects to generate a steady stream of voice traffic by
providing high-quality service and superior customer support. Carrier1's IP
services are charged, depending on service type, either at a flat monthly rate,
regardless of usage, based on the line speed and level of performance made
available to the customer, or on usage-based pricing, with no minimum volume
commitment by the customer. The majority of IP contracts to date have been
usage-based. Carrier1's agreements with its IP customers are generally for a
minimum term of twelve months, although Carrier1 may seek minimum terms of two
years or more for agreements providing for higher line speeds.
Currently, voice and IP services are both priced competitively and Carrier1
emphasizes quality and customer support, rather than offering the lowest prices
in the market. The rates charged to voice and IP customers are subject to change
from time to time. Carrier1 will also vary pricing on its routes as a traffic
management tool. Carrier1 initially priced its IP services at a discount to its
competitors to build rapidly its customer base. Carrier1 expects to experience
declining revenue per billable minute for voice traffic and
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declining revenue per Mb for IP traffic, in part as a result of increasing
competition. Carrier1 believes, however, that the impact on its results of
operations from such price decreases will be at least partially offset by
decreases in its cost of providing services and increases in its voice and IP
traffic volumes.
COMPETITION
The European telecommunications industry is highly competitive, and the
liberalization it is currently undergoing is rendering it increasingly more so.
The opening of the market to new telecommunications service providers, combined
with technological advances that greatly augment the transmission capacity of
circuits at a relatively small incremental cost, has resulted in significant
reductions in retail and wholesale prices for voice services. Prices declined
significantly during 1998, and Carrier1 expects prices to continue to decline.
While decreasing prices are fueling growing demand for bandwidth, they are also
narrowing gross profit margins on long distance voice traffic. Carrier1's
ability to compete successfully in this environment will be highly dependent on
its ability to generate high traffic volumes from its customers while keeping
its costs of services low. Prices for IP services remain relatively high in
Europe. However, the United States market for IP services has been experiencing
downward pressure on prices, and Carrier1 expects comparable price decreases in
the European IP market over the next few years as competition increases. As
prices for IP services decline, Carrier1's ability to compete successfully in
the IP market will be highly dependent on its ability to attract and retain
enough customers and keep its cost base low.
In voice services, Carrier1 has two main categories of competitors. The
first is the group of large established carriers, consisting of ITOs and
affiliated companies, that offer a wide range of wholesale services in addition
to their retail services. This group includes AT&T, British Telecom, the KPN
Telecom/ Qwest Communications International Inc. alliance, Cable & Wireless,
Global One (a joint venture of Deutsche Telekom, France Telecom and Sprint
Corp.), MCI WorldCom, Inc., Tele Danmark A/S, Teleglobe Inc., Unisource N.V. and
Telecom Italia S.P.A. The second category comprises new entrants to the
telecommunications market that provide wholesale services. This group includes
Pacific Gateway Exchange Inc., FaciliCom International, Inc., Hermes (which
recently merged with Esprit and which owns 75% of Ebone, a large European
backbone provider), STAR Telecommunications, Inc., Viatel, Telegroup Inc., and
RSL Communications Ltd.
In IP services, Carrier1's main competitors are Ebone, UUNet and Qwest
Communications International Inc., all of which have an established customer
base and either a significant European infrastructure or strong connectivity to
the United States through various peering arrangements. Carrier1 believes that,
if the quality of the service is consistently high, IP customers will typically
renew their contracts because it is costly and technically burdensome to switch
carriers.
Carrier1 is a wholesale carrier and, while it does not compete directly with
the ITOs or other carriers for end-users, it is entering a rapidly developing
market in which companies traditionally focused on the retail sector are
beginning to sell to the wholesale market and owners of infrastructure are
beginning to provide services as well as capacity at both the retail and
wholesale level. In addition, many of Carrier1's competitors are larger
enterprises with greater financial resources than Carrier1, and accordingly may
be able to deploy more extensive networks or may be better able to withstand
pricing and other market pressures. See "Risk Factors--The European
Telecommunications Market Is Highly Competitive."
A number of Carrier1's competitors are devoting significant resources to the
provision of European telecommunications services to carriers and other service
providers, including through the construction of their own networks. Those
wholesale providers that own a European infrastructure will benefit from a lower
cost base than Carrier1, at least initially, and it will be essential for
Carrier1 to lower its cost base as quickly as possible to compete effectively
with them. Furthermore, those wholesale carriers that have successfully
negotiated interconnection agreements with the relevant ITOs or peering
arrangements with other IP backbone providers, as applicable, will also have a
lower cost structure than Carrier1 and will, therefore, be in a better position
to compete on the basis of price than Carrier1, until Carrier1 enters into
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such agreements. See "--Services--Wholesale IP Service--Global Transit Service"
and "Risk Factors-- Our Ability to Enter into Interconnection Agreements and
Peering Arrangements Could Affect Our Business."
Carrier1 competes with a number of ITOs. In many European countries, the ITO
controls access to local networks and has significant operational economies,
including a large national network, and existing operating agreements with other
ITOs. Moreover, ITOs generally have close ties with national regulatory
authorities, which have, in some instances, shown reluctance to adopt policies
and grant regulatory approvals that would result in increased competition for
the local ITO. In addition, many of Carrier1's non-ITO competitors are
associated with ITOs and such ITOs may be more likely to provide transmission
capacity on favorable terms and direct excess traffic to their related carriers
than to Carrier1. However, Carrier1 believes that such affiliations may be more
of a hindrance than a benefit. The ITOs are more focused and dependent on
traditionally structured retail services, and are less responsive to the
dynamics of the wholesale market and the growth of the IP market. Furthermore,
the ITOs are resisting the new pricing and services rationales created by low
cost alternative infrastructure and European Commission mandated changes in
interconnection tariffs as these threaten to accelerate the collapse of
traditional ARM based services which have historically been a major source of
profitability for the ITOs. Therefore, while the ITOs cannot afford to
completely ignore the development of new service markets, they may perceive a
short term interest in slowing the pace of their growth, with the result of ITOs
treating their affiliates more as competitors than as partners.
Other factors contributing to the competitiveness of the wholesale carrier
market are:
- Basic voice carrier services are not highly differentiated, and switching
carriers is not costly. Voice customers can easily redirect their traffic
to another carrier, and certain customers may do so on the basis of even
small differences in price.
- Network buildout costs are high, creating an incentive for wholesale
carriers that have built their network to lower prices so as to increase
volume and maximize utilization rates.
- New networks are being built to provide significant additional capacity,
creating further downward pressure on prices.
Many of Carrier1's competitors, however, are also potential customers. For
example, carriers with their own infrastructure may have excess traffic that
wholesale carriers such as Carrier1 can carry. Furthermore, Carrier1 may, in
certain instances, be able to provide less expensive routing for certain
destinations and may therefore carry traffic over those particular routes. It is
customary industry practice for carriers and other telecommunications service
providers to use a number of wholesale voice service providers. Accordingly,
Carrier1 need not be a customer's sole wholesale voice carrier but may be one of
three or four selected.
GOVERNMENT REGULATION
The following discussion summarizes the regulatory frameworks in certain
regions in which Carrier1 currently operates or plans to operate in the near
future. This discussion is intended to provide a general overview of the more
relevant regulations and Carrier1's current regulatory posture in the most
significant jurisdictions in which Carrier1 operates and expects to operate. It
is not intended as a detailed description of the entire regulatory framework
applicable to Carrier1.
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OVERVIEW
Increasing regulatory liberalization in many countries' telecommunications
markets now permits more flexibility in the way Carrier1 can provide
infrastructure and services to its customers. The recent steps of the European
Union to implement full liberalization, as well as the World Trade Organization
(the "WTO") Basic Telecom Agreement (the "WTO Agreement"), have significantly
reduced most if not all regulatory barriers to entry in the markets in which
Carrier1 intends to operate. However, national regulatory frameworks within the
European Union that are fully consistent with the policies and requirements of
the European Union and the WTO have only recently been, or are still being, put
in place in many member states.
Various directorates of the European Commission, including Directorate
General ("DG") XIII (telecommunications and information services) and DG IV
(competition), have had an active role in overseeing the implementation of
recently adopted European Union directives. These directorates have, on their
own initiative or upon formal or informal complaint by interested parties,
sought to ensure consistent implementation and interpretation of various key
European Union directives, including in particular those relating to licensing
and interconnection.
The principal telecommunications operators in many European Union member
states, including in particular the United Kingdom and most Scandinavian
countries, have generally accepted market liberalization and have acted
accordingly in their dealings with new entrants. In other markets, Carrier1 and
other new entrants face less open and independent regulatory environments and
hence more protracted and difficult procedures to obtain licenses and negotiate
interconnection agreements. Carrier1 believes that the current overall
regulatory climate in the European Union is favorable to development of new
infrastructure and services by new entrants, and that potential restrictions on
its operations will become less onerous as national regulatory frameworks within
the European Union become more uniform and begin to converge with those in the
countries with fully liberalized regulatory policies such as the United States.
However, Carrier1 is unable to predict with certainty the precise impact of
regulatory requirements and restrictions on its implementation of its business
strategy or on its financial performance.
WTO AGREEMENT
The regulation of the European Union telecommunications industry is subject
to certain multilateral trade rules and regulations. Under the WTO Agreement,
concluded on February 15, 1997, 69 countries comprising more than 90% of the
global market for basic telecommunications services agreed to permit competition
from foreign carriers and adopt regulatory measures designed to protect
telecommunications providers against anticompetitive behavior by ITOs. In
addition, 59 of these countries have subscribed to specific pro-competitive
regulatory principles.
The WTO Agreement became effective on February 5, 1997 and for most
signatory countries (including ten European Union member states) the commitments
took effect on January 1, 1998. Although there may be substantial implementation
delays, Carrier1 believes that the WTO Agreement will increase opportunities for
Carrier1 and its competitors. However, the precise scope and timing of the
implementations of the WTO Agreement remain uncertain and there can be no
assurance that the WTO Agreement will result in beneficial regulatory
liberalization.
EUROPEAN UNION
In an effort to promote competition and efficiency in the European Union
telecommunications market, the European Commission and the European Council have
in recent years issued a series of directives establishing basic principles for
the liberalization of such market. The general framework for this liberalized
environment has been set out in the European Commission's Services Directive,
adopted in 1990, and its subsequent amendments, including the Full Competition
Directive, adopted in March 1996. These directives require most European Union
member states to permit competition in all
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telecommunications services, and had set January 1, 1998 as the date by which
all restrictions on the provision of telecommunications services and
telecommunications infrastructure were to be removed. These directives have been
supplemented by various harmonizing directives, including primarily the
Licensing Directive and the Interconnection Directive, adopted in 1997.
The Licensing Directive established a common framework for the granting of
authorizations and licenses related to telecommunications services. It permits
European Union member states to establish different categories of licenses for
providers of infrastructure and services, but requires the overall scheme to be
transparent and non-discriminatory. The Interconnection Directive requires
European Union member states to remove restrictions preventing negotiation of
interconnection agreements, ensure that interconnection requirements are
non-discriminatory and transparent, and ensure adequate and efficient
interconnection for public telecommunications networks and publicly available
telecommunications services. It also requires that interconnection be cost-based
and supported by a cost accounting system that telecommunications operators with
significant market power are expected to put in place under the supervision of
national regulatory agencies.
In October 1997, the European Commission issued a consultative document
supporting the imple-
mentation of long run incremental cost ("LRIC") principles as a basis for
interconnection pricing. This document also sets forth interconnection pricing
benchmarks reflecting current interconnection agreements in European Union
member states. The European Commission believes such benchmarks should be relied
upon pending the adoption of accounting systems and interconnection rates based
on LRIC principles. These guidelines have become an important reference point in
commercial negotiations between new entrants and ITOs.
The European Commission's consultative paper also proposes that European
Union member states permit cross-border interconnection between a national
telecommunications operator and an operator that does not have a local point of
presence and that is established and licensed in another member state on the
basis of interconnection arrangements that do not discriminate between
cross-border and national operators. Carrier1 believes that the European
Commission's stance with respect to cross-border interconnection may not be
sufficiently supported by some national regulatory agencies as it is not yet set
forth in a binding directive. Nevertheless, Carrier1 may seek cross-border
interconnection in those countries in which it does not have a point of
presence. However, there can be no assurance as to when or if Carrier1 will be
successful as no operational arrangements have been made or other steps taken to
implement cross-border interconnection.
Several European Union member states have chosen to apply the provisions of
the Interconnection Directive within their jurisdictions in such ways as to give
more favorable treatment to infrastructure providers and network operators than
to carriers and resellers that have made no infrastructure investment. Such
distinctions must be objectively justified on the grounds of the type of
interconnection provided or because of relevant licensing conditions. The
Licensing Directive does not provide a clear definition of an infrastructure
investment, and many European Union member states have adopted inconsistent
approaches with respect to the level and type of infrastructure investment
required to justify differences in interconnection charges. While Carrier1
believes that the European Commission will seek to minimize these disparities in
national interconnection policies, there can be no assurance that these
disparities can be eliminated or significantly reduced or that any such
differences in regulatory treatment will not have a material adverse effect on
Carrier1. To the extent ITOs deny or delay granting Carrier1 interconnection,
even if only for a limited period of time, in any of the countries in which
Carrier1 has or will have points of presence, Carrier1 will be forced to
terminate traffic through refile or resale agreements with other carriers,
resulting in higher costs. Furthermore, if interconnection is not granted at the
most competitive rate (i.e., the rate for operators and infrastructure
providers), Carrier1's termination costs will be higher than those of
competitors which have implemented such interconnect agreements. See "Risk
Factors--Our Ability to Enter into Interconnection Agreements and Peering
Arrangements Could Affect
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Our Business" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Factors Affecting Future Operations--Cost of
Services--Voice Termination Costs."
REGULATORY STATUS
The following discussion summarizes Carrier1's assessment of the regulatory
situation in the major markets in which it expects to operate in the next
several years.
UNITED KINGDOM. The Telecommunications Act 1984 provides a licensing and
regulatory framework for telecommunications activities in the United Kingdom.
The United Kingdom has already liberalized its market to meet or even exceed the
requirements of the Full Competition Directive, and most restrictions on
competition have been removed in practice as well as in law.
Carrier1 currently has been granted an international simple voice services
resale license and an international facilities license that allows it to own
IRUs and to lay cable for international services. Carrier1 will not need any
additional licenses as long as it does not connect end-users systems directly to
its network. Carrier1 has obtained a switched access number which has been
implemented with British Telecom. This access number enables Carrier1 to allow
switchless resellers to offer switched access services directly to their
customers in the United Kingdom.
In the United Kingdom, entities with "relevant connectable systems" status
are entitled to request and receive interconnection from those operators that
have been determined to be "well established operators." British Telecom and
Kingston Communications International Ltd. have been so determined for all
services and Cable & Wireless has been so determined in respect of international
services on virtually all routes. Carrier1 currently has implemented
interconnection agreements with Cable & Wireless and British Telecom. In
addition, Carrier1 has entered into interconnection agreements with other
telecommunications operators in the United Kingdom to route traffic to locations
not directly served by Carrier1.
The current liberal regulatory climate in the United Kingdom has encouraged
the rapid development of new operators that are available to interconnect with
Carrier1 or to be served by Carrier1 as customers for its wholesale service
offerings. London, along with New York, has become one of the major
international centers for refiling of traffic among international
telecommunications service providers. Overall, Carrier1 has not encountered
significant interconnection barriers in the United Kingdom.
UNITED STATES. In June 1998, Carrier1 obtained a Section 214 authorization
to provide international telecommunications services to all locations around the
world. Carrier1 will be subject only to various reporting obligations with
respect to its current operations in the United States.
Under the terms of recent Federal Communications Commission (the "FCC")
orders relating to international settlement rates, the terms of its Section 214
authorization and the WTO Agreement, Carrier1 will be expected to settle its
international switched traffic at or below the level of the international rate
benchmarks prescribed by the FCC. It would also have to obtain prior FCC
approval to resell leased lines in any country in which it might operate with an
affiliated carrier with market power. However, Carrier1 does not expect that any
current or currently anticipated FCC regulatory requirement would materially
limit its commercial or operational flexibility.
The FCC has taken an active role in opening competition on an international
basis and has been involved in a longstanding effort to lower international
accounting rates on a world-wide basis. Although the FCC has implemented the WTO
Agreement and no longer bases its international licensing determinations
specifically on whether international markets are open on a fully reciprocal and
comparable basis to U.S. telecommunications operators, it continues to monitor
competitive developments in international markets in order to assess whether any
restrictive practices with respect to international service arrangements or
rates might have an adverse or distorting impact on competition in the U.S.
domestic telecommunications market. In addition, the FCC as well as various
executive branch agencies of
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the U.S. government have taken an active posture with respect to the full
implementation of market-opening commitments made in connection with the WTO
Agreement, and have from time to time taken positions against potential
restrictive regulatory practices by national regulators or operators in the
European countries in which Carrier1 intends to operate.
Carrier1 has experienced no difficulties in negotiating interconnection
agreements with U.S.-based telecommunications operators. These arrangements
permit Carrier1 to extend its services into the U.S. domestic market as well as
to terminate traffic worldwide. In addition, refiling arrangements available in
the United States can often be a very cost-effective basis for terminating
traffic in European Union markets that are not directly served by Carrier1's own
infrastructure. Depending on market conditions, such arrangements represent a
viable alternative to refiling through the United Kingdom.
GERMANY. The German Telecommunications Act of July 25, 1996 provided for
the liberalization of all telecommunications activities by January 1, 1998. The
German Telecommunications Act has been complemented by several ordinances
concerning, among other things, license fees, rate regulation, interconnection,
universal service, frequencies and customer protection. The German
telecommunications sector is currently overseen by a new Regulatory Authority
for Telecommunications and Post that operates under the aegis of the Ministry of
Economics and has taken over the regulatory responsibilities of the now
disbanded Ministry of Post and Telecommunications.
Under the German Telecommunications Act, licenses can be issued for
different types of infrastructure as well as for the provision of services based
on transmission lines provided by other service providers. Carrier1 has been
issued a Class 4 license for the provision of voice telephony services and a
Class 3 infrastructure license to construct fiber optic cables. Carrier1 has
submitted amendments to its infrastructure and services licenses to authorize
the geographic extension of its network. Carrier1 may be required to seek
amendments or additions to obtain nationwide service authorization as the
geographic scope of its services expands in the future. However, Carrier1 does
not anticipate any difficulty in obtaining any required amendments. On October
30, 1998, the German regulator ruled, in a case filed by Carrier1 against
Deutsche Telekom, that Deutsche Telekom had to interconnect with Carrier1 at the
two points of interconnect requested by Carrier1 within three months after the
ruling. This ruling is currently being implemented by both parties and is based
on a condition that Carrier1 will be installing 13 total points of
interconnection with Deutsche Telekom when it deploys its German Network by the
end of 1999. See "--Network--Planned Network Deployment--The German Network." In
the event that Carrier1 does not install such additional points of
interconnection anticipated by the ruling and Carrier1's business plans, the
pricing of its interconnection arrangements with Deutsche Telekom may have to be
renegotiated. There can be no assurance that any new pricing terms would be as
favorable to Carrier1 as those provided by the ruling. Furthermore, the German
regulator recently concluded a public consultation indicating that Deutsche
Telekom may charge a higher interconnect rate to those operators who only
interconnect at one point of interconnect. This conclusion, however, still needs
to be implemented into law. Carrier1 believes the German regulator may indicate
that Deutsche Telekom may require a greater number of points of interconnect for
full interconnection capacity. Carrier1 believes that, if so required, it will
be able to implement such greater number of points of interconnect.
Carrier1 has initiated discussions with Deutsche Telekom relating to the
installments of its points of interconnection. Though Carrier1 believes that
these discussions are generally proceeding in a satisfactory fashion, there have
been a number of disputes over the availability, and timing of delivery, of
interconnection capabilities requested by Carrier1. Though Carrier1 intends to
pursue such disputes with Deutsche Telekom and the German regulator, it does not
currently anticipate that there is likely to be any significant adverse impact
on its plans to provide service in Germany in accordance with its business
plans. Carrier1 has obtained a switched access number and has implemented it
with Deutsche Telekom. This access number enables Carrier1 to allow switchless
resellers to offer switched access services directly to their customers in
Germany.
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FRANCE. In July 1996, legislation was enacted providing for the
liberalization of all telecommunications activities in France by January 1,
1998. The establishment and operation of public telecommunications networks and
the provision of voice telephony services are subject to individual licenses
granted by the Minister in charge of telecommunications upon recommendation of
the Autorite de Regulation des Telecommunications ("ART"), France's new
independent regulatory agency.
Carrier1 has been confirmed to receive an L-33.1 license (governing public
telecommunications network operators) and an L-34.1 license (governing voice
telephony providers). The interconnection tariffs of France Telecom, which have
been officially approved by the ART, provide substantially more favorable
interconnection rates for public telecommunications network operators than for
voice telephony providers. Telephony providers are charged interconnection rates
that can be as much as 30% higher than rates charged to public
telecommunications network operators. An L-34.1 license allows an operator to
terminate traffic nationwide via interconnect only if it connects in all 18
interconnect regions, whereas an L-33.1 license allows an operator to terminate
traffic nationwide via interconnect at only one point.
The ART and other French regulatory authorities have not published precise
guidelines concerning what type of infrastructure investment is required as a
basis for grant of an L-33.1 infrastructure license. In recent decisions L-33.1
licenses have been granted to operators that owned or planned to own switches
and to acquire dark fiber, without laying down cables themselves. Carrier1 plans
to make a comparable investment in France, and thus it expects to be granted
both L-33.1 and L-34.1 licenses. Failure by Carrier1 to obtain an L-33.1 license
could impede its ability to achieve a reasonable, cost-efficient interconnection
arrangement with France Telecom, which in turn could have a material adverse
effect on Carrier1's ability to provide terminating services into and through
France on a cost-effective basis.
Carrier1 believes that the dual pricing system engaged in by France Telecom
is discriminatory and not founded on a cost-based differentiation and thus
violates the terms of the WTO Agreement as well as provisions of various
relevant European Union directives. Nevertheless, any process initiated by
Carrier1 against France Telecom's practices with the European Union or the WTO,
even if successful, might well be costly and time consuming, and Carrier1 is not
able to predict with certainty the timing and eventual resolution of any legal
challenge over interconnection rates.
Carrier1 initiated interconnection negotiations with France Telecom in early
1999. In a recent decision, ART has ruled that interconnection agreements have
to be implemented within nine months after start of negotiations and that
negotiations can start after the application for a license has been submitted,
but before a license has been granted. The interconnection agreement, however,
can only be implemented after grant of the license.
In France, the ART implements an extra charge (cost per minute) to finance
the cost of universal service fund. The total amount of this universal service
fund was $1 billion for 1998 and has been challenged by new entrants in the
French market, who have filed a complaint with DG IV, the European Union's
competition directorate. Carrier1 is unable to estimate at this time the impact
of the proposed universal service program if implemented on its operating
margins. Carrier1 intends to apply to the French regulator to obtain a switched
access number in order to enable Carrier1 to allow switchless resellers to offer
switched access services directly to their customers in France.
BELGIUM. In December 1997, the Belgian parliament provided for full
liberalization of the provision of telecommunications services. The
Telecommunications Act and secondary legislation are not yet complete.
Under the current licensing scheme, applicants for a telecommunications
network operator license such as Carrier1 must agree to make a minimum amount of
infrastructure investment or install a minimum amount of fiber optic capacity
within three years, as well as make a contribution to the advancement of
technological processes by investing an amount equal to 1% of net revenue to
fund research and development activities. Carrier1 has filed an application
(which has been confirmed to be complete) to
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become a network operator with respect to which regulatory action by the Belgian
national regulator, the Belgian Institute for Postal Services and
Telecommunications ("BIPT"), is expected by July 1999. As Carrier1 plans to
acquire dark fiber in Belgium, it expects to be granted an infrastructure
license.
Carrier1 has initiated interconnection negotiations with Belgacom S.A.,
Belgium's ITO. The interconnection tariffs of Belgacom provide more favorable
rates for infrastructure providers and network operators than for switch-based
carriers and resellers. Carrier1 expects to qualify for these more favorable
rates. However, the outcome of Carrier1's efforts with respect to its
interconnection arrangements may depend in part upon deliberations concerning
the requirements for a network operator license as well as ongoing Belgian
regulatory determinations.
The Belgian telecommunications law also provided for the establishment of a
universal service fund, to be managed by BIPT, to which operators would be
required to contribute in proportion to their revenues from the Belgian market.
However, the fund is not to be activated before the year 2000, by which time the
BIPT is required to determine the aggregate payment to support universal
service. Carrier1 is unable to estimate at this time the impact of any potential
universal service payments on the overall cost of terminating its customers'
calls in Belgium.
ITALY. In 1997, Italian authorities enacted a legislative framework for the
full liberalization of telecommunications services by January 1, 1998. This
framework has yet to be implemented by a number of necessary decrees. Major
uncertainties remain with regard to the rules applicable to interconnection. No
assurance can be provided as to the timing or manner in which Carrier1 will be
able to benefit from full liberalization in Italy. Carrier1 has filed both for
infrastructure and service licenses (which applications have been confirmed to
be complete) and expects to be granted licenses by July 1999.
In August 1998, Telecom Italia published its Reference Interconnect Offer
(the "RIO"), which has been amended recently due to decisions by the Italian
regulator. The RIO now allows interconnection at one point of interconnect and
brought interconnection rates down to a level much closer to the European Union
benchmarks. Carrier1 initiated interconnection negotiations in January 1999 and
expects to have an interconnection agreement with Telecom Italia in the summer
of 1999.
In Italy, providers of network infrastructure and switched voice services as
well as national mobile operators must contribute to a universal service fund.
Such a requirement is to take effect in 1999 provided that Telecom Italia can
demonstrate by March 31, 1999 on the basis of audited reports that its universal
service obligations impose on it net losses. Even in these circumstances, the
Italian regulator can exempt new entrants from an obligation to contribute to
such a universal service fund. Both the Italian competition agency and the
European Commission are likely to recommend such an exemption scheme to the
Italian regulator. However, Carrier1 cannot assess at this time any possible
impact of any such universal service obligations on its operating margins.
THE NETHERLANDS. The Netherlands liberalized voice telephony in July 1997.
Legislation to implement the requirements of the Full Competition Directive has
been enacted.
Carrier1 has obtained the necessary authorization to provide in The
Netherlands the services included in its business plans. Though Carrier1 is
entitled under its authorization to acquire existing dark fiber transmission
capacity, it would be required to obtain additional authorization to obtain
rights of way and construct its own infrastructure. In addition, it may also be
required to obtain additional approvals in the event that it were to decide to
market services to end users directly connected to Carrier1's network rather
than provide services on a wholesale basis as currently anticipated. However,
Carrier1 does not expect that there would be any significant difficulty in
obtaining such approvals.
Carrier1 signed an interconnection agreement with KPN Telecom which is
expected to be implemented by April 1999 and it has obtained a switched access
number from the Dutch regulator.
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<PAGE>
SWITZERLAND. A new Telecommunications Act went into effect on January 1,
1998, together with ordinances containing more detailed regulations covering
telecommunications services, frequency management, numbering, terminal equipment
and license fees. The new Telecommunications Act provides for liberalization of
the Swiss telecommunication market as of January 1, 1998.
Carrier1 has obtained the necessary authorization to provide services in
Switzerland. Although Switzerland is not a member of the European Union and
accordingly European Union directives do not apply, the Swiss regulatory agency,
Bakom, generally follows European Union policies and directives. Switzerland is
a party to the WTO Agreement as well, and Carrier1 expects that the national
regulatory body will follow the general principles and policies embedded in the
WTO Agreement.
Carrier1 signed an interconnection agreement with Swisscom which has been
implemented, and it has obtained a switched access number.
AUSTRIA. A new Telecommunications Act came into effect on January, 1, 1998,
together with ordinances providing more detailed regulations on
telecommunications services, interconnection and numbering. Carrier1 obtained
the necessary licenses in Austria.
The interconnection rules provide for cost-based interconnection rates for
every licenseholder, without distinction between infrastructure owners and
resellers. Carrier1 signed an interconnection agreement with PTA (the Austrian
ITO) which has been implemented. It has also obtained a switched access number
from the Austrian regulator.
SPAIN. The Spanish government implemented the full liberalization of public
switched telephone services on December 1, 1998. Prior to full liberalization, a
second telecommunications operator was authorized to compete with Telefonica de
Espana, S.A., and a third national voice telephony license was granted in May
1998. Cable television operators are expected to apply for licenses to provide
voice telephony services. In addition, a third license for a mobile
telecommunications operator was granted in June 1998. Carrier1 expects to be
able to provide services on a wholesale basis to these newly authorized
operators.
Carrier1 expects to file an application to provide infrastructure and
services in Spain in the first half of 1999. It will need a license and an
interconnection agreement by early 2000 when it plans to install a point of
presence in Spain.
SWEDEN, DENMARK, FINLAND, NORWAY, AND IRELAND. Carrier1 is or may be
planning to provide services in a number of countries including Sweden, Denmark,
Finland, Norway, and Ireland which have adopted a liberal approach to
authorizing new service providers.
In Norway, new service providers must register with the national regulator,
and in Finland and Sweden, a similar notification procedure is required to
authorize new service providers. In Denmark, services and infrastructure can be
provided by new entrants on the basis of a class license requiring no
registration, notification, or prior approval procedures involving the national
regulator. Carrier1 has complied with the applicable procedures in each of these
countries.
Carrier1 has entered into interconnection agreements with Tele Danmark in
Denmark and Telia in Sweden, but has not yet opened discussions with the main
national operators in Finland and Norway. In all of the above-mentioned
countries, it expects that interconnection arrangements will be implemented when
its points of presence become operational in these countries. Carrier1 has
obtained a switched access number in Finland, and it has applied for such
numbers in Sweden, Denmark and Norway.
Any new service provider must obtain a license to provide services in
Ireland. Carrier1 has received such a license. Carrier1 expects that an
interconnection agreement with Telecom Eireann will be implemented when its
point of presence in Dublin is operational.
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OTHER COUNTRIES. Carrier1 will also be able to provide service through
direct operating agreements with correspondent telecommunications operators in
countries where it has not been directly authorized to provide services. As a
consequence of its having obtained the status of a recognized operator agency
under the rules of the International Telecommunications Union, Carrier1 will
negotiate such correspondent agreements with foreign telecommunications
operators in circumstances where such agreements will result in lower
termination costs than might be possible through refile arrangements. See
"--Network--Existing and Planned Traffic Termination Agreements."
EMPLOYEES
As of December 31, 1998, Carrier1 employed 53 people. None of Carrier1's
employees is represented by a labor union or covered by a collective bargaining
agreement. Carrier1 believes that relations with its employees are good.
PROPERTIES
Carrier1 leases certain office and other space under operating leases and
subleases that expire at various dates, including a lease of Carrier1
International GmbH's 762 square meter headquarters in Zurich, Switzerland, which
expires in 2003.
Carrier1's aggregate rent expense was $1,097,000 for the period from
Inception to December 31, 1998.
LEGAL PROCEEDINGS
Carrier1 may, from time to time, be a party to litigation that arises in the
normal course of its business operations. Carrier1 is not presently a party to
any such litigation that Carrier1 believes would reasonably be expected to have
a material adverse effect on its business or results of operations.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
The following table sets forth certain information with respect to the
directors, executive officers and other key employees of Carrier1 as of December
31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH CARRIER1
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Stig Johansson....................................... 56 Chief Executive Officer, President of Carrier1 and
Director of Carrier1 International
Eugene A. Rizzo...................................... 47 Vice President, Sales and Marketing
Terje Nordahl........................................ 51 Chief Operating Officer
Joachim W. Bauer..................................... 54 Chief Financial Officer
Kees van Ophem....................................... 36 Vice President, Purchase and General Counsel
Neil E. Craven....................................... 30 Vice President, Business Development
Phil Poulter......................................... 48 Managing Director of Sales, United Kingdom and
Ireland
Edward A. Gross...................................... 40 Managing Director of Sales, Germany, Austria and
Switzerland
Isabelle Russier..................................... 34 Managing Director of Sales, France
Marcus J. Gauw....................................... 38 Managing Director of Sales, Internet
Gustav Schaefer...................................... 43 Managing Director of Sales, Benelux and Scandinavia
Carlos Colina........................................ 46 Manager, Carrier Sales--North America
Rick Mikolajczuk..................................... 49 Project Director, Network Build
Glenn M. Creamer..................................... 36 Director of Carrier1 International
Jonathan E. Dick..................................... 40 Director of Carrier1 International
Mark A. Pelson....................................... 36 Director of Carrier1 International
Victor A. Pelson..................................... 61 Director of Carrier1 International
Thomas J. Wynne...................................... 58 Director of Carrier1 International
</TABLE>
STIG JOHANSSON has served as a director of Carrier1 International since
August 1998 and as Carrier1's Chief Executive Officer and President since March
1998 and has more than 30 years of experience in the telecommunications
industry. Prior to founding Carrier1, Mr. Johansson was President of Unisource
Carrier Services AG ("Unisource Carrier Services") from September 1996 until
February 1998, where he was responsible for transforming Unisource Carrier
Services from a network development and planning company into a fully
commercial, wholesale carrier of international traffic. Mr. Johansson was a
member of Unisource N.V.'s supervisory board from 1992 until 1996. Prior to
joining Unisource Carrier Services, Mr. Johansson worked for Telia AB ("Telia"),
the Swedish ITO, where he was most recently Executive Vice President. During his
26 years at Telia, Mr. Johansson held a variety of positions. He began in 1970
working in engineering operations and rose to head of strategic network planning
(1977), general manager of the Norrkoping Telecom region (1978), head of
CPE-business division (1980), executive vice president and marketing director of
Televerkit/Telia AB (1984) and Executive Vice President responsible for Telia's
start-up operations in the Nordic countries and the United Kingdom (1995). He
was a member of Telia's corporate management board from 1985 to 1996. Mr.
Johansson holds a Master's degree in Business Economics from Hermods Institut,
Sweden and a degree of Engineer of Telecommunications from Lulea College, and he
completed a senior executive business course at IMD in Lausanne, Switzerland. He
is a citizen of Sweden.
EUGENE A. RIZZO has served as Carrier1's Vice President, Sales and Marketing
since March 1998 and has over 21 years of experience in international sales and
marketing and 10 years of experience in the telecommunications industry. From
1993 to 1998, Mr. Rizzo managed sales and marketing groups for
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several affiliates of Unisource NV, including Unisource Carrier Services and
AT&T-Unisource Communications Services ("AT&T-Unisource"), an international
joint venture between AT&T Corp. ("AT&T") and Unisource NV. Prior to joining
Unisource, Mr. Rizzo held various marketing and management positions with
International Business Machines Corporation ("IBM"), Wang Laboratories, Inc. and
Tandem Computers Inc. ("Tandem"). While at Tandem, Mr. Rizzo assisted in the
start-up of Tandem's European Telco Group. Mr. Rizzo holds a Master of Business
Administration degree from the University of Massachusetts. He is a citizen of
the United States.
TERJE NORDAHL has served as Carrier1's Chief Operating Officer since March
1998 and has 25 years of experience in telecommunications operations. Mr.
Nordahl also has extensive experience in the computer and data industry. As a
Managing Director at Unisource Business Networks BV ("Unisource Business
Networks") from 1997 to 1998, he established and built the Unisource Business
Data Network in Norway. From 1995 to 1997, Mr. Nordahl was President of Telia AS
(Norway), Telia's subsidiary in Norway, where he supervised the building of an
ATM backbone network with integrated voice and data services. Mr. Nordahl worked
closely with Nortel on this project. From 1993 to 1995, Mr. Nordahl established
and operated Creative Technology Management AS ("CTM"), which provided business
development services for government and industrial organizations. Prior to
establishing CTM, Mr. Nordahl held engineering, development and marketing
positions with various companies, including IBM and telecommunications companies
affiliated with Ericsson (L.M.) Telephone Co. and ITT Corp. Mr. Nordahl holds a
Bachelor of Science degree from Heriot-Watt University, Edinburgh and has
completed the INSEAD Advanced Management Program. He is a citizen of Norway.
JOACHIM W. BAUER has served as Carrier1's Chief Financial Officer since
March 1998 and has five years of experience in the telecommunications industry.
From 1994 to 1998, Mr. Bauer served as Chief Financial Officer of Unisource
Carrier Services. Before joining Unisource Carrier Services, Mr. Bauer held
various management positions with IBM and its affiliates, including Controller
of IBM (Switzerland). Mr. Bauer graduated from a commercial school in Zurich,
was educated at IMEDE business school, Lausanne, Switzerland, and completed the
senior executive program of the Swiss Executive School (SKU). Mr. Bauer holds a
Certified Diploma in Accounting and Finance (CPA). He is a citizen of Germany.
KEES VAN OPHEM has served as Carrier1's Vice President, Purchase and General
Counsel since March 1998, with responsibility for interconnection, licensing and
legal affairs. Mr. van Ophem has seven years of experience in the
telecommunications industry. Prior to joining Carrier1, he was Vice President
Purchase and General Counsel for Unisource Carrier Services from 1994 to 1998
and was on its management board from its inception in early 1994. From 1992 to
1994 Mr. van Ophem served as legal counsel to Royal PTT Nederland NV (KPN)
("KPN"), with responsibility for the legal aspects of its start-up ventures in
Hungary, Bulgaria, Czech Republic and Ukraine and the formation of Unisource
Carrier Services. Prior to joining KPN, Mr. van Ophem worked at law firms in
Europe and the United States. Mr. van Ophem holds a Juris Doctorate degree from
the University of Amsterdam and, as a Fulbright scholar, a Master of Laws degree
in International Legal Studies from New York University. He is a citizen of The
Netherlands.
NEIL E. CRAVEN has served as Carrier1's Vice President, Business Development
since March 1998 and has five years of experience in the telecommunications
industry. From 1995 to 1998, Mr. Craven was a member of the management team at
Unisource Carrier Services, initially responsible for Corporate Strategy and
Planning and later serving as Vice President of Business Development. Prior to
joining Unisource Carrier Services, Mr. Craven was employed by Siemens AG in
Germany, where he worked on various international infrastructure projects. Mr.
Craven has an Honors degree in Computer Engineering from Trinity College, Dublin
and a Master of Business Administration degree from the Rotterdam School of
Management. He is a citizen of Ireland.
PHILIP POULTER has served as Carrier1's Managing Director of Sales, United
Kingdom and Ireland since June 1998 and has over 30 years of experience in the
telecommunications industry. Prior to joining Carrier1, Mr. Poulter was
Operations Director of ACC Long Distance UK Ltd. ("ACC"), a switch-based
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provider of telecommunications services, from December 1997 to June 1998. From
March 1997 to December 1997, Mr. Poulter served as Network & Carrier Services
Director of ACC. From August 1996 to March 1997, Mr. Poulter was Managing
Director of Nelcraft Services Ltd., a provider of installation and maintenance
services relating to the cable television and telecommunications industries.
From March 1995 to August 1996, Mr. Poulter served as Carrier Manager of ACC.
From 1993 to 1995, Mr. Poulter was employed as Sales Director for Business
Communication for Videotron Corporation Ltd. ("Videotron"), a U.K. provider of
cable television and telephony services. Prior to joining Videotron, Mr. Poulter
held various management, sales and engineering positions, including more than
fifteen years of experience in designing and implementing telecommunications
switching and transmission systems for British Telecom. Mr. Poulter is a
director of Carrier1 UK Ltd., a subsidiary of Carrier1 International. Mr.
Poulter has a Final Certificate in Electronics and Communications from the
London C & G Institute. He is a citizen of the United Kingdom.
EDWARD A. GROSS has served as Carrier1's Managing Director of Sales,
Germany, Austria and Switzerland since May 1998 and has over 20 years of
experience in the telecommunications and networking industries. Prior to joining
Carrier1, Mr. Gross served as Sales Director, Germany for Unisource Carrier
Services from December 1996 to May 1998. From March 1996 to December 1996, Mr.
Gross served as Director of Customer Services Engineering--Central Europe for
AT&T-Unisource. From 1992 to 1996, Mr. Gross was a member of the management team
at Unisource Business Networks, where he was responsible for the start-up of
operations in Germany and Austria and subsequently served as Director of
Customer Services. Prior to joining Unisource Business Networks, Mr. Gross was
employed by Unisys Corporation for more than 12 years, during which time he held
various positions in network support and software development, primarily in
Germany as well as South Korea and the United States. Mr. Gross holds a Bachelor
of Science degree in Management Studies from the University of Maryland and has
completed the Accelerated Development Program at London Business School. He is a
citizen of the United States.
ISABELLE RUSSIER has served as Carrier1's Managing Director of Sales, France
since August 1998 and has three years of experience in the telecommunications
industry. From November 1997 to July 1998, Ms. Russier was employed in London by
ACC, where she handled various projects in its Business Development Europe
Division. From December 1995 to October 1997, Ms. Russier was employed in France
as General Manager of sales for UNIFI Communications, Inc., a U.S.-based
telecommunications value-added service provider. From 1992 to 1995, she worked
for Apple Computer, Inc., most recently as a Regional Sales Director, and from
1987 to 1992, she was employed by Intel Corp. in a variety of sales positions.
Ms. Russier holds an Engineering degree in Microelectronics and a European
Master of Business Administration degree (ISA) from the HEC School of
Management. She is a citizen of France.
MARCUS J. GAUW has served as Carrier1's Managing Director of Sales, Internet
since May 1998 and has 13 years of experience in the telecommunications
industry. From 1996 to 1998, Mr. Gauw served as Sales Manager for Internet
Transit Services at AT&T-Unisource, and from 1994 to 1996, he served as Sales
Manager, Voice Services at AT&T-Unisource. From 1992 to 1994, Mr. Gauw was a
Senior Sales Consultant for Unisource Business Networks. Prior to joining
Unisource Business Networks, Mr. Gauw was employed by KPN for approximately
seven years, during which time he held various positions in sales and marketing.
Mr. Gauw holds a Bachelor's degree in Telecommunications and Electronics from
Hogere Technische School, Alkmaar, The Netherlands. He is a citizen of The
Netherlands.
GUSTAV SCHAEFER has served as Carrier1's Managing Director of Sales, Benelux
and Scandinavia since September 1998 and has over nine years of experience in
the telecommunications industry. From 1995 to 1998, Mr. Schaefer was employed by
Unisource Carrier Services, where he contributed to the development of the
service provider market. Prior to joining Unisource Carrier Services, Mr.
Schaefer was employed by KPN, where he served as a sales consultant and later
developed and implemented KPN's Call Center
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business solutions. Mr. Schaefer received a Master's degree in Physics from
Delft Technical University. He is a citizen of The Netherlands.
CARLOS COLINA has served as Carrier1's Manager, Carrier Sales--North America
since September 1998 and has over 23 years of experience in the
telecommunications industry. Prior to joining Carrier1, Mr. Colina handled
various sales and marketing assignments with AT&T, including responsibility for
directing AT&T's efforts in the assessment and analysis of the international
business switched services marketplace from 1993 to 1998. Mr. Colina has
extensive training in voice and data communications and holds a Bachelor's
degree in Information Sciences from Fordham University. He also has completed
the Wharton School of Business/AT&T business education program. He is a citizen
of the United States.
RICK MIKOLAJCZUK has served as Project Director, Network Build for Carrier1
since November 1998 and has over 28 years of experience in the
telecommunications industry. Prior to joining Carrier1, Mr. Mikolajczuk was an
Engineering Manager for Telewest Communications PLC ("Telewest"), a provider of
cable television and telephony services to businesses and residences in the
United Kingdom, where he was responsible for engineering Telewest's National
Network from its design stage in early 1997 through to completion in October
1998. From 1971 to 1996, Mr. Mikolajczuk was employed by British Telecom, where
he gained extensive experience in duct, cable and transmission planning,
external operations and quality management. Mr. Mikolajczuk holds an Engineering
degree in Electronics from the University of Liverpool. He is a citizen of the
United Kingdom.
GLENN M. CREAMER has served as a director of Carrier1 International since
August 1998. Mr. Creamer has been a Managing Director of Providence Equity
Partners Inc. since its inception in 1996 and is also a General Partner of
Providence Ventures L.P., which was formed in 1991. Mr. Creamer is also a Vice
President of Narragansett Capital Inc., which he joined in 1988. Mr. Creamer is
a director of American Cellular Corporation, Celpage, Inc., Epoch Networks, Inc.
and Wireless One Network L.P. Mr. Creamer received a Bachelor of Arts degree
from Brown University and a Master of Business Administration degree from the
Harvard Graduate School of Business Administration. He is a citizen of the
United States.
JONATHAN E. DICK has served as a director of Carrier1 International since
August 1998. Mr. Dick has been a Managing Director of Primus Venture Partners,
Inc. since December 1993. Prior to joining Primus in June 1991, Mr. Dick held
various positions in sales management at Lotus Development Corporation. Mr. Dick
is also a director of PlanSoft Inc. Mr. Dick received a Bachelor of Science
degree in Applied Mathematics and Economics from Brown University and a Master
of Business Administration degree from the Harvard Graduate School of Business
Administration. He is a citizen of the United States.
MARK A. PELSON has served as a director of Carrier1 International since
August 1998. Mr. Pelson is a Principal of Providence Equity Partners Inc., which
he joined in August 1996. Prior to 1996, Mr. Pelson was a co-founder and
director, from 1995 to 1996, of TeleCorp., Inc., a wireless telecommunications
company, and from 1989 to 1995 served in various management positions with AT&T,
including most recently as a general manager of strategic planning and mergers
and acquisitions. Mr. Pelson is a director of American Cellular Corporation,
Madison River Telephone Company, L.L.C. and Wired Ventures Inc. Mr. Pelson
received a Bachelor of Arts degree from Cornell University and a Juris Doctorate
from Boston University. Mr. Pelson is the son of Victor A. Pelson. He is a
citizen of the United States.
VICTOR A. PELSON has served as a director of Carrier1 International since
January 1999. Mr. Pelson is a Senior Advisor to Warburg Dillon Read LLC., an
investment banking firm. He was a Director and Senior Advisor of Dillon, Read &
Co. Inc. at the time of its merger in 1997 with SBC Warburg. Before joining
Dillon, Read in April 1996, Mr. Pelson was associated with AT&T from 1959 to
March 1996, where he held a number of executive positions, including Group
Executive and President responsible for the Communications Services Group,
Executive Vice President and member of the Management Executive Committee. At
his retirement from AT&T, Mr. Pelson was Chairman of Global Operations (for what
is now AT&T, Lucent Technologies and NCR) and a member of the Board of
Directors. Mr. Pelson is also
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chairman of the board of trustees of New Jersey Institute of Technology and a
director of Eaton Corporation and United Parcel Service of America, Inc. Mr.
Pelson received a Bachelor of Science degree in Mechanical Engineering from New
Jersey Institute of Technology and a Master of Business Administration degree
from New York University. Mr. Pelson is the father of Mark A. Pelson. He is a
citizen of the United States.
THOMAS J. WYNNE has served as a director of Carrier1 International since
January 1999. Mr. Wynne is currently a partner with Sycamore Creek Development
Co. He was President and Chief Operating Officer of LCI International Inc. and
its subsidiaries from July 1991 to October 1997. From 1977 to 1991, Mr. Wynne
held several executive positions with MCI Communications Corp., including
President of the West Division, Vice President of Sales and Marketing for the
Mid-Atlantic Division, and Vice President in the Midwest Division. Mr. Wynne is
also a director of Advanced Radio Telecom Corp. Mr. Wynne holds a Bachelor of
Science degree in Political Science from St. Joseph's University. He is a
citizen of the United States.
BOARD OF DIRECTORS
The general affairs and business of Carrier1 International are managed by
the Board of Directors (the "Board"). Carrier1 International's Articles of
Incorporation (the "Articles") provide for at least three directors appointed by
a general meeting of shareholders for terms no greater than six years. Under the
Articles, the number and terms of directors are to be determined, and each
director may be reelected or removed at any time, by a general meeting of
shareholders. Directors are not required to hold any shares in Carrier1
International by way of qualification. Carrier1 International is bound by the
joint signature of two directors or the sole signature of a managing director
for ordinary course management decisions, if one has been appointed by the
Board. Carrier1 International currently has six directors and has no persons
appointed as corporate officers.
COMMITTEES OF THE BOARD OF DIRECTORS
Carrier1 International currently does not have any Board committees.
COMPENSATION OF DIRECTORS
Carrier1 International will reimburse the members of the Board for their
reasonable out-of-pocket expenses incurred in connection with attending Board
meetings. Additionally Carrier1 International expects to maintain directors' and
officers' liability insurance. Members of the Board receive no other
compensation for services provided as a Director.
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SUMMARY EXECUTIVE COMPENSATION TABLE
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to, the Chief Executive
Officer and the other four most highly compensated executive officers of
Carrier1 during the period from March 4, 1998 through December 31, 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
SHORT TERM MAXIMUM NUMBER OF
COMPENSATION SECURITIES ALL OTHER
---------------------- UNDERLYING OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION PERIOD SALARY(B) BONUS (A) (B)(C)
- ----------------------------------------- --------- ----------- ----------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
Stig Johansson........................... March-
President and Chief Executive Officer December
1998 $ 245,569 $ 46,044 711,111 $ 61,738
Gene Rizzo............................... March-
Vice President, Sales and Marketing December
1998 173,343 32,502 711,111 49,436
Terje Nordahl............................ April-
Chief Operating Officer December
1998 135,207 25,352 355,555 44,217
March-
Joachim W. Bauer.........................
Chief Financial Officer December
1998 150,230 28,168 711,111 56,980
Kees van Ophem........................... March-
Vice-President, Purchase and General
Counsel December
1998 150,230 28,168 711,111 36,944
</TABLE>
- ------------------------
(a) The maximum number of securities underlying each option is equal to the
lesser of (i) the number of securities stated in the table opposite each
name above and (ii) a specified percentage of the total number of Class A
Units of Carrier One, LLC available from time to time for option grants to
employees of the Company and directors of Carrier One, LLC. Such available
Units equal in the aggregate 11.1% of the total Class A Units purchased
under the Securities Purchase Agreement dated March 4, 1998, as amended.
The table assumes that the maximum number of Class A Units will be
purchased under such Agreement by such purchasers.
(b) Carrier1 records this compensation expense in Swiss Francs. The U.S. dollar
amounts shown were calculated using an average exchange rate for the period
of March 4, 1998 through December 31, 1998 of $0.69337 to SFr1.
(c) Consists of business expenses and contributions under a pension plan for its
executive officers paid by Carrier1 International GmbH, a wholly owned
subsidiary of Carrier1 International.
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STOCK OPTION GRANTS
The following table sets forth information regarding grants of options to
purchase Class A Units in Carrier One, LLC (the "LLC"), which were granted to
the executive officers listed in the Summary Compensation Table above pursuant
to the 1998 Option Plan. The LLC is a Delaware limited liability company that
currently owns 99.9995% of the equity of Carrier1 International.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
MAXIMUM PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS PRESENT VALUE
UNDERLYING GRANTED TO EXERCISE AT DATE OF
OPTIONS EMPLOYEES PRICE GRANT
NAME GRANTED(A) IN 1998 ($/SHARE) EXPIRATION DATE ($/OPTION)
- -------------------------------------------- ----------- ----------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Stig Johansson.............................. 711,111 17.6% $ 1.00 March 4, 2008 $ 0.15
Gene Rizzo.................................. 711,111 17.6 1.00 March 4, 2008 0.15
Terje Nordahl............................... 355,555 8.8 1.00 March 4, 2008 0.15
Joachim W. Bauer............................ 711,111 17.6 1.00 March 4, 2008 0.15
Kees van Ophem.............................. 711,111 17.6 1.00 March 4, 2008 0.15
</TABLE>
- ------------------------
(a) The maximum number of securities underlying each option is equal to the
lesser of (i) the number of securities stated in the table opposite each
name above and (ii) a specified percentage of the total number of Class A
Units of the LLC available from time to time for option grants to employees
of the Company and directors of the LLC. Such available Units equal in the
aggregate 11.1% of the total Class A Units purchased under the Securities
Purchase Agreement dated March 4, 1998, as amended.
Under the 1998 Option Plan, the LLC authorized the issuance of options for
up to 4,444,444 Class A Units, of which options for 4,044,442 underlying Class A
Units were granted. These options are in the process of being cancelled in
exchange for the grant of new options to acquire shares of Carrier1
International's common stock pursuant to a securities purchase and cancellation
agreement described below. See "Certain Relationships and Related
Transactions--Equity Investor Agreements--Securities Purchase and Cancellation
Agreement."
The Company has authorized the issuance of options for up to 2,222,222
shares of Carrier1 International's common stock pursuant to the 1999 Share
Option Plan, of which the Company currently is in the process of granting
2,197,218 options to its employees. See "Certain Relationships and Related
Transactions--Equity Investor Agreements--1999 Share Option Plan."
EMPLOYMENT AGREEMENTS
Each of Stig Johansson, Eugene A. Rizzo, Terje Nordahl, Joachim Bauer and
Kees van Ophem (the "Executives") has entered into an employment agreement with
Carrier1 International GmbH, a wholly owned subsidiary of Carrier1
International. Such agreements include, among others, the following terms:
TERM. The employment agreements may be terminated by either party after
August 31, 1999, upon six months' notice.
NONDISCLOSURE, NONCOMPETITION AND NONSOLICITATION COVENANTS. Each Executive
has agreed that during his period of employment and the eighteen months
thereafter (the "Non-Compete Period") he or she will refrain from disclosing
confidential information and will not participate in any business that is
engaged in the provision of international long distance telecommunications
services or that is otherwise in competition with any business conducted by the
LLC or its subsidiaries. Additionally, each Executive has agreed that during the
Non-Compete Period, he or she will not induce or attempt to induce any employee
of the Company to leave the employ of the Company, nor will he attempt to induce
any supplier, distributor or customer of the Company or its affiliates to cease
doing business with Company. In addition,
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each Executive is subject to nondisclosure, noncompetition and nonsolicitation
covenants pursuant to Deeds of Covenant entered into among the LLC, Carrier One
Limited, Providence and the Executives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Carrier1 International currently does not have a compensation committee and
the compensation of executive officers and other key employees of Carrier1 are
determined by the Board. Stig Johansson, the Company's President and Chief
Executive Officer, is currently a member of the Board and participates in such
determination.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE LLC'S LIMITED LIABILITY COMPANY AGREEMENT
The outstanding shares of Carrier1 International are owned by the LLC and
Providence Equity Partners L.P., which holds one share. The LLC's limited
liability company agreement provides for a Board of Member Representatives (the
"LLC's Board"). The number of members may be reduced or increased by the LLC's
Board or the holders of a majority interest in the LLC, subject to the
provisions of the securityholders' agreement to which the current security
holders of the LLC are parties (the "LLC Securityholders' Agreement"). The
parties to the LLC Securityholders' Agreement intend to amend and restate the
agreement (effective as of March 1, 1999) to provide that the LLC must comply
with certain conditions before it exercises its preemptive and first refusal
rights under the securityholders' agreement related to Carrier1 International
(as described below). Under certain conditions, the LLC's current
securityholders will have a right to acquire securities of Carrier1
International which may be acquired by the LLC pursuant to the LLC's preemptive
and first refusal rights described below. The amended and restated LLC
Securityholders' Agreement will also provide, until a public offering by the LLC
of its securities, that the LLC's and Carrier1 International's Boards shall
consist of seven representatives, five of whom are to be appointed by funds
managed by Providence, one of whom is to be appointed by funds managed by Primus
and, in the case of Carrier1 International only, one of whom is to be Stig
Johansson (until the termination for any reason of his employment). Vacancies
left by the resignation or removal of a Primus representative or Stig Johansson
are to be left unfilled. The amended and restated LLC Securityholders' Agreement
will also provide, among other things, that the number of representatives
appointed by funds managed by Primus on the LLC's and the Company's Boards may
be decreased in the event Primus's ownership interest in the LLC drops below
certain thresholds.
EQUITY INVESTOR AGREEMENTS
SECURITIES PURCHASE AND CANCELLATION AGREEMENT
In connection with a restructuring of the management equity arrangements of
Carrier1, the LLC, Providence, Primus, and Messrs. Johansson, Bauer, Rizzo, van
Ophem, Craven, Nordahl, Gross, and Poulter are entering into a securities
purchase and cancellation agreement (effective as of March 1, 1999) (the
"Securities Purchase and Cancellation Agreement"). Pursuant to that agreement,
Providence and Primus intend to purchase the outstanding Class A Units issued by
the LLC to Messrs. Johansson, Bauer, Rizzo, van Ophem, Craven, Nordahl, Gross,
and Poulter (the "Management Securityholders"), consisting of an aggregate
546,080 Class A Units. See "Management--Stock Option Grants." The proceeds of
such purchase are to be used by the Management Securityholders to acquire shares
of Carrier1 International's common stock. The Securities Purchase and
Cancellation Agreement is also expected to provide that the options granted to
the Management Securityholders for the securities of the LLC will be canceled
without any further payment, and that all of the option agreements in relation
to securities of the LLC will be terminated. The Management Securityholders and
certain other employees of Carrier1 intend to enter into the new agreements with
Carrier1 International for the purchase of shares and granting of options for
shares of Carrier1 International's common stock as described below. Thomas J.
Wynne and Victor A. Pelson each intend to acquire (directly or through trusts
organized for the benefit of family members) 400,000 Class A Units in the LLC
(and the LLC in turn expects to acquire a total of 400,000 shares of Carrier1
International's common stock). In addition, Carrier1 International intends to
grant to Thomas J. Wynne and Victor A. Pelson options to purchase a total of
40,000 shares of Carrier1 International's common stock (20,000 shares of common
stock each).
1999 SHARE OPTION PLAN
The Board of Carrier1 International has adopted the 1999 Share Option Plan
(the "1999 Share Option Plan"), under which the Company and related companies of
the Carrier1 group may grant to any
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employee or director options (the "Options") for shares of Carrier1
International's common stock ("Shares") or other equity securities issued by
Carrier1 International. The Option Plan is administered by the Board or a
committee appointed by the Board, and authorizes the Board or such committee to
issue Options in such forms and on such terms as determined by the Board or such
committee. The Board or such committee may determine the number of Options to
grant, provided that the number of Shares issued pursuant to the Option Plan
shall be no greater than 2,222,222 Shares. The per Share exercise price for the
Options may not be less than $2.00. If Options are to be granted to an employee
of a subsidiary, such subsidiary will grant such Options instead of Carrier1
International. Carrier1 International will grant the subsidiary options to
acquire Shares to meet its Option obligations at a per Share exercise price
based upon an agreed fair market value (or, failing agreement, a fair market
value determined by the Board). Options granted under the Option Plan will vest
in five equal annual installments beginning the first anniversary of the grant
of such Options. Options will expire if not exercised within 10 years of the
grant, or on an earlier date as specified by the Board or the committee. If the
employment of a participant is terminated for any reason, all unvested Options
will immediately expire and vested Options must be exercised within a particular
number of days, which number will vary depending on the reasons for termination.
Subject to certain exceptions, Options will be nontransferable during the life
of an optionee except pursuant to a valid domestic relations order. Upon an
optionee's death, disability or termination of employment, the subsidiary which
employs the optionee, or its designee, will have the right to repurchase all
Shares held by the optionee, whether or not such Shares were acquired pursuant
to the exercise of Options. Under Luxembourg law, Carrier1 International and
certain subsidiaries may be precluded from exercising such right directly.
Carrier1 is in the process of granting Options pursuant to the 1999 Share
Option Plan to acquire approximately 2,197,218 Shares at an exercise price of
$2.00 per Share plus applicable capital duty (currently 1% of the subscription
price payable to Carrier1 International by the subsidiary granting the
applicable Option). Carrier1 intends to grant additional Options in the future.
SECURITIES PURCHASE AGREEMENT
Carrier1 International, the LLC and up to 43 employee investors
(collectively, the "Management Investors") are in the process of entering into
the Securities Purchase Agreement (the "Securities Purchase Agreement")
(effective as of March 1, 1999) whereby each Management Investor will agree to
purchase a specified number of Shares at $2.00 per Share, for an aggregate
purchase price of between $1.9 and $2.0 million. The Securities Purchase
Agreement will also provide that on one or more occasions, upon notice given by
the Board, Carrier1 International will sell to the LLC an aggregate number of
additional Shares, up to a number of Shares that, together with all other Shares
previously acquired by the LLC (whether or not still held by the LLC), does not
exceed 35.4 million. Carrier1 International intends in the future to issue
additional Shares to employees that are or become party to the Securities
Purchase Agreement. The Securities Purchase Agreement will provide that Carrier1
International will indemnify the LLC and Management Investors for, among other
things, losses related to any transaction financed or to be financed with
proceeds from the sale of securities purchased pursuant to the Securities
Purchase Agreement or any related agreement and environmental losses. The
Securities Purchase Agreement will contain customary conditions, representations
and warranties.
REGISTRATION RIGHTS AGREEMENT
Carrier1 International, the LLC, and Messrs. Johansson, Bauer, Rizzo, van
Ophem, Craven, Nordahl, Gross and Poulter (the "Original Management Investors")
are in the process of entering into a registration rights agreement (effective
as of March 1, 1999) (the "Registration Rights Agreement"). The Registration
Rights Agreement will provide that the LLC may at any time request registration
under the Securities Act of its Shares and certain other equity securities. In
addition, the Registration Rights Agreement will give certain piggyback
registration rights to the LLC and the Original Management Investors and, at the
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request of certain Original Management Investors, possibly additional employees
party to the Securities Purchase Agreement or the Securityholders' Agreement
described below. The Original Management Investors will not, however, have
piggyback rights in connection with an initial public offering. The Registration
Rights Agreement will contain provisions governing the registration statement
filing process. Among other things, it will provide that Carrier1 International
will bear all registration expenses and expenses for each piggyback registration
in which the LLC or any of the Original Management Investors participate, other
than underwriting discounts and commissions, in connection with its obligations
under the Registration Rights Agreement.
SECURITYHOLDERS' AGREEMENT
In connection with the Securities Purchase Agreement, Carrier1 International
is in the process of entering into a securityholders' agreement (effective as of
March 1, 1999) (the "Securityholders' Agreement") with the Management Investors
and the LLC. The Securityholders' Agreement will place restrictions on
Management Investors' ability to transfer their securities without the prior
written consent of the Board except under special circumstances. Transfers of
securities will be subject to the LLC's (or its transferees') right of first
refusal. The LLC will also benefit from preemptive rights in certain other
circumstances. The Securityholders' Agreement will also provide that the
Management Investors will (i) consent to and raise no objections to a sale of
Carrier1 International approved by the Board (with Management Investor tag-along
rights in the event a majority of the securities is proposed to be sold to a
third party or in the event that the LLC owns a majority of the outstanding
Shares and a holder of securities of the LLC proposes to sell a majority of such
securities) and (ii) comply with a Board request to pledge their securities to
secure financing to be provided to Carrier1 International. The Securityholders'
Agreement will provide for certain individuals to be appointed to the Board.
Finally, under the Securityholders' Agreement, the Management Investors will
agree not to disclose confidential information of, compete with, or solicit
employees or customers from the LLC or the Company.
EPOCH PEERING ARRANGEMENT
Carrier1 has entered into a peering arrangement with Epoch Networks. The
contract with Epoch Networks provides for the free exchange of IP traffic
between Carrier1 and Epoch Networks. A fund managed by Providence that holds a
majority of the Class A Units of the LLC and another fund managed by Providence
that also holds an interest in Class A Units of the LLC own a combined 21% of
the outstanding equity of Epoch Networks.
OTHER TRANSACTIONS
The LLC has advanced a loan of $68,260, bearing interest at a market rate,
to Mr. van Ophem, evidenced by a promissory note dated June 30, 1998, to finance
his equity investment in the LLC. As of December 31, 1998, Mr. van Ophem owed
$68,260 to the LLC. Mr. van Ophem is required to repay principal and interest on
the loan in five equal annual installments of $18,936 commencing July 1, 2001.
Carrier1 expects (effective as of March 1, 1999) to become the creditor with
respect to such loan.
During the period ended December 31, 1998, Carrier1 reimbursed Providence
and Primus for expenses incurred in connection with the formation of Carrier1
and the negotiation of certain agreements entered into by Carrier1. Such
reimbursements totaled $339,000 and were expensed as selling, general and
administrative expenses.
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PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Shares of Carrier1 International, as of February 28, 1999, by
(i) each person known to Carrier1 International to own beneficially more than 5%
of Carrier1 International's outstanding Shares, (ii) each director of Carrier1
International, (iii) each executive officer of Carrier1 International listed in
the Summary Compensation Table under "Management" above and (iv) all executive
officers and directors of Carrier1 International as a group. All information
with respect to beneficial ownership has been furnished to Carrier1
International by the respective shareholders of Carrier1 International.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF SHARES SHARES(2)
- --------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Carrier One, LLC................................................................. 29,999,999 99.99%
c/o Providence Equity Partners Inc.
901 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Providence Equity Partners L.P.(3)............................................... 30,000,000 100.00
901 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
<CAPTION>
NAME OF EXECUTIVE OFFICER OR DIRECTOR
- ---------------------------------------------------------------------------------
<S> <C> <C>
Stig Johansson................................................................... -- --
Eugene A. Rizzo.................................................................. -- --
Terje Nordahl.................................................................... -- --
Joachim Bauer.................................................................... -- --
Kees van Ophem................................................................... -- --
Glenn Creamer (3)................................................................ -- --
Jonathan E. Dick................................................................. -- --
Mark A. Pelson................................................................... -- --
Victor A. Pelson................................................................. -- --
Thomas J. Wynne.................................................................. -- --
All directors and executive officers as a group (11 persons)..................... -- --
</TABLE>
- ------------------------
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a person is deemed a "beneficial owner" of a
security if he or she has or shares the power to vote or direct the voting
of such security or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities
which that person has the right to acquire beneficial ownership of within 60
days. More than one person may be deemed to be a beneficial owner of the
same securities.
(2) Based upon 30,000,000 Shares outstanding as a result of the Equity
Investment, and not including Shares expected to be held by directors and
officers following consumation of the equity restructuring.
(3) The LLC is the direct beneficial owner of 29,999,999 Shares and Providence
Equity Partners L.P. ("Providence L.P.") is the direct beneficial owner of 1
Share. Providence L.P. is the majority Class A Unit holder of the LLC, and
by virtue of such status may be deemed to be the beneficial owner of the
Shares in which the LLC has direct beneficial ownership. Providence Equity
Partners L.L.C. ("PEP LLC") is the general partner of Providence L.P., and
by virtue of such status may be deemed to be the beneficial owner of the
Shares in which Providence L.P. has direct or indirect beneficial ownership.
Jonathan M. Nelson, Glenn M. Creamer and Paul J. Salem may be deemed to
share voting and investment power with respect to the Shares in which PEP
LLC has direct or indirect beneficial ownership. Each of Jonathan M. Nelson,
Glenn M. Creamer, Paul J. Salem, PEP LLC and Providence L.P. disclaims such
deemed beneficial ownership.
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The following table sets forth certain information regarding the current
beneficial ownership of Class A Units (the "Class A Units") of the LLC by each
director of Carrier1 International, each executive officer of Carrier1
International listed in the Summary Compensation Table under "Management" above
and all directors and executive officers of Carrier1 International as a group as
of February 28, 1999. The share ownership information provided in the following
table for each executive officer represents holdings in Class A Units prior to a
restructuring of the equity ownership of the LLC and Carrier1 International. In
connection with the equity restructuring, pursuant to the Securities Purchase
and Cancellation Agreement, certain officers intend to sell their Units in the
LLC to Providence and Primus. The proceeds of such sale are to be used by the
officers to purchase Shares of Carrier1 International. Pursuant to the
Securities Purchase and Cancellation Agreement, all options held by the officers
in respect of securities of the LLC are being terminated (with effect as of
March 1, 1999) and the officers will be granted equivalent options to acquire
Shares. See "Certain Relationships and Related Transactions--Equity Investor
Agreements."
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF DIRECTOR/EXECUTIVE OFFICER(1) NUMBER OF UNITS UNITS(1)
- ---------------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Stig Johansson (2)................................................................ 210,482 *
Eugene A. Rizzo (2)............................................................... 210,482 *
Terje Nordahl (2)................................................................. 139,371 *
Joachim Bauer (2)................................................................. 210,482 *
Kees van Ophem (2)................................................................ 210,482 *
Glenn M. Creamer (3).............................................................. -- --
Jonathan E. Dick.................................................................. -- --
Mark A. Pelson.................................................................... -- --
Victor A. Pelson (4).............................................................. 400,000 *
Thomas J. Wynne (4)............................................................... 400,000 *
All directors and executive officers as a group (11 persons)(5)................... 1,991,781 3.3%
</TABLE>
- ------------------------
* Less than one percent.
(1) Based upon approximately 60.0 million Class A Units outstanding as a result
of the Equity Investment, and not including Class A Units held (or Shares
expected to be held following the equity restructuring) by directors or
officers.
(2) Includes 142,222 Class A Units (71,111 in the case of Mr. Nordahl) issuable
to each such person upon exercise of options which are exercisable within 60
days.
(3) The LLC is the direct beneficial owner of 29,999,999 Shares and Providence
Equity Partners L.P. ("Providence L.P.") is the direct beneficial owner of 1
Share. Providence L.P. is the majority Class A Unit holder of the LLC, and
by virtue of such status may be deemed to be the beneficial owner of the
Shares in which the LLC has direct beneficial ownership. Providence Equity
Partners LLC ("PEP LLC") is the general partner of Providence L.P., and by
virtue of such status may be deemed to be the beneficial owner of the Shares
in which Providence L.P. has direct or indirect beneficial ownership.
Jonathan M. Nelson, Glenn M. Creamer and Paul J. Salem may be deemed to
share voting and investment power with respect to the Shares in which PEP
LLC has direct or indirect beneficial ownership. Each of Jonathan M. Nelson,
Glenn M. Creamer, Paul J. Salem, PEP LLC and Providence L.P. disclaims such
deemed beneficial ownership.
(4) Thomas J. Wynne and Victor A. Pelson each are being granted the right to
subscribe for and purchase (directly or through trusts organized for the
benefit of family members) 400,000 Class A Units in the LLC, which in turn
may use the proceeds of such purchases to acquire a total of 400,000 Shares.
These Class A Units do not include additional options that Carrier1
International intends to issue to each of Thomas J. Wynne and Victor A.
Pelson for a total of 40,000 Shares of its common stock (20,000 Shares
each). Messrs. Wynne and Pelson intend to disclaim beneficial ownership in
any Class A Units held in any such trusts.
(5) Includes 782,221 Units issuable upon exercise of options which are
exercisable within 60 days.
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DESCRIPTION OF THE NOTES
Each of the Old Dollar Notes and the Old Euro Notes were issued under an
Indenture, each dated as of February 19, 1999 (the "Dollar Indenture" and the
"Euro Indenture," respectively, and together the "Indentures"), between the
Company, as issuer, and The Chase Manhattan Bank, as trustee under each
Indenture (each a "Trustee" and together the "Trustees"). The New Dollar Notes
will be issued under the Dollar Indenture and the New Euro Notes will be issued
under the Euro Indenture. The Indentures have been filed as exhibits to the
Registration Statement of which this Prospectus is a part and are available as
set forth under the heading "Where You Can Find More Information." The terms of
the New Notes of a series are identical to the terms of the Old Notes of such
series for which they may be exchanged pursuant to the Exchange Offer, except
that the New Notes will be registered under the Securities Act and will not
contain restrictions on transfer or include provisions relating to additional
interest and will contain terms of an administrative nature that differ from
those of the Old Notes. New Notes will otherwise be treated as Notes for
purposes of the Indentures. The following summary of certain provisions of the
Indentures does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Indentures, including
the definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended. Whenever particular defined terms
of the Indentures not otherwise defined herein are referred to, such defined
terms are incorporated herein by reference. For definitions of certain
capitalized terms used in the following summary, see "--Certain Definitions."
The term "Company" as used hereunder means Carrier1 International S.A. and any
successors in interest thereto under the relevant Indenture, excluding its
Subsidiaries.
GENERAL
The Notes will be unsecured (except to the extent described under
"--Security" below) unsubordinated obligations of the Company, initially limited
to $160.0 million principal amount of Dollar Notes and [Euro]85.0 million
principal amount of Euro Notes, and will mature on February 15, 2009. Each
Dollar Note will initially bear interest at 13.25% per annum, and each Euro Note
will initially bear interest at 13.25% per annum, from the Closing Date or from
the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually (to Holders of record at the close of
business on the February 1 or August 1 immediately preceding the Interest
Payment Date) on February 15 and August 15 of each year, commencing August 15,
1999. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
If by the date that is six months after the Closing Date, the Company has
not consummated a registered exchange offer for the Old Dollar Notes or the Old
Euro Notes or caused a shelf registration statement with respect to resales of
the Old Dollar Notes or the Old Euro Notes to become effective, the interest
rate on such series of Notes will increase by 0.5% per annum until the
consummation of a registered exchange offer or the effectiveness of a shelf
registration statement. Any interest will be computed on the basis of a 360-day
year of twelve 30-day months. See "--Registration Rights."
Principal of, and premium, if any, and interest on, the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of the Company in the Borough of Manhattan, the City of New York (which
initially will be the corporate trust office of the relevant Trustee in the City
of New York); PROVIDED that, at the option of the Company, payment of interest
may be made by check mailed to the Holders at their addresses as they appear in
the Security Register.
The Dollar Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. The Old Dollar Notes are represented by and the New Dollar
Notes will be represented by one or more permanent global Dollar Notes (each, a
"Global Dollar Note") and deposited with the relevant Trustee as custodian for,
and registered in the name of a nominee of, DTC. The Euro Notes will be issued
only in fully registered form, without coupons, in denominations of [Euro]1,000
of principal amount and any integral multiple thereof. The Old Euro Notes
initially sold in reliance on Rule 144A are represented by and the New Euro
Notes will be represented by a
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permanent global Euro Notes (each, a "Global Euro Note" and, together with the
Global Dollar Notes, the "Global Notes") and deposited with the relevant
Trustee, as common depositary for Euroclear and Cedel Bank. Old Euro Notes
offered and sold in transaction outside the United States in reliance on
Regulation S are, and will be, represented solely by certificated Old Euro
Notes. If a Qualified Institutional Buyer of a beneficial interest in a Global
Euro Note wishes to hold such interest through DTC, any such beneficial
interests will be represented by one or more permanent global Euro Notes in
definitive, fully registered form without interest coupons (each, a "DTC Euro
Note") and will be deposited with the relevant Trustee as custodian for, and
registered in the name of a nominee of, DTC. No service charge will be made for
any registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
Subject to the covenants described below under "--Covenants" and applicable
law, the Company may issue additional Notes ("Additional Notes") under the
Indentures. Each series of Old Notes, any New Notes of such series and any
Additional Notes subsequently issued in such series will be treated as a single
class for all purposes under the relevant Indenture. References in this
"Description of the Notes" to the Notes refer to the relevant series of Notes.
THE GLOBAL SECURITIES
Ownership of beneficial interests in a global Dollar Note will be limited to
persons who have an account with DTC or Euroclear and Cedel Bank
("participants") or persons who hold interests through participants. Beneficial
interests in the global Dollar Notes will be shown on, and transfers thereof
will be effected only through records maintained by DTC (with respect to its
participants) and its participants. Beneficial interests in the global Euro
Notes will be shown on, and transfers thereof will be effected through records
maintained by Euroclear and Cedel Bank (with respect to their participants) and
their participants; PROVIDED, HOWEVER, that beneficial interests in the DTC Euro
Notes will be shown on and transfers thereof will be effected through records
maintained by DTC (with respect to its participants) and its participants.
Qualified institutional buyers may hold their interest in a Global Note directly
through DTC or Euroclear and Cedel Bank, if they are participants in such
system, or indirectly through organizations which are participants in such
system. Carrier1 expects that pursuant to procedures established by DTC or
Euroclear and Cedel Bank, as applicable, upon deposit of a Global Note
representing New Notes, DTC or Euroclear and Cedel Bank, as applicable, will
credit the account of participants tendering Old Notes in exchange for New Notes
with an interest in the applicable Global Note. All beneficial interests in the
global securities will be subject to the procedures and requirements of DTC,
Euroclear or Cedel Bank, as applicable. Transactions settled through DTC,
Euroclear and Cedel will settle on a T+3 basis.
Owners of beneficial interests in the global securities will not be entitled
to have Notes registered in their names, and will not receive or be entitled to
receive physical delivery of definitive certificates representing individual
Notes except in certain limited circumstances set forth in the relevant
Indenture. 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 securities represented by
a global security to such persons may be limited. In addition, because DTC,
Euroclear and Cedel Bank can act only on behalf of their respective
participants, who in turn act on behalf of persons who hold interests through
such participants, the ability of a person having an interest in the securities
represented by a global security to pledge or transfer such interest to persons
or entities that do not participate in DTC's, Euroclear's or Cedel Bank's
system, or to otherwise take actions in respect of such interest, may be
affected by the lack of a physical definitive security in respect of such
interest.
So long as DTC, Euroclear or Cedel Bank, as applicable, or any nominee
thereof is the registered owner or holder of any of the global securities, DTC,
Euroclear or Cedel Bank, as applicable, or such nominee, as the case may be,
will be considered the sole owner or holder of the securities represented by
such global securities for all purposes under the Indentures. No beneficial
owner of an interest in the
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global securities will be able to transfer that interest except in accordance
with DTC's, Euroclear's or Cedel Bank's applicable procedures, in addition to
those provided for under the relevant Indenture.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
The Company expects that DTC, Euroclear or Cedel Bank, as applicable, will
take any action permitted to be taken by a holder of Notes (including the
presentation of Notes for exchange as described below) only at the direction of
one or more participants to whose account the interests in a global security is
credited and only in respect of such portion of the securities as to which such
participant or participants has or have given such direction.
PAYMENTS
Payments of any amounts owing in respect of the global securities will be
made through one or more paying agents to DTC (in the case of global Dollar
Notes and DTC Euro Notes) or Euroclear or Cedel Bank (in the case of global Euro
Notes (other than the DTC Euro Notes)) in proportion to their respective
interests as the registered owner thereof. All amounts payable under the Dollar
Notes will be payable in U.S. dollars and all amounts payable under the Euro
Notes will be payable in Euro, except as otherwise provided below. None of the
Company, any Trustee, the transfer agent 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
securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest. If the Euro Notes are included in the
Regulated Unofficial Market (Freiverkehr) of the Frankfurt Stock Exchange, the
Company will maintain a paying agent and registrar in Germany.
The Company expects that DTC, Euroclear or Cedel Bank, as the case may be,
or any nominee thereof, upon receipt of any payments made in respect of the
global securities, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the global Note, as shown on the records of DTC, Euroclear or Cedel Bank, as
applicable. The Company also expects that payments by participants to owners of
beneficial interests in the global securities 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.
PAYMENTS ON GLOBAL EURO NOTES. Payments to holders of global Euro Notes in
respect of principal and interest on the Euro Notes will be made in Euro, except
as may otherwise be agreed between any applicable securities clearing system and
any holders. See "--Currency Conversions for Holders of Beneficial Interests in
DTC Euro Notes." Payments will be subject in all cases to any fiscal or other
laws and regulations applicable thereto. None of the Company, the relevant
Trustee or any paying agent shall be liable to any holder of a global Euro Note
or other person for any commissions, costs, losses or expenses in relation to or
resulting from any currency conversion or rounding effected in connection
therewith.
CURRENCY CONVERSIONS FOR HOLDERS OF BENEFICIAL INTERESTS IN DTC EURO
NOTES. Notwithstanding the payment provisions described above, investors who
hold beneficial interests in DTC Euro Notes, directly or indirectly, through DTC
will be paid in U.S. dollars converted from such payments in Euro by the
applicable agent unless the registered holder, on behalf of any such owner of
beneficial interests, elects to receive payments in Euro or the chosen currency,
as the case may be. All costs of conversion, if any, will be borne by holders of
beneficial interests in the DTC Euro Notes, by deduction from such payments.
An owner of a beneficial interest in a DTC Euro Note may receive payment in
Euro by notifying the DTC participant through which its beneficial interest in
the DTC Euro Note is held on or prior to the record date of (i) such investor's
election to receive payment in Euro and (ii) wire transfer instructions to an
account entitled to receive the relevant payment. Such DTC participant must
notify DTC of such
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election and wire transfer instructions on or prior to the second New York
Business Day after the record date for any payment of interest and on or prior
to the eighth day prior to the payment of principal. DTC will notify the paying
agent of such election and wire transfer instructions on or prior to the fourth
New York Business Day after the record date for any payment of interest and on
or prior to the sixth New York Business Day prior to the payment of principal.
If complete instructions are received by the DTC participant and forwarded by
the DTC participant to DTC and by DTC to the paying agent on or prior to such
dates, such investor will receive payment in Euro outside DTC; otherwise only
U.S. dollar payments will be made by the paying agent. All costs of such payment
by wire transfer will be borne by registered holders receiving such payments by
deduction from such payments. For purposes of the foregoing, "New York Business
Day" means a day all banking institutions are not authorized or obligated by law
or executive order to be closed in The City of New York.
Investors may be subject to foreign exchange risks that may have important
economic and tax consequences to them.
INFORMATION CONCERNING DTC, EUROCLEAR AND CEDEL
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, 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").
The Company understands that: Euroclear and Cedel Bank hold securities for
participating organizations and facilitate the clearance and settlement of
securities transactions between their respective participants through electronic
book-entry changes in accounts of such participants. Euroclear and Cedel Bank
provide to their participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Euroclear and Cedel Bank interface with
domestic securities markets. Euroclear and Cedel Bank participants are financial
institutions such as underwriters, securities brokers and dealers, banks, trust
companies and certain other organizations. Indirect access to Euroclear or Cedel
Bank is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodian relationship with a
Euroclear or Cedel Bank participant, either directly or indirectly.
Subject to compliance with any transfer restrictions applicable to the
global Notes, cross-market transfers between the participants in DTC, on the one
hand, and Euroclear or Cedel Bank participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel Bank, as the case may be, by its depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel Bank,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the global Notes in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC, Euroclear participants and Cedel Bank participants may not
deliver instructions directly to the depositaries for Euroclear or Cedel Bank.
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Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a global security from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel Bank participant, during the securities
settlement processing day (which must be a business day for Euroclear and Cedel
Bank) immediately following the settlement date of DTC. Cash received in
Euroclear or Cedel Bank as a result of sales of interest in a global securities
by or through a Euroclear or Cedel Bank participant to a participant in DTC will
be received with value on the settlement date of DTC but will be available in
the relevant Euroclear or Cedel Bank cash account only as of the business day
for Euroclear or Cedel Bank following DTC's settlement date.
Although DTC, Euroclear and Cedel Bank are expected to follow the foregoing
procedures to facilitate transfers of interests in the global Notes and global
Warrants among participants in DTC, Euroclear and Cedel Bank, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, any Trustee or
any paying agent will have any responsibility for the performance by DTC,
Euroclear and Cedel Bank or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If (i) at any time DTC is unwilling or unable to continue as a depositary,
or Euroclear and Cedel Bank cease to be a clearing agency, for the global Notes
and, in either case, a successor depositary or clearing agency, as the case may
be, is not appointed by the Company within 90 days or (ii) certain other events
occur, as provided in the applicable Indenture, then, certificated securities
will be issued in exchange for the Global Securities. All such certificated
securities representing Old Notes would be subject to certain transfer
restrictions.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after February 15, 2004 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice, at the
following Redemption Prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on or
prior to the Redemption Date to receive interest due on an Interest Payment
Date), if redeemed during the 12-month period commencing February 15 of the
years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2004........................................................................ 106.625%
2005........................................................................ 104.417
2006........................................................................ 102.208
2007 and thereafter......................................................... 100.000
</TABLE>
In addition, at any time prior to February 15, 2002, the Company at its
option may redeem Notes of either series in an aggregate principal amount equal
to up to 35% of the principal amount of the Dollar Notes or Euro Notes, as the
case may be (including the principal amount of any Additional Notes of such
series), with funds in an amount equal to the proceeds of one or more sales of
Capital Stock (other than Disqualified Stock) of, or capital contributions to,
the Company, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 113.25%, plus accrued and
unpaid interest to the Redemption Date (subject to the rights of holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); PROVIDED that (i) an
aggregate principal amount equal to at least 65% of the principal amount of the
initially issued Dollar Notes or Euro Notes, as the case may be (plus the
principal amount of any
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Additional Notes of such series) remains outstanding after each such redemption
and (ii) notice of any such redemption is provided within 60 days of each such
sale or capital contribution.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the relevant Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the relevant Notes are
listed or, if the relevant Notes are not listed on a national securities
exchange, by lot or by such other method as such Trustee in its sole discretion
shall deem to be fair and appropriate; PROVIDED that no Dollar Note of $1,000 in
principal amount or less or Euro Note of [Euro]1,000 in principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
In the event that (i) as a result of any change in, or amendments to, any
laws or treaties (or any regulations or rulings promulgated thereunder) or any
change in official position regarding the application of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective after the Closing Date, the Company has become or would become
obligated to pay, on the next date on which any amount would be payable under or
with respect to the Notes, any Additional Amounts (as defined herein), and (ii)
the Company cannot reasonably arrange (without other material adverse
consequences to the Company) for another obligor to make such payment so as to
avoid the requirement to pay such Additional Amounts, then the Company may
redeem all, but not less than all, the Notes at any time at 100% of the
principal amount thereof, together with accrued interest thereon, if any, to the
redemption date. See "--Additional Amounts."
SINKING FUND
There will be no sinking fund payments for the Notes.
REGISTRATION RIGHTS
The Company has agreed with the Placement Agents, for the benefit of the
Holders, that the Company will use its best efforts, at its cost, to file with
the United States Securities and Exchange Commission (the "Commission") and
cause to become effective a registration statement with respect to a registered
offer to exchange each series of the Old Notes for an issue of New Notes, which
shall be unsubordinated notes of the Company with terms identical in all
material respects to such series of Old Notes (except that the New Notes will be
registered under the Securities Act and therefore will not contain restrictions
on transfer, will not contain certain provisions relating to additional interest
and will contain terms of an administrative nature that differ from those of the
Old Notes). The Registration Statement of which this Prospectus is a part
constitutes the registration statement to be filed pursuant to the Registration
Rights Agreement. Upon such Registration Statement being declared effective, the
Company shall offer the New Notes in return for surrender of the applicable Old
Notes. Such offer shall remain open for not less than 20 business days after the
date notice of the Exchange Offer is mailed, or otherwise provided, to Holders.
For each Old Note surrendered to the Company under the Exchange Offer, the
Holder will receive a New Note of equal principal amount. Interest on each New
Note shall accrue from the last Interest Payment Date on which interest was paid
on the Old Notes so surrendered or, if no interest has been paid on such Old
Notes, from the Closing Date. In the event that applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or under certain other circumstances, the Company shall, at its cost, use
its best efforts to cause to become effective a shelf registration statement
(the "Shelf Registration Statement") with respect to resales of each series of
Old Notes and to keep such Shelf Registration Statement effective until the
expiration of the time period referred to in Rule 144(k) under the Securities
Act after the Closing Date, or such shorter period that will terminate when all
Notes covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or Rule 144 under the Securities Act or are no
longer outstanding. The
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Company shall, in the event of such a shelf registration, provide to each Holder
copies of the prospectus, notify each Holder when such Shelf Registration
Statement has become effective and take certain other actions as are required to
permit resales of the Notes. A Holder that sells its Notes pursuant to a Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such a
Holder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective with respect to either series
of Old Notes on or prior to the date that is six months after the Closing Date
the interest rate borne for such series of Old Notes will be increased by 0.5%
per annum until the Exchange Offer is consummated or the Shelf Registration
Statement is declared effective.
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer 20 business days after the commencement thereof,
PROVIDED that it has accepted all Old Notes theretofore validly surrendered in
accordance with the terms of the Exchange Offer. Notes not tendered in the
Exchange Offer shall be subject to all of the terms and conditions specified in
the relevant Indenture and to certain transfer restrictions.
This summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a copy
of which is available as set forth under the heading "Where You Can Find More
Information."
SECURITY
Pursuant to each Indenture, the Company has purchased and pledged to the
relevant Trustee for the benefit of the Holders of the relevant Notes the
Pledged Securities in such amount as will be sufficient upon receipt of
scheduled interest and principal payments of such securities to provide for
payment in full for the first five scheduled interest payments due on the Notes.
The Company used approximately $49.2 million of the net proceeds from the
issuance of the Dollar Units and [Euro]26.9 million of the net proceeds from the
issuance of the Euro Units to acquire the Pledged Securities. The Pledged
Securities have been pledged by the Company to the relevant Trustee for the
benefit of the Holders of the relevant series of Notes pursuant to the relevant
Pledge Agreement and will be held by the relevant Trustee in the relevant Pledge
Account. Pursuant to each Pledge Agreement, immediately prior to an Interest
Payment Date on the Notes, the Company may either deposit with the relevant
Trustee from funds otherwise available to the Company cash sufficient to pay the
interest scheduled to be paid on such date or the Company may direct such
Trustee to release from the relevant Pledge Account proceeds sufficient to pay
interest then due on the Notes. In the event that the Company exercises the
former option, the Company may thereafter direct such Trustee to release to the
Company proceeds or Pledged Securities from the relevant Pledge Account in like
amount. A failure by the Company to pay interest on either series of Notes in a
timely manner through the first five scheduled interest payment dates will
constitute an immediate Event of Default under the applicable Indenture, with no
grace or cure period.
Each series of Notes is secured in part by the applicable Pledged Securities
and the applicable Pledge Account (including cash and any other property on
deposit therein) maintained with an affiliate of such Trustee as securities
intermediary (the "Securities Intermediary") and, accordingly, such Pledged
Securities and Pledge Account will also secure repayment of the principal amount
of such Notes to the extent of such security. Under each Pledge Agreement, once
the Company makes the first five scheduled interest payments on the Notes, all
of the remaining Pledged Securities and any other amounts in such Pledge
Account, if any, will be released from the Pledge Account and thereafter the
Notes will be unsecured.
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RANKING
The Indebtedness evidenced by the Notes will rank PARI PASSU in right of
payment with all existing and future unsubordinated indebtedness of the Company
(except as described in "--Security" above) and senior in right of payment to
all subordinated indebtedness of the Company. After giving PRO FORMA effect to
the Original Offering and the Equity Investment as of December 31, 1998, the
Company would have had no indebtedness outstanding other than the Notes of both
series. In addition, all existing and future liabilities (including trade
payables) of the Company's subsidiaries will be effectively senior to the Notes.
See "Risk Factors--We Will Have Substantial Indebtedness, and We May Incur More
Indebtedness," "--The Notes Will Be Effectively Subordinated to Our Senior Debt"
and "--Our Ability to Service the Notes Depends on Our Ability to Get Cash from
Our Subsidiaries."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indentures. Reference is made to the
Indentures for the definition of any other capitalized term used herein for
which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or is merged with or consolidated
with a Restricted Subsidiary or assumed in connection with an Asset Acquisition
by a Restricted Subsidiary and not Incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP; PROVIDED that the
following items shall be excluded in computing Adjusted Consolidated Net Income
(without duplication):
(i) the net income (or loss) of any Person that is not a Restricted
Subsidiary, except (x) with respect to net income, to the extent of the
amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and (y)
with respect to net losses, to the extent of the amount of Investments made
by the Company or any Restricted Subsidiary in such Person during such
period;
(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below (and in
such case, except to the extent includable pursuant to clause (i) above),
the net income (or loss) of any Person accrued prior to the date it becomes
a Restricted Subsidiary or is merged into or consolidated with the Company
or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary other than a Permanent
Guarantor to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of such net income is
not at the time permitted (after giving effect to any effective waiver,
consent or approval) by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses attributable to Asset Sales (without regard to
clause (c) or (d) in the proviso to the definition thereof);
(v) solely for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below, any amount
paid or accrued as dividends on Preferred Stock of the Company or any
Restricted Subsidiary owned by Persons other than the Company and any of its
Restricted Subsidiaries;
(vi) all extraordinary gains and extraordinary losses or extraordinary
charges;
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(vii) any compensation expense to the extent paid or payable solely with
Capital Stock (other than Disqualified Stock) of the Company or any options,
warrants or other rights to acquire Capital Stock (other than Disqualified
Stock) of the Company; and
(viii) the cumulative effect of a change in accounting principles.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Company and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries, prepared in conformity with GAAP and
filed with the Commission or provided to the relevant Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant.
"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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment, as
determined in good faith by the Board of Directors (whose determination shall be
conclusive and evidenced by a Board Resolution) or (ii) an acquisition by the
Company or any of its Restricted Subsidiaries of the property and assets of any
Person other than the Company or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person;
PROVIDED that the property and assets acquired are related, ancillary or
complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such acquisition, as determined in good faith by the Board of
Directors (whose determination shall be conclusive and evidenced by a Board
Resolution).
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock of or any
other Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by the
provisions of the relevant Indenture applicable to mergers, consolidations and
sales of all or substantially all of the assets of the Company; PROVIDED that
"Asset Sale" shall not include (a) sales, transfers or other dispositions of
Temporary Cash Investments, inventory, receivables and other current assets, (b)
sales, transfers or other dispositions of assets constituting a Restricted
Payment (or a transaction excluded from the definition of the term "Restricted
Payments") permitted to be made under the "Limitation on Restricted Payments"
covenant, (c) sales, transfers or other dispositions of assets with a fair
market value (as certified in an Officers' Certificate) not in excess of $2
million in any transaction or series of related transactions, or
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(d) sales or other dispositions of assets for consideration at least equal to
the fair market value of the assets sold or disposed of, to the extent that the
consideration received would constitute property or assets of the kind described
in clause (B) of the second paragraph of the "Limitation on Asset Sales"
covenant.
"Average Life" means, at any date of determination with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such Indebtedness and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or "group" (within the
meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% (50%, if the Permitted Holders hold more than 35% of the voting
power of the Voting Stock of the Company on a fully diluted basis) of the total
voting power of the Voting Stock of the Company on a fully diluted basis and
such ownership represents a greater percentage of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, than is held by Permitted
Holders on such date; or (ii) during any period of two consecutive years
beginning on or after the Closing Date, individuals who at the beginning of such
period were members of the Board of Directors (together with any new directors
whose election by the Board of Directors or whose nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
members of the Board of Directors then 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 the Board of Directors then in office.
"Closing Date" means the date on which the Notes are first issued under the
Indentures.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) provision for all taxes based on income, profits or capital, (iii)
depreciation expense, (iv) amortization expense (including but not limited to
amortization of goodwill and intangibles and amortization and write-off of
financing costs) and (v) all other non-cash items reducing Adjusted Consolidated
Net Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income (other than any item
reversing, offsetting or reducing any such accrual or reserve), all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; PROVIDED that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the percentage
ownership interest in the income of such Restricted Subsidiary not owned on the
last day of such period by the Company or any of its Restricted Subsidiaries.
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"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
on Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and the interest component 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, all as determined on
a consolidated basis (without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) four times the amount of Consolidated EBITDA for the then most recent
fiscal quarter for which financial statements of the Company have been filed
with the Commission or provided to the relevant Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant described below (such
quarter being the "Quarter"); PROVIDED that, in making the foregoing
calculation, (A) PRO FORMA effect shall be given, in calculating the amount of
Indebtedness outstanding on the Transaction Date, to any Indebtedness to be
Incurred on the Transaction Date, or to be repaid, repurchased, redeemed or
otherwise retired or discharged on the Transaction Date; (B) PRO FORMA effect
shall be given to Asset Dispositions and Asset Acquisitions (including giving
PRO FORMA effect to the application of proceeds of any Asset Disposition) that
occur from the beginning of the Quarter through the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) PRO FORMA effect shall be
given to asset dispositions and asset acquisitions (including giving PRO FORMA
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into, or consolidated with, the Company or any Restricted Subsidiary
during such Reference Period and that would have constituted Asset Dispositions
or Asset Acquisitions had such transactions occurred when such Person was a
Restricted Subsidiary as if such asset dispositions or asset acquisitions were
Asset Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; PROVIDED that to the extent that clause (B) or (C) of this
sentence requires that PRO FORMA effect be given to an Asset Acquisition or
Asset Disposition, such PRO FORMA calculation shall be based upon the full
fiscal quarter immediately preceding the Transaction Date of the Person, or
division or line of business of the Person, that is acquired or disposed of for
which financial information is available.
"Consolidated Net Worth" means, at any date of determination, shareholders'
equity (plus, to the extent not otherwise included, Preferred Stock of the
Company) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"disinterested member" means, with respect to any transaction, a member of
the Board of Directors having no material financial interest in or with respect
to such transaction. A member of the Board of Directors shall not be deemed to
have such a financial interest solely by reason of such member's holding
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Capital Stock of the Company or any parent thereof or any options, warrants or
other rights in respect of such Capital Stock.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; PROVIDED that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below and
such Capital Stock, or the agreements or instruments governing the redemption
rights thereof, specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control"
covenants described below.
"European Government Obligations" means securities that are direct and
unconditional obligations of the Belgian, Dutch, French, German or Swiss
government and are not callable or redeemable at the option of the issuer
thereof; provided that at the time of determination the conversion rate between
the sovereign currency of such country and the Euro is fixed and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such European Government Obligation or a specific payment of
interest on or principal of any such European Government Obligation held by such
custodian for the account of the holder of a depository receipt; PROVIDED that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the European Government
Obligation or the specific payment of interest on or principal of the European
Government Obligation evidenced by such depository receipt.
"European Government Securities" means securities that are direct and
unconditional obligations of the German government meeting the requirements of
the Pledge Agreement relating to the Euro Notes.
"European Union" means the European Union, including the countries of
Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom; as
well as any other country which at the time of determination is a member of the
European Union.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; PROVIDED that for purposes of clause (viii) of
the second paragraph of the "Limitation on Indebtedness" covenant, (x) the fair
market value of any security registered under the Exchange Act shall be the
average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the sale of Capital Stock and (y)
in the event the aggregate fair market value of any other property (other than
cash or cash equivalents) received by the Company exceeds $10 million, the fair
market value of such property shall be determined by a nationally recognized
investment banking or appraisal firm and set forth in their written opinion
which shall be delivered to the relevant Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
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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; PROVIDED, HOWEVER, that all reports and other
financial information provided by the Company to the Holders of the relevant
series of Notes or the relevant Trustee shall be prepared in accordance with
GAAP as in effect from time to time. All ratios and computations contained or
referred to in the relevant Indenture shall be computed in conformity with GAAP
applied on a consistent basis, except that calculations made for purposes of
determining compliance with the terms of the covenants and with other provisions
of the relevant Indenture shall be made without giving effect to (i) the
amortization or write-off of any expenses incurred in connection with the
offering of the Units and (ii) the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"German Network" means the fiber optic network to be built in Germany by the
Company or any of its Restricted Subsidiaries with affiliates of Viatel, Inc.
and Metromedia Fiber Network Inc. contemplated by the letter of intent dated
August 20, 1998.
"German Network L/C" means a letter of credit in an amount not to exceed $75
million issued to secure obligations of the Company or any of its Restricted
Subsidiaries with respect to the German Network.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any such obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, enter into any Guarantee of or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness, including an "Incurrence" by means 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 principal obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all reimbursement obligations of such Person in respect of letters
of credit or other similar instruments (excluding obligations with respect
to letters of credit (including trade letters of credit) or other similar
instruments securing obligations (other than obligations described in (i) or
(ii) above or (v), (vi) or (vii) below) entered into in the ordinary course
of business of such Person to the extent such letters of credit are not
properly honored and drawn upon or, if properly honored and drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except Trade
Payables;
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(v) all Capitalized Lease Obligations of such Person;
(vi) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED that the amount of such Indebtedness of such Person shall be the
lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other Persons;
(vii) all Indebtedness of other Persons Guaranteed by such Person;
provided that the amount of Indebtedness of such Person shall be the lesser
of (A) the amount Guaranteed and (B) the amount of such Indebtedness of such
other Persons; and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements, except
if such agreements (a) are designed solely to protect the Company or its
Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder.
The amount of Indebtedness of any Person as described above at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations as described
above, the maximum liability upon the occurrence of the contingency giving rise
to the obligation, provided (A) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at the time of its issuance as determined in
conformity with GAAP, (B) that obligations for money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so
long as such money is held to secure the payment of such interest, (C) that the
amount of an obligation in respect of a letter of credit or other similar
instrument is the aggregate undrawn and unexpired amount thereof plus the
aggregate amount of drawings properly honored thereunder that have not then been
reimbursed, and (D) that "Indebtedness" shall not include any liability for
federal, state, local or other taxes. Indebtedness shall not be deemed to
include any obligation arising from the honoring of a check, draft or similar
instrument drawn against insufficient funds, provided that such obligation is
extinguished within five business days of its Incurrence.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances, loans or other extensions of credit
to customers or suppliers in the ordinary course of business to the extent
required by GAAP to be recorded as accounts receivable, prepaid expenses or
deposits on the balance sheet of the Company or its Restricted Subsidiaries) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of the "Limitation on the
Issuance and Sale of Capital Stock of Restricted Subsidiaries" covenant;
PROVIDED that the fair market value of the Investment remaining in any Person
that has ceased to be a Restricted Subsidiary shall not exceed the aggregate
amount of Investments previously made in such Person valued at the time such
Investments were made less the net reduction of such Investments. For purposes
of the
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definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Management Investor" means any officer, director, employee or other member
of the management of the Company or any of its Subsidiaries, or family members
or relatives thereof, or trusts or partnerships for the benefit of any of the
foregoing, or any of their heirs, executors, successors and legal
representatives.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale when received in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, including as a consequence of any
transfer of funds in connection with the application thereof in accordance with
the "Limitation on Asset Sales" covenant, (iii) payments made, or required to be
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 Asset Sale, (iv) all
distributions and other payments required to be made to minority interest
holders in a Restricted Subsidiary or joint venture as a result of such Asset
Sale by or of such Restricted Subsidiary or joint venture, or to any other
Person (other than the Company or a Restricted Subsidiary) owning a beneficial
interest in the assets disposed of in such Asset Sale, and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary as a reserve
against any liabilities or obligations associated with such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and (b) with respect to any issuance or sale
of Capital Stock, the proceeds of such issuance or sale in the form of cash or
cash equivalents, including payments in respect of deferred payment obligations
(to the extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to the
extent such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof. In
the event that any consideration for any Asset Sale that would otherwise
constitute Net Cash Proceeds is required to be held in escrow pending
determination of whether a purchase price adjustment, indemnification or other
payment or other similar adjustment will be made, such consideration will become
Net Cash Proceeds only when and to the extent released from escrow to the
Company or a Restricted Subsidiary.
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"Offer to Purchase" means an offer to purchase Notes by the Company from the
Holders commenced by mailing a notice to the relevant Trustee and providing
notice to each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer
to Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or an integral multiple
thereof, with respect to the Dollar Notes, and [Euro]1,000 or an integral
multiple thereof, with respect to the Euro Notes.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the relevant 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 relevant Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or portions
thereof accepted for payment by the Company. The relevant Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price, and the relevant Trustee shall promptly authenticate and
mail to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered; PROVIDED that each Note purchased and each new
Note issued shall be in a principal amount of $1,000 or an integral multiple
thereof, with respect to the Dollar Notes, and [Euro]1,000 or an integral
multiple thereof, with respect to the Euro Notes. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable after the
Payment Date. The relevant Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase. To the extent the provisions
of any such laws or regulations conflict with the provisions of the relevant
Indenture, the Company will comply with such laws and regulations and will not
be deemed to have breached its obligations under such Indenture by virtue
thereof.
"Permanent Guarantor" means a Restricted Subsidiary that irrevocably
guarantees the payment of the Notes on an unsubordinated basis; provided that
such guarantee may provide that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer (including by
way of
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merger or consolidation), to any Person not an Affiliate of the Company, of all
of the Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange, transfer or other transaction is not prohibited by the relevant
Indenture), (ii) the legal or covenant defeasance of the Notes or satisfaction
and discharge of the relevant Indenture, subject to customary contingent
reinstatement provisions or (iii) upon the merger or consolidation of the
Permanent Guarantor with and into the Company or another Permanent Guarantor
that is the surviving Person in such merger or consolidation.
"Permitted Holder" means any of the following: any of Providence Equity
Partners L.P., Providence Equity Partners II L.P., Providence Equity Partners
III L.P., Primus Capital Fund IV Limited Partnership and Primus Executive Fund
Limited Partnership and any of the respective Affiliates or successors of the
foregoing.
"Permitted Investment" means:
(i) an Investment in the Company (including the Notes of either series)
or a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with
or into, or transfer or convey all or substantially all its assets to, the
Company or a Restricted Subsidiary; PROVIDED that such Person's primary
business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such Investment;
(ii) Temporary Cash Investments;
(iii) commissions, payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP;
(iv) stock, obligations, securities or other Investments received (a) in
satisfaction of judgments or (b) in settlement of debts, or as a result of
foreclosure, perfection or enforcement of any Lien, in each case under this
clause (b) arising in the ordinary course of business and not in
contemplation of the acquisition of such stock, obligations, securities or
other Investments;
(v) Investments in negotiable instruments held for collection, lease,
utility and worker's compensation, performance and other similar pledges or
deposits and other pledges or deposits permitted under the "Limitation on
Liens" covenant;
(vi) obligations under Interest Rate Agreements and Currency Agreements
designed solely to protect the Company or its Restricted Subsidiaries
against fluctuations in interest rates or foreign currency exchange rates;
(vii) Investments in a joint venture to cover the Company's portion of
the cost (including the cost of design, development, acquisition,
construction, installation and improvement) of building a telecommunications
network (or network segment) in Europe, provided that the Company or any of
its Restricted Subsidiaries will directly own their portion of such network
(or network segment); and Investments in joint ventures to acquire or
maintain or otherwise relating to any rights-of-way, wayleaves, governmental
approvals, licenses, franchises or concessions relating to any such network
(or network segment);
(viii) Investments in any Person in an aggregate amount not to exceed
25% of any gains (net of any losses) attributable to Asset Sales after the
Closing Date and prior to the date of such Investment; and
(ix) loans or advances to directors, officers or employees of the
Company or any Restricted Subsidiary that do not in the aggregate exceed $3
million at any time outstanding.
"Permitted Joint Venture" means any joint venture between the Company or any
Restricted Subsidiary and any Person other than a Subsidiary, engaged in the
provision or sale of telecommunications
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services, or in any other business that is related, ancillary or complementary
to the provision or sale of telecommunications services, as determined in good
faith by the Board of Directors (whose determination shall be conclusive if
evidenced by a Board Resolution); PROVIDED that prior to making any Investment
in such a Person, the Company's Board of Directors shall have determined that
such Investment fits the Company's strategic plan and is on terms that are fair
and reasonable to the Company.
"Permitted Liens" means:
(i) Liens for taxes, assessments, governmental charges or claims not yet
delinquent, or that in the aggregate are not material, or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made;
(ii) statutory and common law Liens of landlords, carriers,
warehousemen, mechanics, suppliers, materialmen or repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or that have been bonded or being contested in
good faith by appropriate 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 and other similar legislation or other
insurance-related obligations (including, without limitation, pledges or
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements);
(iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, licenses, obligations for utilities, statutory or
regulatory obligations, bankers' acceptances, letters of credit, surety and
appeal bonds, government or other contracts, completion guarantees,
performance and return-of-money bonds and other obligations of a similar
nature incurred in the ordinary course of business (exclusive of obligations
for the payment of borrowed money);
(v) easements, rights-of-way, municipal and zoning ordinances, utility
agreements, reservations, encroachments, restrictions 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, renewals and replacements thereof)
upon real or personal property or assets (including leases on an
indefeasible right-to-use basis); PROVIDED that (a) such Lien is created
solely for the purpose of securing Indebtedness Incurred, in accordance with
the "Limitation on Indebtedness" covenant described below, to finance or
refinance the cost (including the cost of design, development, acquisition,
construction, installation, improvement, transportation or integration) of
the item of property or assets subject thereto and the original such Lien is
created prior to, at the time of or within one year after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or assets, (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, accessions or proceeds
in respect of such item;
(vii) leases, subleases, licenses or sublicenses 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 (and
related rights) in favor of a contractor or developer, or arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
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(x) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xi) Liens (including extensions, renewals and replacements thereof) on
property or assets of, or on shares of Capital Stock or Indebtedness of, any
Person existing (in the case of the original such Lien) at the time such
Person becomes, or becomes a part of, any Restricted Subsidiary; PROVIDED
that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property, assets,
Capital Stock or Indebtedness so acquired (plus improvements, accessions or
proceeds (including dividends or distributions) in respect thereof);
(xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment, order,
decree or award against the Company or any Restricted Subsidiary that does
not give rise to an Event of Default;
(xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case,
securing Indebtedness or other obligations under Interest Rate Agreements
and Currency Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed solely to
protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities;
(xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business;
(xviii) Liens on or sales or transfers of receivables (including related
rights);
(xix) Liens that secure Indebtedness or other obligations with an
aggregate principal amount not in excess of $5 million at any time
outstanding;
(xx) Liens placed by any third party on property over which the Company
or any Restricted Subsidiary has easement or other rights or on any leased
property, or arising by reason of subordination or similar agreements
relating thereto; and Liens arising by reason of any condemnation or eminent
domain proceedings;
(xxi) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
(xxii) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint venture
or similar arrangement pursuant to any joint venture or similar agreement;
(xxiii) Liens (including extensions, renewals and replacements thereof)
on property or assets acquired by the Company or any Restricted Subsidiary;
provided that (a) such Liens were not created in connection with or in
anticipation of such acquisition, (b) such Liens do not secure Indebtedness
other than Indebtedness assumed in connection with such acquisition, and (c)
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 so acquired
(plus improvements, accessions or proceeds in respect thereof); and
(xxiv) Liens on cash set aside at the time of the Incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government
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securities prefund the payment of interest on such Indebtedness and are held
in an escrow account or similar arrangement to be applied for such purpose.
"Pledge Account" means an account established with the relevant Securities
Intermediary for the benefit of the applicable Trustee pursuant to the terms of
relevant Pledge Agreement for the deposit of the applicable Pledged Securities
to be purchased by the Company with the net proceeds from the sale of relevant
series of Notes.
"Pledge Agreements" means the U.S. Dollar Collateral Pledge and Security
Agreement, dated as of the Closing Date, made by the Company in favor of the
relevant Trustee with respect to the Dollar Notes and the Euro Collateral Pledge
and Security Agreement, dated as of the Closing Date, made by the Company in
favor of the relevant Trustee with respect to the Euro Notes, as each such
agreement may be amended, restated, supplemented or otherwise modified from time
to time.
"Pledged Securities" means the U.S. Government Securities to be purchased by
the Company and held in the relevant Pledge Account in accordance with the
Pledge Agreement related to the Dollar Notes and the European Government
Securities to be purchased by the Company and held in the relevant Pledge
Account in accordance with the Pledge Agreement related to the Euro Notes.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
"refinance" means refinance, refund, replace, renew, repay, modify, restate,
defer, substitute, supplement, reissue, resell or extend (including by way of
any exchange of Indebtedness, or pursuant to any defeasance or discharge
mechanism); and the terms "refinances," "refinanced" and "refinancing" as used
for any purpose in the Indentures shall have a correlative meaning.
"Released Indebtedness" means, with respect to any Asset Sale, (i)
Indebtedness of the Company or any Restricted Subsidiary which is assumed by the
purchaser or any affiliate thereof in connection with such Asset Sale; PROVIDED
that the Company or such Restricted Subsidiary receives written, unconditional,
valid and enforceable releases from each creditor, no later than the closing
date of such Asset Sale and (ii) Indebtedness of a Restricted Subsidiary that is
no longer a Restricted Subsidiary as a result of such Asset Sale; PROVIDED that
neither the Company nor any other Restricted Subsidiary thereafter Guarantees
such Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, and its successors.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated revenues of
the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company or
any Permanent Guarantor Incurred to finance the acquisition of a Person engaged
in a business that is related, ancillary or
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complementary to the business conducted by the Company or any of its Restricted
Subsidiaries, which Indebtedness by its terms, or by the terms of any agreement
or instrument pursuant to which such Indebtedness is Incurred, (i) is expressly
made subordinate in right of payment to the Notes and (ii) provides that no
payment of principal, premium or interest on, or any other payment with respect
to, such Indebtedness may be made prior to the payment in full of all of the
Company's obligations under the Notes; PROVIDED that such Indebtedness may
provide for and be repaid at any time from the proceeds of a capital
contribution or the sale of Capital Stock (other than Disqualified Stock) of the
Company after the Incurrence of such Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof;
(ii) bankers' acceptances, time deposit accounts, certificates of
deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any
foreign country recognized by the United States of America, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor;
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above or clause
(vi) below entered into with a bank meeting the qualifications described in
clause (ii) above;
(iv) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P;
(v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or Moody's; and
(vi) direct obligations of, or obligations fully and unconditionally
guaranteed by, (a) The Netherlands, the United Kingdom, France, Germany or
Switzerland, or (b) any other member of the European Economic Community and
rated at least "A" by S&P or Moody's.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such Indebtedness
is to be Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
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"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; PROVIDED that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than such
amount, such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that (i) no Default or Event of Default shall have occurred and be continuing at
the time of or after giving effect to such designation and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be Incurred
(and shall be deemed to have been Incurred) for all purposes of the relevant
Indenture. Any such designation by the Board of Directors shall be evidenced to
the relevant Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Government Securities" means direct obligations of, obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the option of the
issuer thereof.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
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COVENANTS
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes of either series
(including any New Notes of either series, but excluding any Additional Notes),
and other Indebtedness existing on the Closing Date); PROVIDED that the Company
or any Permanent Guarantor may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Leverage Ratio would be greater than zero and less
than 6:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal
amount not to exceed (after giving effect to any refinancing thereof) the
sum of (a) $100 million, less any amount of such Indebtedness permanently
repaid as provided under the "Limitation on Asset Sales" covenant described
below, plus (b) an amount equal to the lesser of (1) 80% of the consolidated
book value of the accounts receivable of the Company and its Restricted
Subsidiaries determined in accordance with GAAP (determined as of the end of
the most recently ended fiscal quarter for which reports have been filed
with the Commission or provided to the relevant Trustee) and (2) $100
million;
(ii) Indebtedness owed (A) to the Company evidenced by a promissory note
or (B) to any Restricted Subsidiary; PROVIDED that any event which results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of such Indebtedness (other than to the Company or
another Restricted Subsidiary) shall be deemed, in each case, to constitute
an Incurrence of such Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued to refinance then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vi),
(viii), (xi) or (xii) of this paragraph) and any refinancings thereof, in an
amount not to exceed the amount so refinanced (plus premiums, accrued
interest, fees and expenses); PROVIDED that Indebtedness the proceeds of
which are used to refinance the Notes in part or Indebtedness that is PARI
PASSU with, or expressly subordinated in right of payment to, the Notes or
any Notes Guarantee shall only be permitted under this clause (iii) if (A)
in case the Notes are refinanced in part or the Indebtedness to be
refinanced is PARI PASSU with the Notes or any Notes Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
PARI PASSU with, or expressly subordinate in right of payment to, the
remaining Notes or any Notes Guarantee, (B) in case the Indebtedness to be
refinanced is expressly subordinated in right of payment to the Notes or any
Notes Guarantee, 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 or any Notes Guarantee at least to the extent that the
Indebtedness to be refinanced is subordinated to the Notes or any Notes
Guarantee 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 and the Average Life of such
new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced; and PROVIDED FURTHER that in no event may
Indebtedness of the Company be refinanced by means of any Indebtedness of
any Restricted Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety, appeal or other
similar bonds provided in the ordinary course of business and (B) arising
from agreements providing for indemnification, adjustment of purchase price
or similar obligations, or from Guarantees or letters of credit, bankers'
acceptances, surety or performance bonds or other similar instruments
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
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connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness of the Company or any Permanent Guarantor, to the
extent the net proceeds thereof are promptly (A) used to purchase Notes
tendered in an Offer to Purchase made as a result of a Change in Control or
(B) deposited to defease the Notes as described below under "Defeasance";
(vi) Guarantees of the Notes and Guarantees of Indebtedness of the
Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuance of Guarantees by Restricted Subsidiaries" covenant described below;
and Guarantees of Indebtedness of any Restricted Subsidiary by any
Restricted Subsidiary provided such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the relevant Indenture
providing for a Guarantee of payment of the Notes by such Restricted
Subsidiary;
(vii) Indebtedness (including Guarantees and the German Network L/C)
Incurred to finance or refinance the cost (including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration) to acquire equipment, inventory or network
assets (including leases on an indefeasible right-to-use basis and multiple
investment units) (including acquisitions by way of Capitalized Lease and
acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment,
inventory or network assets so acquired) by the Company or a Restricted
Subsidiary;
(viii) Indebtedness of the Company or any Permanent Guarantor not to
exceed, at any one time outstanding (after giving effect to any refinancing
thereof), two times the sum of (A) the Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from the
issuance and sale of its Capital Stock (other than Disqualified Stock) to a
Person that is not a Subsidiary of the Company, to the extent (I) such
capital contribution or Net Cash Proceeds have not been used pursuant to
clause (C)(2) of the first paragraph or clause (iii), (iv), (vi) or (x) of
the second paragraph of the "Limitation on Restricted Payments" covenant
described below to make a Restricted Payment and (II) if such capital
contribution or Net Cash Proceeds are used to consummate a transaction
pursuant to which the Company Incurs Acquired Indebtedness, the amount of
such Net Cash Proceeds exceeds one-half of the amount of Acquired
Indebtedness so Incurred and (B) 80% of the fair market value of property
(other than cash and cash equivalents) received by the Company after the
Closing Date as a capital contribution or from the sale of its Capital Stock
(other than Disqualified Stock) to a Person that is not a Subsidiary of the
Company, to the extent (I) such capital contribution or sale of Capital
Stock has not been used pursuant to clause (iii), (iv) or (vii) of the
second paragraph of the "Limitation on Restricted Payments" covenant
described below to make a Restricted Payment and (II) if such capital
contribution or Capital Stock is used to consummate a transaction pursuant
to which the Company Incurs Acquired Indebtedness, 80% of the fair market
value of the property received exceeds one-half of the amount of Acquired
Indebtedness so Incurred PROVIDED that such Indebtedness does not mature
prior to the Stated Maturity of the Notes and has an Average Life longer
than the Notes;
(ix) Acquired Indebtedness;
(x) Strategic Subordinated Indebtedness;
(xi) Indebtedness in respect of bankers' acceptance and letters of
credit, all in the ordinary course of business, in an aggregate amount
outstanding at any time not to exceed $10 million; and
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(xii) subordinated Indebtedness of the Company or any Permanent
Guarantor (in addition to Indebtedness permitted under clauses (i) through
(xi) above) in an aggregate principal amount outstanding at any time (after
giving effect to any refinancing thereof) not to exceed $100 million.
(b) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in another currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred (or, in the case of
Indebtedness under a revolving credit facility, at the time of commitment),
PROVIDED that if such Indebtedness is Incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the
relevant currency exchange rate in effect on the date of such refinancing, such
Dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or obligations
with respect to letters of credit, bankers' acceptances or other similar
instruments supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included and (2) any Liens granted pursuant
to the equal and ratable provisions referred to in the "Limitation on Liens"
covenant described below shall not be treated as giving rise to Indebtedness.
For purposes of determining compliance with this "Limitation on Indebtedness"
covenant, (1) any other obligation of the obligor on such Indebtedness arising
under any Lien or letter of credit, bankers' acceptance or other similar
instrument or obligation supporting such Indebtedness shall be disregarded to
the extend that the same secures the principal amount of such Indebtedness and
(2) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described in the above clauses, the Company, in
its sole discretion, shall classify, and from time to time may reclassify, such
item of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses (but may allocate portions of such
Indebtedness between or among such clauses).
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) dividends or distributions on Capital Stock of a
Restricted Subsidiary held by minority interest holders on no more than a pro
rata basis, measured by value and based on all outstanding Capital Stock of such
Restricted Subsidiary) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person other than the Company or any Wholly Owned
Restricted Subsidiary or (B) a Restricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or
any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock
of the Company, (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other acquisition
or retirement for value, of Indebtedness of the Company that is expressly
subordinated in right of payment to the Notes or any Notes Guarantee or (iv)
make any Investment, other than a Permitted Investment, in any other Person
(such payments or any other actions described in clauses (i) through
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(iv) above being collectively "Restricted Payments") if, at the time of, and
after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant or
(C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100%
of the amount of such loss) accrued on a cumulative basis during the
period (taken as one accounting period) beginning on the first day of the
fiscal quarter beginning immediately following the Closing Date and
ending on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed with the Commission or
provided to the relevant Trustee pursuant to the "Commission Reports and
Reports to Holders" covenant PLUS
(2) the aggregate Net Cash Proceeds received by the Company after the
Closing Date as a capital contribution or from the issuance and sale
permitted by the relevant Indenture of its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Company,
including the proceeds of an issuance or sale permitted by the relevant
Indenture of Indebtedness of the Company for cash subsequent to the
Closing Date upon the conversion of such Indebtedness into Capital Stock
(other than Disqualified Stock) of the Company, or from the issuance to a
Person who is not a Subsidiary of the Company of any options, warrants or
other rights to acquire Capital Stock of the Company (in each case,
exclusive of any Disqualified Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required
to be redeemed, prior to the Stated Maturity of the Notes), in each case
except to the extent such Net Cash Proceeds are used to Incur
Indebtedness pursuant to clause (viii) of the second paragraph under the
"Limitation on Indebtedness" covenant PLUS
(3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments and Investments under clause (vi),
(viii) or (xii) of the second paragraph of this "Limitation on Restricted
Payments" covenant) in any Person resulting from payments of interest on
Indebtedness, dividends, distributions, repayments of loans or advances,
or other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale or
other disposition of any such Investment (except, in each case, to the
extent of any gain on such sale or other disposition that would be
included in the calculation of Adjusted Consolidated Net Income for
purposes of clause (C)(1) above), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investments"), not to exceed, in each case, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Person or Unrestricted Subsidiary.
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 or any Notes Guarantee, including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
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Indebtedness Incurred under clause (iii) of the second paragraph of the
"Limitation on Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of Capital Stock
of the Company or any Subsidiary of the Company (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a capital contribution or a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock);
(iv) the making of any principal payment on or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of a capital contribution or a
substantially concurrent offering of, shares of the Capital Stock (other
than Disqualified Stock) of the Company (or options, warrants or other
rights to acquire such Capital Stock);
(v) payments or distributions to dissenting shareholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the relevant
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company;
(vi) any Investment in any Person the primary business of which is
related, ancillary or complementary to the business of the Company and its
Restricted Subsidiaries on the date of such Investment; PROVIDED that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) $25 million, plus (b) the amount of Net Cash Proceeds
received by the Company after the Closing Date as a capital contribution or
from the sale of its Capital Stock (other than Disqualified Stock) to a
Person who is not a Subsidiary of the Company, except to the extent such Net
Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii) of
the second paragraph under the "Limitation on Indebtedness" covenant or to
make Restricted Payments pursuant to clause (C)(2) of the first paragraph,
or clauses (iii), (iv) or (x) of this paragraph, of this "Limitation on
Restricted Payments" covenant, plus (c) the net reduction in Investments
made pursuant to this clause (vi) resulting from distributions on or
repayments of such Investments or from the Net Cash Proceeds from the sale
or other disposition of any such Investment (except in each case to the
extent of any gain on such sale or other disposition that would be included
in the calculation of Adjusted Consolidated Net Income for purposes of
clause (C)(1) above) or from such Person becoming a Restricted Subsidiary
(valued in each case as provided in the definition of "Investments"),
PROVIDED that the net reduction in any Investment shall not exceed the
amount of such Investment;
(vii) Investments acquired as a capital contribution to or in exchange
for Capital Stock (other than Disqualified Stock) of the Company;
(viii) Investments in Permitted Joint Ventures not exceeding, at the
time of the Investment, the sum of (A) $10 million and (B) the net reduction
in Investments made pursuant to this clause (viii) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from the sale or other disposition of any such Investment (except
in each case to the extent of any gain on such sale or disposition that
would be included in the calculation of Adjusted Consolidated Net Income for
purposes of clause (C)(1) above) or from such Person becoming a Restricted
Subsidiary (valued in each case as provided in the definition of
"Investments"), PROVIDED that the net reduction in any Investment shall not
exceed the amount of such Investment;
(ix) repurchases of Warrants pursuant to a Repurchase Offer or within
ten days of their expiration in accordance with the terms of the Warrant
Agreements in effect on the Closing Date, any purchase of any fractional
shares of Common Stock (or other Capital Stock of the Company issuable upon
exercise of the Warrants) in connection with an exercise of the Warrants,
and any payments in connection with the anti-dilution provisions of the
Warrant Agreements;
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(x) the purchase, redemption, retirement or other acquisition for value
of shares of Capital Stock of the Company or options, warrants or other
rights to purchase such shares held by Management Investors upon death,
disability, retirement, termination of employment or pursuant to the terms
of any agreement under which such shares of Capital Stock or options,
warrants or other rights were issued; PROVIDED that the aggregate
consideration paid for such purchase, redemption, retirement or other
acquisition for value of such shares or options, warrants or other rights
after the Closing Date does not in the aggregate exceed (A) $5 million, plus
(B) the aggregate Net Cash Proceeds received by the Company after the
Closing Date as a capital contribution from, or from the issuance or sale
to, Management Investors of Capital Stock of the Company or any options,
warrants or other rights to acquire such Capital Stock, plus (C) the
proceeds of insurance policies used to effect any such purchase, redemption,
retirement or other acquisition;
(xi) any purchase, redemption, retirement or other acquisition of
Capital Stock deemed to occur upon the exercise of options, warrants or
other rights if such Capital Stock represents a portion of the exercise
price thereof; or
(xii) other Restricted Payments in an aggregate amount not to exceed $5
million plus the net reduction in Investments made pursuant to this clause
(xii) resulting from distributions on or repayments of such Investments or
from the Net Cash Proceeds from the sale or other disposition of any such
Investment (except in each case to the extent of any gain on such sale or
disposition that would be included in the calculation of Adjusted
Consolidated Net Income for purposes of clause (C)(1) above) or from such
Person becoming a Restricted Subsidiary (valued in each case as provided in
the definition of "Investments"), PROVIDED that the net reduction in any
Investment shall not exceed the amount of such Investment;
PROVIDED that, except in the case of clauses (i), (iii) and (xi), no Default or
Event of Default shall have occurred and be continuing or occur as a consequence
of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or
(iv) thereof, an Investment referred to in clause (vii) thereof and a purchase,
redemption, retirement or other acquisition of Capital Stock referred to in
clause (xi) thereof), and the Net Cash Proceeds from any capital contribution or
any issuance of Capital Stock referred to in clauses (iii), (iv) and (vi)
thereof, shall be included in calculating whether the conditions of clause (C)
of the first paragraph of this "Limitation on Restricted Payments" covenant have
been met with respect to any subsequent Restricted Payments.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to
the Company or any other Restricted Subsidiary, (iii) make loans or advances to
the Company or any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date, including under the Indentures or any
other agreements or instruments in effect on the Closing Date, and any
refinancings of such agreements or instruments; PROVIDED that the
encumbrances and restrictions in any such refinancings 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 refinanced;
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(ii) existing under or by reason of applicable law or any requirement of
any applicable governmental regulatory authority;
(iii) existing with respect to any Person, or any property or assets,
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 (A) in the case of an
acquisition of such Person, to any other Person or (B) in the case of an
acquisition of such property or assets, any other property or assets;
(iv) in the case of clause (iv) (and, solely with respect to clauses
(A), (B) and (D) of this clause (iv), clause (i)) 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, license, conveyance or contract or similar property
or asset, (B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the
relevant Indenture, (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 (D) arising under the terms of Indebtedness
Incurred under clause (vii) of the second paragraph of the "Limitation on
Indebtedness" covenant that restrict the transfer of the property or assets
acquired with such Indebtedness;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary;
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued, or any agreement relating to
the sale, disposition or financing of receivables, if (A) either (1) the
encumbrance or restriction applies only in the event of a payment default or
a default with respect to a financial covenant contained in the terms of
such Indebtedness or agreement or (2) the Company in good faith determines
(as set forth in a Board Resolution) that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes and (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the
Notes than is customary in comparable financings (as determined by the
Company in good faith);
(vii) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
or
(viii) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted under the "Limitation on Liens" covenant 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.
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LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except:
(i) to the Company or a Wholly Owned Restricted Subsidiary;
(ii) issuances of director's qualifying shares or issuances or sales to
foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and
any Investment in such Person remaining after giving effect to such issuance
or sale would have been permitted to be made under the "Limitation on
Restricted Payments" covenant if made on the date of such issuance or sale;
or
(iv) issuances or sales of Common Stock of a Restricted Subsidiary,
provided that the Company or such Restricted Subsidiary applies the Net Cash
Proceeds, if any, of any such sale in accordance with clause (A) or (B) of
the "Limitation on Asset Sales" covenant described below.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company or any Subsidiary
Guarantor which is PARI PASSU with or expressly subordinate in right of payment
to the Notes or any Notes Guarantee ("Guaranteed Indebtedness"), unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the relevant Indenture providing for a Guarantee (a "Subsidiary
Guarantee") of payment of the Notes by such Restricted Subsidiary and (ii) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee, until payment in full of the outstanding principal amount
of such Notes and any premium or accrued and unpaid interest thereon then due
and owing; PROVIDED that this paragraph shall not be applicable to any Guarantee
of any Restricted Subsidiary (a) that existed at the time such Person became a
Restricted Subsidiary and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or (b) of
Indebtedness Incurred pursuant to clause (i) of the second paragraph of the
"Limitation on Indebtedness" covenant. If the Guaranteed Indebtedness is (A)
PARI PASSU with the Notes, then the Guarantee of such Guaranteed Indebtedness
shall be PARI PASSU with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
(including by way of merger or consolidation), to any Person not an Affiliate of
the Company, of all of the Company's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange, transfer or other transaction is not prohibited by the
relevant Indenture), (ii) the legal or covenant defeasance of the Notes or
satisfaction and discharge of the relevant Indenture, subject to customary
contingent reinstatement provisions, (iii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee or (iv)
upon the merger or consolidation of such Subsidiary Guarantor with and into the
Company or another Subsidiary Guarantor that is the surviving Person in such
merger or consolidation.
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LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (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 with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms that taken as a whole are no less favorable to the Company or
such Restricted Subsidiary than could be obtained, at the time of such
transaction or, if such transaction is pursuant to a written agreement, at the
time of the execution of the agreement providing therefor, in a comparable
arm's-length transaction with a Person that is not such a holder or an
Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the disinterested members
of the Board of Directors or (B) for which the Company or a Restricted
Subsidiary delivers to the relevant Trustee a written opinion of a
nationally recognized investment banking or appraisal firm stating that the
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view, or is upon terms that taken as a whole are no less
favorable to the Company or such Restricted Subsidiary than could be
obtained in a comparable arm's-length transaction;
(ii) any transaction solely between or among the Company and any of its
Wholly Owned Restricted Subsidiaries or solely between or among Wholly Owned
Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes;
(v) any Restricted Payments (or a transaction excluded from the
definition of the term "Restricted Payments") not prohibited by the
"Limitation on Restricted Payments" covenant;
(vi) transactions consisting of or pursuant to employment or benefit
agreements, plans, programs or arrangements for or with, or indemnification
or contribution obligations to, employees, officers or directors in the
ordinary course of business;
(vii) the entering into of the Securities Purchase and Cancellation
Agreement, the 1999 Share Option Plan, the Securities Purchase Agreement,
the Registration Rights Agreement and the Securityholders' Agreement, as
described in the Offering Memorandum relating to the Original Offering, and
performance of the obligations and the transactions contemplated thereby; or
(viii) issuances or sales of Capital Stock (other than Disqualified
Stock) of the Company or options, warrants or other rights to acquire such
Capital Stock.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (ii) through
(viii) of this paragraph, the aggregate amount of which exceeds $2 million in
value, must be approved or determined to be fair in the manner provided for in
clause (i)(A) or (B) above.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character (including, without limitation, licenses), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Notes and all other amounts due under
the relevant Indenture to be directly
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secured equally and ratably with (or, if the obligation or liability to be
secured by such Lien is expressly subordinated in right of payment to the Notes,
prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or Capital Stock
of the Company or its Restricted Subsidiaries created in favor of the
Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such
other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is permitted to be Incurred under
clause (iii) of the second paragraph of the "Limitation on Indebtedness"
covenant to refinance secured Indebtedness; PROVIDED that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets securing the Indebtedness being
refinanced;
(v) Liens on the Capital Stock of, or any property or assets of, a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
(or obligations in respect thereof) permitted under the "Limitation on
Indebtedness" covenant; or
(vi) Permitted Liens.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties more than one
year after acquiring such assets or properties and then or thereafter leases
such assets or properties or any part thereof or any other assets or properties
which the Company or such Restricted Subsidiary, as the case may be, intends to
use for substantially the same purpose or purposes as the assets or properties
sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the second paragraph of the "Limitation on
Asset Sales" covenant described below.
LIMITATION ON ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary (including any Released Indebtedness and including
by way of relief from or by any other Person assuming responsibilities for any
liabilities other than Indebtedness ("Released Liabilities")) is at least equal
to the fair market value of the assets sold or disposed of; PROVIDED that this
clause (i) shall not apply to any sale, transfer or other disposition arising
from foreclosure, condemnation or similar action with respect to any assets and
(ii) at least 75% of the consideration received (including any Released
Indebtedness and Released Liabilities) consists of cash, Temporary Cash
Investments or Released Indebtedness and Released Liabilities; PROVIDED,
HOWEVER, that this clause (ii) shall not apply to long-term assignments in
capacity in a telecommunications network or other transfers of indefeasible
rights of use, multiple investment units or dark fibers.
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In the event and to the extent that the Net Cash Proceeds received by the
Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission or provided to the relevant Trustee pursuant to the
"Commission Reports and Reports to Holders" covenant), then the Company shall or
shall cause the relevant Restricted Subsidiary to:
(i) within 12 months after the date Net Cash Proceeds so received exceed
10% of Adjusted Consolidated Net Tangible Assets
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company or any
Restricted Subsidiary providing a Notes Guarantee, or Indebtedness of any
other Restricted Subsidiary, in each case owing to a Person other than
the Company or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant to
clause (A), (or enter into a definitive agreement committing to so invest
within 12 months after the date of such agreement) in property or assets
(other than current assets) of a nature or type or that are used in a
business (or in a company having property and assets of a nature or type,
or engaged in a business) similar or related to the nature or type of the
property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment (as
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) and
(ii) apply (no later than the end of the 12-month period referred to in
clause (i)) such excess Net Cash Proceeds (to the extent not applied or
committed to be applied pursuant to clause (i)) as provided in the following
paragraph of this "Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied or committed to be applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders of the Notes (and if and to the
extent required by the terms of any Indebtedness that is PARI PASSU with the
Notes or any Notes Guarantee ("Pari Passu Indebtedness"), purchase, redeem or
repay such Pari Passu Indebtedness) on a PRO RATA basis an aggregate principal
amount of Notes (and an amount of Pari Passu Indebtedness) equal to the Excess
Proceeds on such date, at a purchase price equal to 100% of the principal amount
of the Notes (and the required amount of Pari Passu Indebtedness) plus accrued
interest (if any) to the Payment Date. If the aggregate principal amount of the
Notes and aggregate principal amount of such Pari Passu Indebtedness validly
tendered and not withdrawn (or otherwise subject to purchase, redemption or
repayment) exceeds such Excess Proceeds, such Excess Proceeds will be
apportioned between the Notes and such Pari Passu Indebtedness, with the portion
of such Excess Proceeds payable in respect of the Notes to equal the lesser of
(x) the Excess Proceeds amount multiplied by a fraction, the numerator of which
is the aggregate principal amount of the Notes and the denominator of which is
the sum of the aggregate principal amount of the Notes and the aggregate
principal amount of such Pari Passu Indebtedness and (y) the principal amount of
Notes validly tendered and not withdrawn.
Any Excess Proceeds remaining after such Offer to Purchase is completed may
be applied to fund any general corporate purpose not prohibited by the relevant
Indenture.
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For purposes of the first paragraph of this "Limitation on Asset Sales"
covenant, (1) securities received by the Company or any Restricted Subsidiary in
any Asset Sale that are converted by the Company or such Restricted Subsidiary
into cash within 12 months after such Asset Sale and (2) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary, shall be
deemed to be cash.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, PLUS accrued and
unpaid interest (if any) to the Payment Date.
The terms of other Indebtedness of the Company and its Subsidiaries may
provide that the occurrence of a Change of Control constitutes a default
thereunder, prohibit certain events that would constitute a Change of Control,
or require such Indebtedness to be repurchased or repaid upon a Change of
Control. Moreover, the exercise by the Holders of their right to require the
Company to repurchase the Notes could cause a default under the terms of such
other Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. The above covenant requiring
the Company to repurchase the Notes will, unless consents are obtained, require
the Company to repay all indebtedness then outstanding which by its terms would
prohibit such Note repurchase, either prior to or concurrently with such Note
repurchase. The Company's ability to pay cash to the Holders upon a Change of
Control may be limited by the Company's then existing financial resources. There
can be no assurance that the Company will have sufficient funds available at the
time of any Change of Control to make any debt payment (including repurchases of
Notes) required by the foregoing covenant or under the terms of any other
Indebtedness.
The Change of Control purchase feature is a result of negotiations between
the Company and the Placement Agents. The Company has no present plans to engage
in a transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to the limitations
contained in the Indentures, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or recapitalizations,
that would not constitute a Change of Control under the Indentures, but that
could increase the amount of Indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings.
COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times from and after the earlier of (i) the date of the commencement
of an Exchange Offer or the effectiveness of a Shelf Registration Statement (the
"Registration") and (ii) the date that is six months after the Closing Date, in
either case, whether or not the Company is then required to file reports with
the Commission, the Company shall file with the Commission to the extent then
permitted by the Securities Exchange Act of 1934, as amended, and by the
Commission, all such information on an appropriate available form as it would be
required to file with the Commission by Sections 13(a) or 15(d) under the
Securities Exchange Act of 1934 as if it were a U.S. company and subject thereto
including information required by annual, quarterly and current reports whether
or not required to be so filed. The Company shall supply the relevant Trustee
and each Holder or shall supply to the relevant Trustee for forwarding to all
Holders, without cost to such Holders, copies of such reports and other
information. In addition, at all times prior to the earlier of the date of the
Registration and the date that is six months after the Closing Date, the Company
shall, at its cost, supply the relevant Trustee and each Holder or shall supply
to the relevant Trustee for forwarding to all Holders, without cost to such
Holders, quarterly and annual reports substantially equivalent to those
described above or which would otherwise be required by the Exchange Act
commencing with the report for the fiscal quarter ending immediately after the
Closing Date; provided that the Company may deliver copies of the registration
statement (including pre-effective amendments thereto) with respect to the
Exchange Offer to the extent it contains the information that would have been
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required in such reports. In addition, at all times prior to the Registration,
upon the request of any Holder or any prospective purchaser of the Notes
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the relevant
Indenture:
(a) default in the payment of principal of (or premium, if any, on) any
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise;
(b) default in the payment of interest on any Note when the same becomes
due and payable, and such default continues for a period of 30 days;
provided that a failure to make any of the first five scheduled interest
payments on the relevant series of Notes on the applicable Interest Payment
Date will constitute an Event of Default with no grace or cure period;
(c) default in the performance or breach of the provisions of such
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to make or
consummate an Offer to Purchase when required in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change of
Control" covenant;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in such Indenture or under the relevant
Notes (other than a default specified in clause (a), (b) or (c) above) or
the relevant Pledge Agreement and such default or breach continues for a
period of 30 consecutive days after written notice by the relevant Trustee
or the Holders of 25% or more in aggregate principal amount of the relevant
series of Notes;
(e) there occurs with respect to any issue or issues of Indebtedness of
the Company or any Significant Subsidiary having an outstanding principal
amount of $10 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to
declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration
has not been rescinded or annulled within 30 days of such acceleration
and/or (II) the failure to make a principal payment at the final (but not
any interim) fixed maturity and such defaulted payment shall not have been
made, waived or extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 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 $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order
for (A) relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Company or any Significant Subsidiary or for all or substantially all
of the property and assets of the Company or any Significant Subsidiary or
(C) the winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 30 consecutive days; or
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(h) the Company or any Significant Subsidiary (A) commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets of the
Company or any Significant Subsidiary or (C) effects any general assignment
for the benefit of creditors; or
(i) the relevant Pledge Agreement shall cease to be in full force and
effect or enforceable in accordance with its terms, other than in accordance
with its terms.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the relevant Indenture, the relevant Trustee or the Holders of
at least 25% in aggregate principal amount of the Dollar Notes or the Euro
Notes, as the case may be, then outstanding, by written notice to the Company
(and to the relevant Trustee if such notice is given by the Holders), may, and
such Trustee at the request of such Holders shall, declare the principal of, and
premium, if any, and accrued and unpaid interest on the relevant Notes to be
immediately due and payable. Upon a declaration of acceleration, such principal
of, and premium, if any, and accrued and unpaid interest shall be immediately
due and payable. In the event of a declaration of acceleration because an Event
of Default set forth in clause (e) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default triggering such Event of Default pursuant to clause (e) shall
be remedied or cured by the Company or the relevant Significant Subsidiary or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (g) or (h) above occurs with respect to the Company, the
principal of, and premium, if any, and accrued and unpaid interest on the Notes
then outstanding shall IPSO FACTO become and be immediately due and payable
without any declaration or other act on the part of either Trustee or any
Holder. The Holders of at least a majority in principal amount of the
outstanding Notes of the relevant series, by written notice to the Company and
to the relevant Trustee, may waive all past defaults and rescind and annul a
declaration of acceleration and its consequences if (i) all existing Events of
Default, other than the nonpayment of the principal of, premium, if any, and
interest on the relevant Notes that have become due solely by such declaration
of acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. For
information as to the waiver of defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Dollar Notes or Euro Notes, as the case may be, may direct the time,
method and place of conducting any proceeding for any remedy available to the
relevant Trustee or exercising any trust or power conferred on such Trustee.
However, such Trustee may refuse to follow any direction that conflicts with law
or the relevant Indenture, that may involve such Trustee in personal liability,
or that such Trustee determines in good faith may be unduly prejudicial to the
rights of Holders of the Dollar Notes or Euro Notes, as the case may be, 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
the relevant Notes. A Holder may not pursue any remedy with respect to the
relevant Indenture or the relevant Notes unless: (i) the Holder gives the
relevant Trustee written notice of a continuing Event of Default; (ii) the
Holders of at least 25% in aggregate principal amount of outstanding Dollar
Notes or Euro Notes, as the case may be, make a written request to such Trustee
to pursue the remedy; (iii) such Holder or Holders offer such Trustee indemnity
satisfactory to such Trustee against any costs, liability or expense; (iv) such
Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and (v) during such 60-day period, the
Holders of a majority in aggregate principal amount of the outstanding Dollar
Notes or Euro Notes, as the case may be, do not give such Trustee a direction
that is inconsistent with the request. However, such limitations do not apply to
the right of any Holder of a Note to receive payment of the principal of, and
premium, if any, or interest on, such Note or to bring suit for the enforcement
of any such
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payment, on or after the due date expressed in the Notes, which right shall not
be impaired or affected without the consent of the Holder.
Each Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under such Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company is also obligated to notify the relevant Trustee of any default or
defaults in the performance of any covenants or agreements under the relevant
Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into the Company unless:
(i) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or that acquired or leased such property and assets of the Company
shall be a corporation organized and validly existing under the laws of the
Kingdom of the Netherlands (including the Netherlands Antilles), Bermuda,
Canada, Switzerland, any member state of the European Union or the United
States of America or any jurisdiction thereof and shall expressly assume, by
a supplemental indenture, executed and delivered to the relevant Trustee,
all of the obligations of the Company on the relevant series of Notes and
under the relevant Indenture;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro forma
basis, the Company or any Person becoming the successor obligor of the Notes
shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
PROVIDED that this clause (iii) shall only apply to a sale of less than all
of the assets of the Company;
(iv) immediately after giving effect to such transaction on a pro forma
basis the Company, or any Person becoming the successor obligor on such
Notes, as the case may be, could Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant; PROVIDED
that this clause (iv) shall not apply to a consolidation, merger or sale of
all (but not less than all) of the assets of the Company if all Liens and
Indebtedness of the Company or any Person becoming the successor obligor of
the Notes, as the case may be, and its Restricted Subsidiaries outstanding
immediately after such transaction would, if Incurred at such time, have
been permitted to be Incurred (and all such Liens and Indebtedness, other
than Liens and Indebtedness of the Company and its Restricted Subsidiaries
outstanding immediately prior to the transaction, shall be deemed to have
been Incurred) for all purposes of the relevant Indenture; and
(v) the Company delivers to the relevant Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv) above) and Opinion of Counsel, in each case to
the effect that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for in this paragraph relating to such transaction have been
complied with;
PROVIDED, HOWEVER, that (x) in giving any such opinion such counsel may rely on
an Officers' Certificate as to compliance with the foregoing clauses (ii), (iii)
and (iv) and as to any matters of fact and (y) clauses (iii) and (iv) above will
not apply if, in the good faith determination of the Board of Directors of the
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Company, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the jurisdiction of
organization of the Company, and such transaction does not have as one of its
purposes the evasion of the foregoing limitations.
DEFEASANCE
DEFEASANCE AND DISCHARGE
Each Indenture provides that the Company will be deemed to have paid and
will be discharged from any and all obligations in respect of the Notes issued
thereunder on the 123rd day after the deposit referred to below, and the
provisions of the relevant Indenture will no longer be in effect with respect to
such Notes (except for, among other matters, certain obligations to register the
transfer or exchange of such Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things:
(A) the Company has deposited with the relevant Trustee, in trust, money
and/or U.S. Government Obligations, in the case of Dollar Notes, or European
Government Obligations, in the case of Euro Notes, that through the payment
of interest and principal in respect thereof in accordance with their terms
will provide money in an amount sufficient to pay the principal of, premium,
if any, and accrued interest on the relevant Notes (i) on the Stated
Maturity of such payments in accordance with the terms of the relevant
Indenture and such Notes or (ii) on any earlier Redemption Date pursuant to
the terms of the relevant Indenture and such Notes; PROVIDED that the
Company has provided the relevant Trustee with irrevocable instructions to
redeem all of the outstanding Notes of such series on such Redemption Date,
(B) the Company has delivered to the relevant Trustee (i) either (x) an
Opinion of Counsel to the effect that Holders will not recognize income,
gain or loss for federal income tax purposes as a result of the Company's
exercise of its option under this "Defeasance" provision and will be subject
to federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the
same effect unless there has been a change in applicable federal income tax
law after the Closing Date such that a ruling is no longer required or (y) a
ruling directed to the relevant Trustee received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel and (ii)
an Opinion of Counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and after the
passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending on
the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound and
(D) if at such time the relevant Notes are listed on a national
securities exchange, the Company has delivered to the relevant Trustee an
Opinion of Counsel to the effect that the relevant Notes will not be
delisted as a result of such deposit, defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
Each Indenture further provides that the provisions of such Indenture will
no longer be in effect with respect to clauses (iii) and (iv) under
"Consolidation, Merger and Sale of Assets" and all the covenants
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described herein under "Covenants" and "Repurchase of Notes upon a Change of
Control," clause (c) under "Events of Default" with respect to such clauses
(iii) and (iv) under "Consolidation, Merger and Sale of Assets" and with respect
to the "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of
Control" covenants, clause (d) under "Events of Default" with respect to such
other covenants and clauses (e) and (f) under "Events of Default" shall be
deemed not to be Events of Default upon, among other things, the deposit with
the relevant Trustee, in trust, of money and/or U.S. Government Obligations in
the case of Dollar Notes, and European Government Obligations, in the case of
Euro Notes, that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
relevant Notes (i) on the Stated Maturity of such payments in accordance with
the terms of the relevant Indenture and the Notes or (ii) on any earlier
Redemption Date pursuant to the terms of the relevant Indenture and such Notes,
PROVIDED that the Company has provided the relevant Trustee with irrevocable
instructions to redeem all of the outstanding Notes of such series on such
Redemption Date, the satisfaction of the provisions described in clauses
(B)(ii), (C) and (D) of the preceding paragraph and the delivery by the Company
to the relevant Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
In the event the Company exercises its option to omit compliance with
certain covenants and provisions of either Indenture with respect to the
relevant series of Notes as described in the immediately preceding paragraph and
such Notes are declared due and payable because of the occurrence of an Event of
Default that remains applicable, the amount of money and/or U.S. Government
Obligations, in the case of Dollar Notes, and European Government Obligations,
in the case of Euro Notes, on deposit with the relevant Trustee will be
sufficient to pay amounts due on such Notes at the time of their Stated Maturity
or earlier Redemption Date but may not be sufficient to pay amounts due on such
Notes at the time of the acceleration resulting from such Event of Default.
However, the Company will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of either Indenture or either Pledge Agreement
may be made by the Company and the relevant Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Dollar Notes or Euro Notes, as the case may be; PROVIDED, HOWEVER,
that no such modification or amendment may, without the consent of each Holder
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, (iii) change the place or currency of
payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the applicable Indenture, (vi) waive a default in the payment of principal of,
or premium, if any, or interest on, the Notes, (vii) release any collateral
subject to the relevant Pledge Agreement (other than as contemplated thereby),
or (viii) reduce the percentage or aggregate principal amount of outstanding
Notes the consent of whose Holders is necessary for waiver of compliance with
certain provisions of the applicable Indenture or for waiver of certain
defaults.
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ADDITIONAL AMOUNTS
All payments made by the Company under or with respect to the Notes will be
made free and clear of and without withholding or deduction for or on account of
any present or future tax, duty, levy, impost, assessment, or other governmental
charge (including penalties, interest and other liabilities related thereto)
(collectively, "Taxes") imposed or levied by or on behalf of Luxembourg or any
other jurisdiction in which the Company is organized or is a resident for tax
purposes or by any government authority or political subdivision or territory or
possession or agency therein or thereof having the power to tax (each, a "Taxing
Authority"), unless the Company is required to withhold or deduct Taxes by law
or by the interpretation or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes imposed by a Taxing Authority within Luxembourg or within any
other jurisdiction in which the Company is organized or is a resident for tax
purposes, from any payment made under or with respect to the Notes, the Company
will pay such additional amounts ("Additional Amounts") as may be necessary so
that the net amount received by each Holder of Notes after such withholding or
deduction will not be less than the amount the Holder and beneficial owner would
have received if such Taxes had not been withheld or deducted; PROVIDED that no
Additional Amounts will be payable with respect to a payment made to a Holder of
Notes or to a third party on behalf of a Holder, with respect to (a) any Taxes
that would not have been so imposed but for the existence of any present or
former connection between such Holder and the jurisdiction imposing such tax
(other than the mere receipt of such payment or the ownership or holding outside
of Luxembourg of such Note); (b) any estate, inheritance, gift, sales, excise,
transfer, personal property tax or similar tax, assessment or governmental
charge; (c) any Taxes payable otherwise than by deduction or withholding from
payments of principal of, premium, if any, or interest on such Note; or (d)
Taxes that would not have been imposed but for the failure of the Holder or
beneficial owner of a Note to comply, upon written request therefor furnished by
the Company to the Trustee, with any certification, identification, information,
or other documentation requirement under law, regulation, administrative
practice or an applicable treaty that is a precondition to exemption from, or
reduction in the rate of the imposition, deduction or withholding of Taxes; nor
will Additional Amounts be paid:
(i) if the payment under or with respect to the Notes could have been
made by another paying agent without such deduction or withholding,
(ii) if the payment under or with respect to the Notes could have been
made without such deduction or withholding if the beneficiary of the payment
had presented the Note for payment within 30 days after (A) the date on
which such payment or such Note became due and payable or (B) the date on
which payment thereof is duly provided for, whichever is later (except to
the extent that the holder would have been entitled to Additional Amounts
had the Note been presented on the last day of such 30 day period),
(iii) with respect to any payment under or with respect to the Notes to
any holder who is a fiduciary or partnership or any person other than the
sole beneficial owner of such payment, to the extent that a beneficiary or
settlor with respect to such fiduciary, a member of such a partnership or
the beneficial owner of such payment would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the actual holder of such Note.
The Company will also (i) make such withholding or deduction and (ii) remit the
full amount deducted or withheld to the relevant authority in accordance with
applicable law. The Company will use its reasonable efforts to obtain certified
copies of tax receipts evidencing the payment of any Taxes so deducted or
withheld from each Taxing Authority imposing such Taxes. The Company will supply
to the relevant Trustee for forwarding to all Holders, without cost to such
Holders, within 60 days after the date the payment of any Taxes so deducted or
withheld is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Company or if, notwithstanding the Company's
efforts to obtain such receipts, the same are not obtainable, other evidence of
such payments by the Company.
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At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company will be obligated to pay
Additional Amounts with respect to such payment, the Company will deliver to the
relevant Trustee an Officers' Certificate stating the fact that such Additional
Amounts will be payable, the amounts so payable and will set forth such other
information as is necessary to enable such Trustee to pay such Additional
Amounts to holders of Notes on the payment date.
The foregoing provisions shall survive any termination or the discharge of
the relevant Indenture and shall apply MUTATIS MUTANDIS to any jurisdiction in
which any successor Person to the Company is organized or is engaged in business
for tax purposes or any political subdivision or taxing authority or agency
thereof or therein.
In addition, the Company will pay any stamp, issue, registration,
documentary or other similar taxes and duties, including interest and penalties,
payable in Luxembourg or any political subdivision thereof or therein in respect
of the creation, issue and offering of the Notes.
Whenever in the relevant Indenture, the Notes or this Prospectus there is
mentioned in any context, the payment of amounts based upon principal of,
premium, if any, or interest or of any other amount payable under or with
respect to any of the Notes, such mention shall be deemed to include mention of
the payment of Additional Amounts to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.
GOVERNING LAW AND CONSENT TO JURISDICTION
The Notes and the Indentures are governed by the laws of the State of New
York. The Company has appointed CT Corporation System, 1633 Broadway, New York,
NY 10019 as its agent for service of process in any suit, action or proceeding
with respect to the relevant Indenture or the Notes and for actions brought
under federal or state securities laws, in each case brought in any federal or
state court located in the City of New York and will agree to submit to the
jurisdiction of such courts.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
Each Indenture provides that no recourse for the payment of the principal
of, or premium, if any, or interest on, any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in such Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
Each Indenture provides that, except during the continuance of a Default,
the relevant Trustee will not be liable, except for the performance of such
duties as are specifically set forth in such Indenture. If an Event of Default
has occurred and is continuing, the relevant Trustee will use the same degree of
care and skill in its exercise of the rights and powers vested in it under such
Indenture as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
Each Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the relevant Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. Such Trustee is
permitted to engage in other transactions; PROVIDED, HOWEVER, that if it
acquires any conflicting interest, it must eliminate such conflict or resign.
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TAXATION
As used herein, the term "Company" refers to Carrier1 International,
excluding its subsidiaries.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal income tax
considerations relevant to the acquisition, ownership and disposition of the
Notes. The discussion is based upon provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), its legislative history, judicial authority,
current administrative rulings and practice, and existing and proposed Treasury
Regulations, including regulations concerning the treatment of debt instruments
issued with original issue discount (the "OID Regulations"), all as in effect
and existing on the date hereof. Legislative, judicial or administrative changes
or interpretations may be forthcoming that could alter or modify the conclusions
set forth below, possibly on a retroactive basis. This discussion assumes that
any Notes are or will be held as capital assets (as defined in Section 1221 of
the Code) by the holders thereof. Except as otherwise described herein, this
discussion applies only to a person that is an initial holder who purchased
Units pursuant to the Original Offering at the initial offering price and that
is (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States, any
State thereof or the District of Columbia, (iii) an estate the income of which
is subject to U.S. federal income taxation regardless of source or (iv) a trust
if a court within the United States is able to exercise primary supervision over
the administration of such trust and one or more U.S. persons has the authority
to control all substantial decisions of such trust (a "U.S. Holder"). Non-U.S.
Holders are advised to consult their own tax advisors regarding the tax
considerations incident to an investment in the Notes. In addition, this
discussion does not purport to deal with all aspects of U.S. federal income
taxation that might be relevant to other particular holders in light of their
personal investment circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of holders that may be subject
to special rules under the U.S. federal income tax laws, such as persons owning
(or treated as owning) 10% or more of the total combined voting power of the
Company, financial institutions, insurance companies, dealers in securities or
foreign currency, tax-exempt organizations, foreign corporations or nonresident
alien individuals, or persons that hold Notes that are a hedge against, or that
are hedged against, currency risk or that are part of a straddle or conversion
transaction, or persons whose functional currency is not the U.S. dollar.
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF
SUCH HOLDER'S PERSONAL TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF NOTES.
EXCHANGE OFFER. The exchange of an Old Note by a U.S. Holder for a New Note
will not constitute a taxable exchange of the Note, and thus a U.S. Holder will
not recognize taxable gain or loss upon receipt of a New Note, a U.S. Holder's
holding period for a New Note will include the holding period for the Old Note
so exchanged and such U.S. Holder's adjusted tax basis in a New Note will be the
same as such U.S. Holder's adjusted tax basis in the Old Note so exchanged.
ALLOCATION OF ISSUE PRICE BETWEEN NOTES AND WARRANTS
The Old Notes were issued together with warrants and were treated as part of
an "investment unit" for U.S. Federal income tax purposes. Accordingly, the
total issue price of each Unit was allocated between its components (i.e., Notes
and warrants) on the basis of the fair market value of each such component as of
the issue date. The amounts so allocated were a U.S. Holder's initial tax basis
in his warrants and Notes, respectively, and the amount so allocated to the
Notes was the issue price of the Notes. The issue price of
136
<PAGE>
the Dollar Units for U.S. federal income tax purposes was the price at which a
substantial amount of the Dollar Units were sold to the public (excluding sales
to dealers, underwriters, brokers and similar persons). The issue price of the
Euro Units for U.S. federal income tax purposes was determined under the same
principle. The Company intends to take the position that $9.02 of the $1,000
issue price of each Dollar Unit should be allocated to each associated warrant
and the remainder should be allocated to each Dollar Note. The Company also
intends to take the position that [Euro]9.02 of the [Euro]1,000 issue price of
each Euro Unit should be allocated to each associated warrant and the remainder
should be allocated to each Euro Note. On the basis of this allocation and the
Company's best judgment, the amount of original issue discount ("OID") will fall
within the DE MINIMIS exception for OID under the Code and will be treated as
zero. Each Holder will be bound by such allocation for U.S. federal income tax
purposes unless such Holder disclosed on a statement attached to its tax return
for the taxable year that includes the acquisition date of such Unit that its
allocation differs from that of the Company. No assurance can be given that the
Internal Revenue Service (the "IRS") will accept the Company's allocation. If
the Company's allocation were successfully challenged by the IRS, the issue
price, the amount of original issue discount accrued on the Notes and gain or
loss on the sale or disposition of a Note or warrant would be different from
that resulting under the allocation determined by the Company.
NOTES
TAXATION OF STATED INTEREST ON NOTES. Stated interest on a Note will be
includible in the income of a U.S. Holder in accordance with such U.S. Holder's
regular method of tax accounting. In the case of the Euro Notes, a cash method
U.S. Holder will translate stated interest into U.S. dollars at the spot
exchange rate in effect on the date such interest payment is received. In the
case of an accrual method U.S. Holder of Euro Notes, the amount of any interest
income accrued during any accrual period will generally be determined by
translating such accruals into U.S. dollars at the average exchange rate
applicable to the accrual period (or, with respect to an accrual period that
spans two taxable years, at the average exchange rate for the partial period
within the taxable year). Such a U.S. Holder will additionally realize exchange
gain or loss with respect to any interest income accrued on the date that
payment in respect of such interest income is received (or on the date the Note
is disposed of) in an amount equal to the difference between (x) the amount
determined by converting the amount of the payment received into U.S. dollars at
the spot exchange rate in effect on the date such payment is received and (y)
the amount of interest income accrued in respect of such payment according to
the rule set forth in the prior sentence. Any such exchange gain or loss will
generally be treated as ordinary income or loss. Notwithstanding the rules
described above, an accrual method U.S. Holder may alternatively make an
election to apply a "spot accrual convention" that effectively allows such U.S.
Holder to translate accrued interest into U.S. dollars at a single spot exchange
rate, as set forth in Treasury Regulations Section1.988-2(b)(2)(iii)(B). The
above election will apply to all other debt obligations held by the U.S. Holder
and may not be changed without the consent of the IRS. The amount of interest
income earned by a U.S. Holder as set forth in this paragraph will generally be
treated as "passive income" or, in the case of certain U.S. Holders, "financial
services income", in either case from sources outside the United States, and any
foreign currency exchange gain or loss as set forth in this paragraph will
generally be treated as realized from sources within the United States.
SALE, EXCHANGE OR REDEMPTION OF NOTES
In general, unless a nonrecognition provision applies, the sale, exchange,
redemption (including pursuant to an offer by the Company) or other disposition
of a Note will be a taxable event for U.S. federal income tax purposes. In such
event, a U.S. Holder will recognize gain or loss equal to the difference between
(i) the amount of cash plus the fair market value of any property received upon
such sale, exchange, redemption or other taxable disposition (except to the
extent such cash or property is attributable to accrued interest, which will be
taxable as ordinary income) and (ii) the U.S. Holder's adjusted tax basis in the
Note. Any such gain or loss with respect to a Dollar Note should be capital gain
or loss and will be long-term capital gain or loss if such Dollar Note has been
held by the U.S. Holder for
137
<PAGE>
more than one year at the time of such sale, exchange, redemption or other
disposition. Such gain generally will be treated as U.S. source and, under
recently issued U.S. Treasury Regulations, loss on such disposition would be
allocated to reduce U.S. source income, subject to applicable limitations. With
respect to the sale, exchange, retirement or repayment of a Euro Note, the
foreign currency amount realized will be considered to be the payment of accrued
but unpaid interest (on which exchange gain or loss is recognized as described
above) and as a payment of principal. With respect to such payment of principal,
exchange, gain or loss is separately computed on the foreign currency amount of
the purchase price that is repaid to the extent that the rate of exchange on the
date of retirement or disposition differs from the rate of exchange on the date
such Euro Note was acquired. Exchange gain or loss computed on accrued interest,
and principal is recognized, however, only to the extent of total gain or loss
on the transaction. In general, any such recognized exchange, gain or loss will
be treated as ordinary income realized from U.S. sources.
SPECIAL INTEREST
Because the Notes provide for the payment of special interest in certain
circumstances described under "Description of the Notes--Registration Rights"
("Special Interest"), the Notes will be subject to the Treasury Regulations that
apply to debt instruments that provide for one or more contingent payments.
Under those Regulations, however, a payment is not a contingent payment merely
because of a contingency that, as of the issue date, is either "remote" or
"incidental". The Company intends to take the position that, solely for these
purposes, the payment of Special Interest is a remote or incidental contingency.
The Company's determination that such payments are a remote or incidental
contingency for these purposes is binding on a U.S. Holder, unless such U.S.
Holder discloses in the proper manner to the Internal Revenue Service that it is
taking a different position. Prospective investors should consult their tax
advisers as to the tax considerations relating to the payment of Special
Interest, in particular in connection with the Treasury Regulations relating to
contingent payment instruments.
TAXATION OF ADDITIONAL AMOUNTS
In the event that Additional Amounts are paid in respect of withholding or
deduction for taxes imposed on payments on the Notes (as described in
"Description of the Notes--Additional Amounts") such Additional Amounts will be
taxable to a U.S. Holder as ordinary income at the time such amounts are accrued
or received, in accordance with the U.S. Holder's method of accounting for U.S.
federal income tax purposes. The amount taxable to a U.S. Holder also will
include all taxes withheld or deducted in respect thereof. Thus, a U.S. Holder
may be required to report income in an amount greater than the cash it receives
in respect of payments on its Notes. However, a U.S. holder may, subject to
certain limitations, be eligible to claim as a credit or deduction in respect of
such taxes for purposes of computing its U.S. federal income tax liability. The
rules relating to foreign tax credits are extremely complex, and U.S. Holders
should consult their own tax advisors with regard to the availability of a
foreign tax credit and the application of the foreign tax credit to their
particular situation.
TRANSACTIONS IN EURO
Euro received as interest on, or on the sale, exchange or retirement of a
Euro Note will have a tax basis equal to their U.S. dollar value at the time
such interest is received or at the time payment is received in consideration of
such sale, exchange or retirement. The amount of gain or loss recognized on a
sale or other disposition of such Euro will be equal to the differences between
(i) the amount of U.S. dollars, or the fair market value in U.S. dollars of the
other currency or property received in such sale or other disposition and (ii)
the tax basis of such Euro.
138
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and OID on a Note and the proceeds of certain
sales of Notes in respect of U.S. Holders other than certain exempt persons
(such as corporations). A 31.0% backup withholding tax will apply to such
payments if the U.S. Holder fails to provide a correct taxpayer identification
number or certification of exempt status or, with respect to certain payments,
the U.S. Holder fails to report in full all interest income and the IRS notifies
the payor of such under-reporting.
Any amounts withheld under the backup withholding rules will be allocated as
a credit against such U.S. Holder's U.S. federal income tax liability and may
entitle such U.S. Holder to a refund, provided the required information is
furnished to the IRS. Treasury regulations, generally effective for payment made
after December 31, 1999, modify certain of the certification requirements for
backup withholding. It is possible that the Company and other withholding agents
may request a new withholding exemption from holders in order to qualify for
continued exemption from backup withholding under Treasury regulations when they
become effective.
CERTAIN LUXEMBOURG TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX CONSULTANTS TO DETERMINE POSSIBLE
LUXEMBOURG TAX CONSEQUENCES OF AN EXCHANGE OR PURCHASE OF NOTES.
The following summary outlines certain Luxembourg tax consequences to
persons who are nonresidents of Luxembourg and who do not have a permanent
establishment in Luxembourg ("Non-Resident Holders") with respect to the
ownership and disposition of Notes.
Under Luxembourg tax laws currently in effect, there is no withholding tax
on payment of principal, interest, nor on accrued but unpaid interest in respect
of the Notes, nor is any Luxembourg withholding tax payable upon the redemption
of the Notes.
Non-Resident Holders of Notes are not liable for Luxembourg income tax on
payments of principal or interest or upon redemption of, or on capital gains on
sale of, any Notes.
No stamp, value added, issue, registration, transfer or similar taxes or
duties will, under present Luxembourg law, be payable in Luxembourg by the
holders of the Notes in connection with the issue of the Notes.
139
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge and represent that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by certain
broker-dealers (as specified in the Registration Rights Agreement) in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period not to exceed 90 days
after the Expiration Date, it will furnish additional copies of this Prospectus,
as amended or supplemented, to any such broker-dealer that reasonably requests
such documents for use in connection with any such resale. In addition, until
, 1999, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker- dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay certain expenses incident to the Exchange
Offer, and the Company will indemnify the holders of the Old Notes (including
certain broker-dealers) against certain liabilities.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for
Carrier1 by Debevoise & Plimpton, New York, New York, special New York counsel
to Carrier1.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche Experta AG, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
140
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31,
1998:
Consolidated Balance Sheet............................................................................... F-3
Consolidated Statement of Operations..................................................................... F-4
Consolidated Statement of Shareholders' Equity........................................................... F-5
Consolidated Statement of Cash Flows..................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7
</TABLE>
F-1
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Carrier1 International S.A.
We have audited the accompanying consolidated balance sheet of Carrier1
International S.A. and subsidiaries (collectively, the "Company") as of December
31, 1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for the period from February 20, 1998 (date of inception)
to December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Carrier1 International S.A. and
subsidiaries as of December 31, 1998, and the results of its operations and its
cash flows for the period from February 20, 1998 (date of inception) to December
31, 1998 in conformity with generally accepted accounting principles in the
United States of America.
DELOITTE & TOUCHE EXPERTA AG
<TABLE>
<S> <C>
/s/ DAVID WILSON /s/ JERRY M. MAYER
David Wilson Jerry M. Mayer
</TABLE>
Erlenbach, Switzerland
March 17, 1999
F-2
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 4,184
Restricted cash.................................................................. 1,518
Accounts receivables............................................................. 1,217
Unbilled receivables............................................................. 1,645
Other receivables................................................................ 3,014
Prepaid expenses and other current assets........................................ 3,179
---------
Total current assets........................................................... 14,757
PROPERTY AND EQUIPMENT--Net (See Note 5)........................................... 31,091
INVESTMENT IN JOINT VENTURE (See Note 6)........................................... 4,675
OTHER ASSETS....................................................................... 911
---------
TOTAL.............................................................................. $ 51,434
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable........................................................... $ 27,602
Accrued liabilities.............................................................. 4,643
---------
Total current liabilities...................................................... 32,245
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 7)
SHAREHOLDERS' EQUITY:
Common stock, $2 par value, 30,000,000 shares authorized, 18,885,207 issued and
outstanding (See Note 2)....................................................... 37,770
Accumulated deficit.............................................................. (19,235)
Accumulated other comprehensive income........................................... 654
---------
Total shareholders' equity..................................................... 19,189
---------
TOTAL.............................................................................. $ 51,434
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<S> <C>
REVENUES.......................................................................... $ 2,792
OPERATING EXPENSES:
Cost of services................................................................ 11,669
Selling, general and administrative............................................. 8,977
Depreciation and amortization................................................... 1,409
---------
Total operating expenses...................................................... 22,055
---------
LOSS FROM OPERATIONS.............................................................. (19,263)
OTHER INCOME (EXPENSE):
Interest income................................................................. 81
Other, net...................................................................... (53)
---------
Total other income (expense).................................................. 28
---------
LOSS BEFORE INCOME TAX BENEFIT.................................................... (19,235)
INCOME TAX BENEFIT--Net of valuation allowance (See Note 9)....................... --
---------
NET LOSS.......................................................................... $ (19,235)
---------
---------
EARNINGS (LOSS) PER SHARE:
Loss from operations:
Basic......................................................................... $ (2.61)
---------
---------
Diluted....................................................................... $ (2.61)
---------
---------
Net loss:
Basic......................................................................... $ (2.61)
---------
---------
Diluted....................................................................... $ (2.61)
---------
---------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON ACCUMULATED COMPREHENSIVE
STOCK DEFICIT INCOME TOTAL
--------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
Issuance of shares (18,885,207 shares)....................... $ 37,770 -- -- $ 37,770
Comprehensive income (loss):
Net loss................................................... -- $ (19,235) -- (19,235)
Other comprehensive income, net of tax:
Currency translation adjustments......................... -- -- $ 654 654
----------
Total comprehensive loss................................... (18,581)
--------- ------------ ----- ----------
BALANCE--December 31, 1998................................... $ 37,770 $ (19,235) $ 654 $ 19,189
--------- ------------ ----- ----------
--------- ------------ ----- ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................ $ (19,235)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................. 1,409
Changes in operating assets and liabilities:
Restricted cash............................................................. (1,518)
Receivables................................................................. (5,838)
Prepaid expenses and other current assets................................... (3,165)
Other assets................................................................ (898)
Trade accounts payable and accrued liabilities.............................. 14,804
---------
Net cash used in operating activities..................................... (14,441)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................................. (15,191)
Investment in joint venture..................................................... (4,675)
---------
Net cash used in investing activities..................................... (19,866)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.......................................... 37,770
---------
Net cash provided by financing activities................................. 37,770
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS...................... 721
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS......................................... 4,184
CASH AND CASH EQUIVALENTS:
Beginning of period............................................................. --
---------
End of period................................................................... $ 4,184
---------
---------
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND INVESTING ACTIVITIES:
As of December 31, 1998, the Company had purchased approximately $17,315 of
equipment on open accounts payable.
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
1. NATURE OF OPERATIONS
Carrier1 International S.A., its subsidiaries in Europe and its subsidiary
in the United States ("Carrier1" or the "Company"), operate in the
telecommunications industry offering long distance voice and Internet Protocol
telecommunication services on a wholesale basis. The Company offers these
services primarily to competitive fixed-line operators, other carriers, wireless
operators, Internet service providers, resellers, and multi-national
corporations. The Company is a societe anonyme organized under the laws of the
Grand Duchy of Luxembourg and has adopted a fiscal year end of December 31.
Since inception, the Company has financed its operations through equity
contributions. The expansion of the Company's business and network will require
significant capital to fund planned capital expenditures, working capital, cash
flow deficits and any debt service. As of December 31, 1998, the major investors
had contributed $37,770 in equity to fund start-up operations and have committed
to contribute an additional $22,230 in equity. In January 1999, the major
investors contributed the additional $22,230 in exchange for common stock of the
Company. In February 1999, the Company raised additional capital through a
private placement debt offering (see Note 13). If additional sources of
financing are required, the Company intends to pursue commercial bank
borrowings, equipment financing or accounts receivable financing, or the private
or public sale of equity or debt securities.
2. ORGANIZATION
In February 1998, the investors of the Company purchased a shelf company
registered in the United Kingdom which was ultimately renamed Carrier1 UK
Limited ("UK"). Subsequently, UK formed subsidiaries in Switzerland, Germany,
the United States and the United Kingdom. In August 1998, Carrier1 International
S.A. ("SA") was formed. Subsequently, SA formed subsidiaries in France, the
Netherlands, Germany, Austria and Luxembourg. Both UK and SA were 99.995% owned
by Carrier One, LLC ("LLC"), a Delaware limited liability company. In December
1998, the Company reorganized the ownership structure of all of its
subsidiaries. The Company, in exchange for all of the outstanding shares of UK,
issued 15,365,207 shares of common stock to LLC.
The effects of the reorganization have been accounted for as a
reorganization of entities under common control similar to a pooling of
interests. This reorganization has been reflected in the Company's consolidated
financial statements as if the post-reorganization structure had been in effect
since the date of inception since all of the entities are under common control.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Estimates are used
when accounting for such items as revenue, long-term customer contracts,
allowances for uncollectable receivables, investments, telecommunications
expense, depreciation and amortization, employee benefit plans and taxes.
F-7
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company are prepared in
accordance with generally accepted accounting principles in the United States.
The financial statements include the consolidated accounts of the Company with
all significant intercompany balances and transactions eliminated.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the Company's reporting currency. The financial
statements of the Company's non-U.S. subsidiaries, where the local currency is
the functional currency, are translated into U.S. dollars using exchange rates
in effect at period end for assets and liabilities and average exchange rates
during each reporting period for results of operations. Adjustments resulting
from translation of financial statements are reflected as a separate component
of shareholders' equity.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the respective functional
currency are included in results of operations as incurred.
REVENUE
The Company recognizes revenue on telecommunication services, generally
measured in terms of traffic minutes processed or transmission capacity provided
to customers, in the period that the service is provided. Revenue is presented
net of discounts.
COMPREHENSIVE INCOME
Comprehensive income is the change in equity of a business enterprise during
a period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity for a period except those resulting
from investments by owners and distributions to owners. For the period from
February 20, 1998 (date of inception) to December 31, 1998, other comprehensive
income consisted of foreign currency translation adjustments.
EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of
shares outstanding during the period. Diluted earnings per share is computed by
including the stock options and stock subscriptions considered to be dilutive
common stock equivalents, unless deemed anti-dilutive.
CASH AND CASH EQUIVALENTS
Cash equivalents consist primarily of interest bearing certificates of
deposit of well-rated European banks. The Company considers all highly-liquid
investments with a maturity of 90 days or less at the time of purchase to be
cash equivalents. The carrying amount reported in the accompanying balance
sheets for cash equivalents approximates fair value due to the short-term
maturity of these instruments.
F-8
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESTRICTED CASH
At December 31, 1998, $1,518 of cash was pledged as collateral on
outstanding letters of credit and guarantees to telecommunication companies that
provide refile services to the Company.
OTHER RECEIVABLES
Other receivables consist primarily of value-added tax refund receivables at
December 31, 1998.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Cost includes the charges received from the equipment and software suppliers for
turnkey installation and customization and network set-up costs. Depreciation is
recorded commencing with the first full month that the assets are in service.
The straight-line depreciation method is applied using the assets' estimated
useful lives as follows:
<TABLE>
<S> <C>
Switching equipment, routers and
network management equipment
including related software 5 years
Computer and data center equipment 3 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of lease term or estimated
useful life
</TABLE>
The capital cost of assets acquired under finance leases is included in
property and equipment and depreciated over the shorter of the lease term or the
estimated useful life of the asset. The outstanding capital element of the lease
obligations is included in borrowings while the interest is charged to
operations over the primary lease term.
Indefeasible Right of Use ("IRUs") investments are amortized over their
estimated useful lives, not to exceed 15 years even in those cases where the
right of use has been acquired for a longer period of time. During the period
from February 20, 1998 (date of inception) to December 31, 1998, the Company
acquired a 25-year IRU on a transatlantic cable. This IRU is being amortized
over a useful life of 15 years. Maintenance, repairs, and reengineering costs
are charged to expense as incurred.
LONG-LIVED ASSETS
The Company reviews the carrying value of its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable. Measurement of any
impairment would include a comparison of discounted estimated future operating
cash flows from such assets with their respective carrying value.
F-9
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENSION PLANS
The Company maintains various plans for providing employee pension benefits,
which conform to laws and practices in the countries concerned. Retirement
benefit plans are generally funded by contributions by both the employees and
the companies to independent entities that operate the retirement benefit
schemes. Where this is not the case, appropriate liabilities are recorded in the
financial statements. Currently, all of the Company's pension plans are defined
contribution plans.
TAXES
Taxes are provided based on reported income and include taxes on capital as
well as non-recoverable tax withheld on dividends, management fees and royalties
received or paid. Such taxes are calculated in accordance with the tax
regulations in effect in each country. The Company provides for deferred taxes
using the comprehensive liability method. Provision is made in respect of all
temporary differences arising between the tax values of assets and liabilities
and their values in the consolidated financial statements. Provision is made
against deferred tax assets to the extent that it is more likely than not that
these will not be realized. Deferred tax balances are adjusted for subsequent
changes in tax rates or for new taxes imposed. Deferred tax liabilities are
included under provisions. Non-recoverable withholding taxes are only accrued if
distribution by subsidiary companies is probable.
STOCK-BASED COMPENSATION PLANS
The Company records compensation expense for its stock-based compensation
plans in accordance with the intrinsic value method prescribed by APB 25,
"Accounting for Stock Issued to Employees." Intrinsic value is the amount by
which the estimated market value of the underlying stock exceeds the exercise
price of the stock option on the measurement date, generally the date of grant.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1998, the carrying amounts of the Company's financial
instruments approximate their fair value.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. This standard is effective
for the Company's fiscal year ending December 31, 2000. Management has not yet
F-10
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
completed its analysis of this new accounting standard and, therefore, has not
determined whether this standard will have a material effect on the Company's
financial statements.
4. EARNINGS PER SHARE
The following details the earnings per share calculations for the period
from February 20, 1998 (date of inception) to December 31, 1998 (in thousands of
U.S. dollars, except per share information):
<TABLE>
<S> <C>
Loss from operations............................................ $ (19,263)
---------
---------
Net loss........................................................ $ (19,235)
---------
---------
Total number of shares used to compute basic earnings
(loss) per share.............................................. 7,367,000
---------
---------
Loss from operations:
Basic loss per share.......................................... $ (2.61)
---------
---------
Diluted loss per share........................................ $ (2.61)
---------
---------
Net loss:
Basic loss per share.......................................... $ (2.61)
---------
---------
Diluted loss per share........................................ $ (2.61)
---------
---------
</TABLE>
Potential dilutive securities have been excluded from the computation for
the period from February 20, 1998 (date of inception) to December 31, 1998 as
their effect is antidilutive. Had the Company been in a net income position for
the period from February 20, 1998 (date of inception) to December 31, 1998,
diluted earnings per share would have included an additional 799,000 shares
related to outstanding stock options and stock subscriptions (determined using
the treasury stock method at the estimated average market value).
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consist of the following:
<TABLE>
<S> <C>
Network equipment............................................... $ 14,613
IRU investments................................................. 11,106
Leasehold improvements.......................................... 1,712
Furniture, fixtures and office equipment........................ 709
Construction in progress........................................ 4,353
-----------
32,493
Less: accumulated depreciation and amortization................. (1,402)
-----------
Property and equipment, net................................... $ 31,091
-----------
-----------
</TABLE>
F-11
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
5. PROPERTY AND EQUIPMENT (CONTINUED)
At December 31, 1998, network equipment totaling $13,565 is encumbered by a
short-term product financing arrangement with a vendor. The Company is currently
negotiating the terms and conditions of such financing arrangement with the
vendor, which is obligated to provide financing under the terms of the related
turnkey purchase agreement.
6. INVESTMENT IN JOINT VENTURE
The Company entered into a binding letter of intent dated August 20, 1998
(the "LOI") with affiliates of Viatel, Inc. ("Viatel") and Metromedia Fiber
Network, Inc. ("Metromedia") which sets forth the principal terms upon which the
parties will build and own a telecommunications network in Germany (the "German
Network"). Under the LOI, the parties have agreed to form a company (the
"Developer") to act as their agent to arrange construction of the German
Network. The Developer will be owned 50.01%, 24.995%, and 24.995% by Viatel, the
Company and Metromedia, respectively. The Developer will be responsible for the
development, design, construction and supervision of the German Network and will
also provide other services related to the German Network.
The parties are currently in negotiations with respect to the legal
structure of the Developer and the definitive project terms. Until such
development agreement has been negotiated and executed by the parties, Viatel
will provide such services as the Developer is obligated to provide under the
LOI. Each of the parties has contributed $4.05 million for incremental costs,
and their pro-rata share of $2.5 million for pre-development costs. Each party
is obligated to provide the Developer with a $75 million letter of credit,
conditional upon the ability of each of the Company and Metromedia to raise at
least $75 million through financing or equity. Failure by any party to do so
will terminate the LOI with respect to such party, and any or all of the parties
that have not so defaulted may, at their option, assume the rights and
obligations of the defaulting party and continue with the construction of the
German Network. If neither remaining party assumes the rights and obligations of
the defaulting party, the LOI is terminated. Under the terms of the LOI, Viatel
is entitled to receive a developer's fee of 3% of certain construction costs
associated with the German Network.
Upon completion of the German Network, each party will own its own cable
subduct and access points. In addition, to the extent possible, each party will
have its own divisible and transferable rights in all permits, easements, rights
of way and other third party approvals. In the event the agreement is
terminated, each party (other than a defaulting party) is entitled to maintain
its ownership interest in any intellectual property rights, technology, plans,
permits and approvals (to the extent such permits and approvals are issued in
the name of such party) and other intangible property, as well as in any actual
construction completed and materials ordered.
On February 19, 1999, the parties executed a development agreement. In
accordance with the development agreement, the Company provided a 109.5 million
Deutsche Mark letter of credit (approximately $64.8 million) to the Developer to
fund the Company's share of construction costs (see Note 13).
The Company currently estimates that its share of the development costs of
the German Network will be up to approximately $82 million, including the fiber
deployed, which is expected to be incurred over the next 15 months.
F-12
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
7. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain network capacity, office space, equipment,
vehicles, and operating facilities under noncancellable operating leases.
Certain leases contain renewal options and many leases for office space require
the Company to pay additional amounts for operating and maintenance costs. As of
December 31, 1998, future minimum lease payments under operating leases with
remaining terms in excess of one year are as follows:
<TABLE>
<S> <C>
1999............................................................ $ 11,393
2000............................................................ 2,863
2001............................................................ 2,637
2002............................................................ 2,558
2003............................................................ 1,235
Thereafter...................................................... 692
-----------
Total minimum lease payments.................................. $ 21,378
-----------
-----------
</TABLE>
Total rental expense under operating leases was $5,171 during the period
from February 20, 1998 (date of inception) to December 31, 1998.
PURCHASE COMMITMENTS
During the period from February 20, 1998 (date of inception) to December 31,
1998, the Company entered into an agreement to purchase a Multiple Investment
Unit ("MIU") that gives the Company rights to a portion of a trans-Atlantic
cable scheduled for completion in early 2000. Currently, the Company estimates
its remaining share of development and construction costs to be $11,262. The
Company has also entered into various contracts with vendors to provide network
set-up and maintenance services. Based on the Company's current network
development plans, such amounts are expected to be paid as follows:
<TABLE>
<CAPTION>
NETWORK
IN THOUSANDS MIU SERVICES TOTAL
- ------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
1999......................................................... $ 3,155 $ 9,050 $ 12,205
2000......................................................... 7,155 9,360 16,515
2001......................................................... 952 952
--------- --------- ---------
$ 11,262 $ 18,410 $ 29,672
--------- --------- ---------
--------- --------- ---------
</TABLE>
8. INCENTIVE COMPENSATION PLANS
In February 1998, the employee stock option plan (the "Stock Option Plan")
was adopted. This plan provides for the issuance of options to purchase Class A
or Class B shares of LLC, based on certain criteria as defined in the plan
document. The aggregate number of option units to be issued under the Stock
Option Plan is the lesser of 4,444,444 units or 11.1% of the number of shares
purchased by the current owners of LLC. The per-share exercise price for the
options may not be less than $1 per share. Options vest over a period of five
years and expire if not exercised within 10 years of the grant. In connection
with
F-13
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
8. INCENTIVE COMPENSATION PLANS (CONTINUED)
the creation of the Stock Option Plan, employees were required to agree to
reduce the percentage of the bonus to which they are eligible under the
Company's cash bonus plan (the "Cash Bonus Plan"). As of December 31, 1998, the
Company had granted options to acquire 4,044,442 Class A shares for a purchase
price of $1 per share to certain members of management. As a result of the
reorganization of the Company in December 1998, the Company intends to create a
new option plan so that employees will be granted options from the Company
rather than LLC. The Company intends to have LLC cancel options granted under
the Stock Option Plan and will grant replacement options with the same economic
terms under the new plan. (See Note 13).
As required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
determined the pro-forma information as if the Company had accounted for stock
options under the fair value method of SFAS 123. The weighted-average fair value
of options granted during the period was $0.15 per option. The fair value of
option grants is estimated on the date of grant using the minimum value
option-pricing model, as allowed under SFAS 123 for nonpublic companies, for
pro-forma footnote purposes with the following assumptions used: dividend yield
of 0%, risk-free interest rate of 5.53%, and expected option life of 5 years.
The tax-effected pro-forma effect of these options would be as follows:
<TABLE>
<S> <C>
Net loss, as reported............................................. $ (19,235)
Estimated fair value of options granted, net of tax............... (226)
---------
Net loss, adjusted................................................ $ (19,461)
---------
---------
Adjusted net loss per share--basic basis.......................... $ (2.64)
---------
---------
</TABLE>
In March 1998, the Company established the Cash Bonus Plan to provide
incentive compensation to certain officers and employees. Individuals are
eligible to receive an annual cash bonus ranging from 10% to 25% of their annual
salary based on the terms of their employment agreement. Bonuses are payable at
the discretion of the Board of Directors based upon the Company achieving
specific goals.
Employees were also entitled to subscribe to purchase shares (the "Stock
Purchase Plan") in LLC at the price of $1 per Class A unit up to a maximum
investment of approximately $68 per employee. The purchase offer was valid until
September 1, 1998 with payment due before October 1, 1998. Under the Stock
Purchase Plan, certain employees committed to purchase approximately 1,424,000
Class A units with an aggregate value of approximately $1,424. Management has
determined that no compensation expense is required to be recognized in
connection with this plan. As a result of the reorganization of the Company in
December 1998, the Company has amended the Stock Purchase Plan so that employees
will be issued shares of common stock of the Company rather than units of LLC.
In 1999, the Company collected the amounts due from employees under the Stock
Purchase Plan and expects to issue the related shares by May 31, 1999.
F-14
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
9. INCOME TAXES
The income tax benefit for the period from February 20, 1998 (date of
inception) to December 31, 1998 consists of the following:
<TABLE>
<S> <C>
Current......................................................... $ --
Deferred........................................................ 5,378
-----------
5,378
Valuation allowance............................................. (5,378)
-----------
Total........................................................... $ --
-----------
-----------
</TABLE>
The Company has tax loss carryforwards of approximately $5,378 at December
31, 1998. The ability of the Company to fully realize deferred tax assets
related to these tax loss carryforwards in future years is contingent upon its
success in generating sufficient levels of taxable income before the statutory
expiration periods for utilizing such net operating losses lapses. Net operating
losses expire as follows: 2003--$149; 2005--$3,245; 2013--$318. Net operating
losses totaling $1,666 do not expire. Due to its limited history, the Company
was unable to conclude that realization of such deferred tax assets in the near
future was more likely than not. Accordingly, a valuation allowance was recorded
to offset the full amount of such assets.
Deferred income tax assets result primarily from net operating loss
carryforwards. Other components of deferred income tax assets and liabilities
are not significant as of December 31, 1998.
10. RELATED PARTY TRANSACTIONS
During the period from February 20, 1998 (date of inception) to December 31,
1998, the Company reimbursed certain companies, which are shareholders in LLC,
for expenses incurred in connection with the formation of the Company and the
negotiation of certain agreements entered into by the Company. Such
reimbursements totaled $339 and were expensed as selling, general and
administrative expenses.
The Company has entered into a transmission peering arrangement with an
entity that is 21% beneficially owned by a combination of Providence Equity
Partners L.P., the majority unitholder of LLC, and Providence Equity Partners II
L.P., another unitholder of LLC. Under the terms of the agreement, the parties
agree to carry certain levels of each other's traffic on their network without
charge for one year. This agreement is automatically renewable unless it is
terminated by either party with appropriate notice as required by the agreement.
11. EMPLOYEE BENEFIT PLANS
The Company contributes to defined contribution pension plans in accordance
with the laws and practices of the countries in which it operates. During the
period from February 20, 1998 (date of inception) to December 31, 1998, the
Company recorded pension expense totaling $267.
F-15
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
12. GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires the Company to disclose certain information related to
geographic areas in which the Company operates and its major customers.
Management has determined that the Company has only one operating segment as
defined in SFAS No. 131 and, accordingly, has omitted segment information
disclosures.
GEOGRAPHIC INFORMATION
The following table also provides detail of the Company's revenues for the
period from February 20, 1998 (date of inception) to December 31, 1998 and
long-lived assets as of December 31, 1998 on a geographic basis. Revenues have
been allocated based on the location of the customer. IRU investments are
included based on entity which owns the investment.
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
----------- -----------
<S> <C> <C>
Germany................................................................ $ 878 $ 10,369
Switzerland............................................................ 108 14,186
United Kingdom......................................................... 1,768 7,399
United States.......................................................... 3,006
Other countries........................................................ 38 1,717
----------- -----------
$ 2,792 $ 36,677
----------- -----------
----------- -----------
</TABLE>
MAJOR CUSTOMERS
During the period from February 20, 1998 (date of inception) to December 31,
1998, the Company earned 69% of its revenues from three major customers as
follows:
<TABLE>
<CAPTION>
% OF
CUSTOMER REVENUES
- ----------------------------------------------------------------------------------- -------------
<S> <C>
Interroute Telecommunications (UK) Limited......................................... 46%
WorldCom Telecommunications Services GmbH.......................................... 13%
Star Telecommunications Deutschland GmbH........................................... 10%
--
69%
--
--
</TABLE>
13. SUBSEQUENT EVENTS
SHAREHOLDERS' EQUITY
On January 15, 1999, the Board of the Company adopted the 1999 Share Option
Plan (the "1999 Option Plan"), under which Carrier1 International SA and related
companies of the Carrier1 group (the "Related Corporations") may grant to any
employee of the Company or Related Corporations options in equity securities
(the "Options") issued by the Company. The 1999 Option Plan is administered by
the Board and may be administered by a committee appointed by the Board, and
authorizes the Board or such committee to issue Options in such forms and on
such terms as determined by the Board or such committee. The Board or such
committee may determine the number of Options to grant, provided that
F-16
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
13. SUBSEQUENT EVENTS (CONTINUED)
the number of shares of the Company (the "Shares") issued pursuant to the 1999
Option Plan is no greater than the lesser of (a) 2,222,222 Shares and (b) the
number of Shares representing 11.1% of the Shares held by purchasers purchasing
shares pursuant to a securities purchase agreement dated as of December 30,
1998. The per-share exercise price for the Options may not be less than $2.
Options granted under the 1999 Option Plan vest in five equal annual
installments beginning on the first anniversary of the grant of such Options.
Options expire if not exercised within 10 years of the grant, or on an earlier
date as specified by the Board or the committee. If the employment of a
participant is terminated for any reason, all unvested Options immediately
expire and vested Options must be exercised within a certain period of time as
specified by the plan document. The Company expects to cancel the options
granted under the 1998 Stock Option Plan and issue replacement options under the
1999 Option Plan by May 31, 1999.
On February 10, 1999, the Company increased its authorized number of shares
to 55,000,000.
LONG-TERM DEBT
On February 19, 1999, the Company issued $165 million and [Euro]85 million
of 13 1/4% senior notes (the "Notes") with detachable warrants with a scheduled
maturity of February 2009. Each Dollar warrant is initially exercisable to
purchase 6.71013 shares of common stock and each Euro warrant is initially
exercisable to purchase 7.53614 shares of common stock. Holders will be able to
exercise the warrants at a per share price equal to the greater of $2.00 per
share and the minimum par value required by Luxembourg law (currently 50
Luxembourg francs), subject to adjustment.
The Company has the right to redeem any of the Notes beginning on February
15, 2004. The initial redemption price is 106.625% of their principal amount,
plus accrued interest. The redemption price will decline each year after 2004
and will be 100% of their principal amount, plus accrued interest, beginning on
February 15, 2007. In addition, before February 15, 2002, the Company may redeem
up to 35% of the aggregate amount of either series of Notes with the proceeds of
sales of its capital stock at 113.25% of their principal amount. The Company may
make such redemption only if after any such redemption, an amount equal to at
least 65% of the aggregate principal amount of such Notes originally issued
remains outstanding.
The Notes contain covenants that restrict the Company's ability to enter
into certain transactions including, but not limited to, incurring additional
indebtedness, creating liens, paying dividends, redeeming capital stock, selling
assets, issuing or selling stock of restricted subsidiaries, or effecting a
consolidation or merger.
The Company is obligated to use its best efforts to cause the Notes to
generally be freely transferable under the Securities Act of 1933 no later than
August 19, 1999. If this requirement is not met, then the interest on the Notes
will increase by 0.5% per annum until the Notes are generally freely
transferable.
COMMITMENTS
On February 2, 1999, the Company entered into a letter of intent for a lease
for network fiber, which requires monthly payments of $274, including operating
and maintenance costs, for 36 months, after which the Company will obtain a
15-year IRU for the leased fiber at no additional charge. The Company will be
required to pay an annual operating and maintenance fee of $250 for the term of
the IRU.
F-17
<PAGE>
CARRIER1 INTERNATIONAL S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM FEBRUARY 20, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)
13. SUBSEQUENT EVENTS (CONTINUED)
On February 18, 1999, the Company entered into an agreement to purchase
fiber optic cable for the German Network during 1999 for $20,286, plus
value-added tax. The seller will either provide financing for the entire amount
of the purchase with the contract value to be repaid over three years in equal
annual installments beginning on December 31, 2001 together with interest, or
will allow the Company to make payment in full by December 31, 2001 without
interest. The loan, if provided, will bear interest at the U.S. dollar Libor
rate plus 4% per annum. If a loan is not provided, the seller is obligated to
provide certain additional equipment to the Company without charge.
F-18
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
CARRIER1 INTERNATIONAL S.A.
OFFER TO EXCHANGE ITS
13 1/4% SENIOR DOLLAR NOTES DUE 2009 AND
13 1/4% SENIOR EURO NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
13 1/4% SENIOR DOLLAR NOTES DUE 2009 AND
13 1/4% SENIOR EURO NOTES DUE 2009, RESPECTIVELY
, 1999
- --------------------------------------------------------------------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Luxembourg law, civil liability of directors both to the company and
to third parties is generally considered to be a matter of public policy. It is
possible that Luxembourg courts would declare void an explicit or even implicit
contractual limitation on directors' liability to Carrier1 International S.A.
Carrier1 International S.A., however, can validly agree to indemnify the
directors against the consequences of liability actions brought by third parties
(including shareholders if such shareholders have personally suffered a damage
which is independent of and distinct from the damage caused to the company).
Under Luxembourg law, an employee of Carrier1 International S.A. can only be
liable to Carrier1 International S.A. for damages brought about by his or her
willful acts or gross negligence. Any arrangement providing for the
indemnification of officers against claims of Carrier1 would be contrary to
public policy. Employees are liable to third parties under general tort law and
may enter into arrangements with Carrier1 International S.A. providing for
indemnification against third party claims.
Under Luxembourg law, an indemnification agreement can never cover a willful
act or gross negligence.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of Carrier1 International S.A.
4.1 Indenture, dated as of February 19, 1999, between Carrier1 International S.A. and the Chase Manhattan
Bank, as Trustee, relating to Carrier1 International S.A.'s 13 1/4 Senior Dollar Notes Due 2009
4.2 Form of 13 1/4 Senior Dollar Note (included in Exhibit 4.1)
4.3 Indenture, dated as of February 19, 1999, between Carrier1 International S.A. and the Chase Manhattan
Bank, as Trustee, relating to Carrier1 International S.A.'s 13 1/4 Senior Euro Notes Due 2009
4.4 Form of 13 1/4 Senior Euro Note (included in Exhibit 4.3)
4.5 Notes Registration Rights Agreement, dated February 12, 1999, among Carrier1 International S.A., Morgan
Stanley & Co. Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear, Stearns & Co.
Inc.
4.6 U.S. Dollar Collateral Pledge and Security Agreement, dated as of February 19, 1999, among Carrier1
International S.A., The Chase Manhattan Bank, as Trustee and The Chase Manhattan Bank, as securities
intermediary
4.7 Euro Collateral Pledge and Security Agreement, dated as of February 19, 1999, among Carrier1
International S.A., The Chase Manhattan Bank, as Trustee and The Chase Manhattan Bank AG, as securities
intermediary
5.1 Opinion of Debevoise & Plimpton*
10.1 Dollar Warrant Agreement, dated as of February 19, 1999, between Carrier1 International S.A. and The
Chase Manhattan Bank, as Warrant Agent
10.2 Euro Warrant Agreement, dated as of February 19, 1999, between Carrier1 International S.A. and The Chase
Manhattan Bank, as Warrant Agent
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.3 Warrants Registration Rights Agreement, dated as of February 12, 1999, between Carrier1 International
S.A. and The Chase Manhattan Bank, as Warrant Agent
10.4 Carrier1 International S.A. 1999 Share Option Plan*
10.5 Master Option Agreement, dated as of December 30, 1998, among Carrier1 International S.A., Carrier One
LLC, Carrier1 International GmbH, Carrier1 B.V., Carrier1 France S.A.R.L., Carrier1 U.K. Limited and
Carrier1 GmbH & Co. AG*
10.6 Form of Option Agreement*
10.7 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Stig Johansson
10.8 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Eugene A. Rizzo
10.9 Employment Agreement, dated as of March 26, 1998, between Carrier One AG and Terje Nordahl
10.10 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Joachim Bauer
10.11 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Kees van Ophem
10.12 Securities Purchase Agreement, dated as of March 1, 1999, among Carrier1, Carrier One LLC and the
employee investors named therein*
10.13 Registration Rights Agreement, dated as of March 1, 1999, among Carrier1 International S.A., Carrier One
LLC, Stig Johansson, Joachim Bauer, Gene Rizzo, Kees van Ophem, Terje Nordahl and the other parties
named therein*
10.14 Securityholders' Agreement, dated as of March 1, 1999, among Carrier1 International S.A. and the
employee investors named therein*
21.1 List of Subsidiaries of Carrier1 International S.A.
23.1 Consent of Deloitte & Touche Experta AG
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5.1 hereto)
24.1 Power of Attorney from Glenn M. Creamer
24.2 Power of Attorney from Jonathan E. Dick
24.3 Power of Attorney from Stig Johansson
24.4 Power of Attorney from Mark A. Pelson
24.5 Power of Attorney from Victor A. Pelson
24.6 Power of Attorney from Thomas J. Wynne
24.7 Power of Attorney from Joachim Bauer
25.1 Statement of Eligibility of The Chase Manhattan Bank on Form T-1
</TABLE>
- ------------------------
* To be filed by amendment
II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements or related
notes and therefore has been omitted.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ZURICH ON
MARCH 29, 1999.
<TABLE>
<S> <C> <C>
By: /s/ STIG JOHANSSON
-----------------------------------------
Name: Stig Johansson
Title: Chief Executive Officer and
President
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------ --------------------------- -------------------
Director, Chief Executive
/s/ STIG JOHANSSON Officer and President
- ------------------------------ (Principal Executive March 29, 1999
Stig Johansson Officer)
Chief Financial Officer
/s/ JOACHIM W. BAUER (Principal Financial
- ------------------------------ Officer and Principal March 29, 1999
Joachim W. Bauer Accounting Officer)
/s/ GLENN M. CREAMER Director
- ------------------------------ March 29, 1999
Glenn M. Creamer
/s/ JONATHAN E. DICK Director
- ------------------------------ March 29, 1999
Jonathan E. Dick
/s/ MARK A. PELSON Director
- ------------------------------ March 29, 1999
Mark A. Pelson
/s/ VICTOR A. PELSON Director
- ------------------------------ March 29, 1999
Victor A. Pelson
/s/ THOMAS J. WYNNE Director
- ------------------------------ March 29, 1999
Thomas J. Wynne
Authorized Representative
CARRIER 1, INC. in the U.S. March 29, 1999
<TABLE>
<S> <C> <C> <C>
By: /s/ KEES VAN OPHEM
-------------------------
Kees van Ophem, ITS
SECRETARY
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of Carrier1 International S.A.
4.1 Indenture, dated as of February 19, 1999, between Carrier1 International S.A. and the Chase Manhattan
Bank, as Trustee, relating to Carrier1 International S.A.'s 13 1/4 Senior Dollar Notes Due 2009
4.2 Form of 13 1/4 Senior Dollar Note (included in Exhibit 4.1)
4.3 Indenture, dated as of February 19, 1999, between Carrier1 International S.A. and the Chase Manhattan
Bank, as Trustee, relating to Carrier1 International S.A.'s 13 1/4 Senior Euro Notes Due 2009
4.4 Form of 13 1/4 Senior Euro Note (included in Exhibit 4.3)
4.5 Notes Registration Rights Agreement, dated February 12, 1999, among Carrier1 International S.A., Morgan
Stanley & Co. Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear, Stearns & Co.
Inc.
4.6 U.S. Dollar Collateral Pledge and Security Agreement, dated as of February 19, 1999, among Carrier1
International S.A., The Chase Manhattan Bank, as Trustee and The Chase Manhattan Bank, as securities
intermediary
4.7 Euro Collateral Pledge and Security Agreement, dated as of February 19, 1999, among Carrier1
International S.A., The Chase Manhattan Bank, as Trustee and The Chase Manhattan Bank AG, as securities
intermediary
5.1 Opinion of Debevoise & Plimpton*
10.1 Dollar Warrant Agreement, dated as of February 19, 1999, between Carrier1 International S.A. and The
Chase Manhattan Bank, as Warrant Agent
10.2 Euro Warrant Agreement, dated as of February 19, 1999, between Carrier1 International S.A. and The Chase
Manhattan Bank, as Warrant Agent
10.3 Warrants Registration Rights Agreement, dated as of February 12, 1999, between Carrier1 International
S.A. and The Chase Manhattan Bank, as Warrant Agent
10.4 Carrier1 International S.A. 1999 Share Option Plan*
10.5 Master Option Agreement, dated as of December 30, 1998, among Carrier1 International S.A., Carrier One
LLC, Carrier1 International GmbH, Carrier1 B.V., Carrier1 France S.A.R.L., Carrier1 U.K. Limited and
Carrier1 GmbH & Co. AG*
10.6 Form of Option Agreement*
10.7 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Stig Johansson
10.8 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Eugene A. Rizzo
10.9 Employment Agreement, dated as of March 26, 1998, between Carrier One AG and Terje Nordahl
10.10 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Joachim Bauer
10.11 Employment Agreement, dated as of March 4, 1998, between Carrier One AG and Kees van Ophem
10.12 Securities Purchase Agreement, dated as of March 1, 1999, among Carrier1, Carrier One LLC and the
employee investors named therein*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.13 Registration Rights Agreement, dated as of March 1, 1999, among Carrier1 International S.A., Carrier One
LLC, Stig Johansson, Joachim Bauer, Gene Rizzo, Kees van Ophem, Terje Nordahl and the other parties
named therein*
10.14 Securityholders' Agreement, dated as of March 1, 1999, among Carrier1 International S.A. and the
employee investors named therein*
21.1 List of Subsidiaries of Carrier1 International S.A.
23.1 Consent of Deloitte & Touche Experta AG
23.2 Consent of Debevoise & Plimpton (included in Exhibit 5.1 hereto)
24.1 Power of Attorney from Glenn M. Creamer
24.2 Power of Attorney from Jonathan E. Dick
24.3 Power of Attorney from Stig Johansson
24.4 Power of Attorney from Mark A. Pelson
24.5 Power of Attorney from Victor A. Pelson
24.6 Power of Attorney from Thomas J. Wynne
24.7 Power of Attorney from Joachim Bauer
25.1 Statement of Eligibility of The Chase Manhattan Bank on Form T-1
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
Exhibit 3.1
STATUTS COORDONNES
Carrier 1 International S.A.
Societe anonyme
Siege social: Luxembourg
R.C. Luxembourg B 65.864
- --------------------------------------------------------------------------------
constituee suivant acte dresse par le notaire Gerard LECUIT, de residence a
Hesperange, en date du 13 aout 1998, publie au Memorial Recueil Special C numero
783 du 28 octobre 1998,
les statuts de la societe ont ete modifies:
- - suivant acte dresse par ledit notaire Gerard LECUIT, en date du 24 decembre
1998,
- - suivant acte dresse par ledit notaire Gerard LECUIT, en date du 15 janvier
1999,
- - suivant actes dresses par ledit notaire Gerard LECUIT, en date du 10 fevrier
1999,
- - suivant acte dresse par ledit notaire Gerard LECUIT, en date du 17 fevrier
1999,
<PAGE>
TITLE I.- DENOMINATION, REGISTERED OFFICE, OBJECT, DURATION,
ARTICLE 1
There is established hereby a societe anonyme under the name of CARRIER 1
INTERNATIONAL S.A.
ARTICLE 2
The registered office of the corporation is established in Strassen.
The registered office may be transferred to any other place in the
municipality by a decision of the board of directors.
If extraordinary political or economic events occur or are imminent, which
might interfere with the normal activities of the registered office, or with
easy communication between the registered office and abroad, the registered
office shall be declared to have been transferred abroad provisionalty, until
the complete cessation of such extraordinary events. Such provisional transfer,
shall have no effect on the nationality of the corporation. Such declaration of
the transfer of the registered office shall be made and brought to the attention
of third parties by the organ of the corporation which is best situated for this
purpose under such circumstances.
ARTICLE 3
The corporation is established for an unlimited period.
ARTICLE 4
The corporation may take any action permitted by the laws of Luxembourg
for commercial companies and in particular, may carry out all transactions
pertaining directly or indirectly to the acquiring of participating interests in
any enterprises, in whatever form, having activities directly or indirectly
related to the field of telecommunications, and the administration,
<PAGE>
management, control, and development of those participating interests.
In particular, the corporation may use its funds for the establishment,
management, development and disposal of a portfolio consisting of any securities
and patents of whatever origin, having a direct or indirect relationship to the
field of telecommunications and participate in the creation, development and
control of any enterprise, the acquisition, by way of investment, subscription,
underwriting or option, of securities and patents, the realisation thereof by
way of sale, transfer, exchange or otherwise, the development of such securities
and patents, and the granting to other companies or enterprises of any support,
loans, advances or guarantees.
The corporation may also carry out any commercial, industrial, or
financial operations, any transactions in respect of real estate or moveable
property, which the corporation may deem useful to the accomplishment of its
purposes. This shall include without limitation the ability to issue warrants,
bonds and notes and other financial instruments, and to borrow funds from
financial institutions and other third parties.
TITLE II.- CAPITAL, SHARES
ARTICLE 5
The subscribed capital of the corporation is fixed at SIXTY MILLION UNITED
STATES DOLLARS (60.OO0.000.-USD) represented by THIRTY MILLION (30.000.000.)
shares with a par value of TWO UNITED STATES DOLLARS (2.-USD) each.
The authorized capital of the corporation is fixed at HUNDRED TEN MILLION
UNITED STATES DOLLARS (110,000,000.-USD) to be divided into FIFTY FIVE MILLION
SHARES (55,000,000) shares with a par value of TWO UNITED STATES DOLLARS
(2.-USD) each.
<PAGE>
A maximum of FOUR MILLION FOUR HUNDRED FOURTY FOUR THOUSAND FOUR HUNDRED FOURTY
FOUR UNITED STATES DOLLARS (4,444,444.-USD) (not counting any additional options
granted to Thomas Wynne or Victor Pelson ) are reserved to the holders of
options issued under the 1999 Share Option Plan approved by the board of
directors on January 15, 1999 and a maximum of EIGHT MILLION UNITED STATES
DOLLARS (8,000,000.-USD) are reserved for the holders of warrants issued as part
of an issuance by the corporation of 1) USD Units, each USD Unit consisting of
one dollar note due 2009 and one warrant to purchase shares of common stock of
the corporation and/or 2) EuroUnits, each Sure Unit consisting of one euro note
due 2009 and one warrant to purchase shares of common stock of the corporation,
in each case as determined by the board of directors or its designee(s)
Subject to what is stated above with respect to the authorized capital
reserved to the holders of options and/or warrants, the authorized and
subscribed capital of the corporation may be increased or reduced by a decision
of the general meeting of shareholders, voting with the same quorum as for an
amendment of the articles of incorporation.
The board of directors is hereby authorized to issue further shares with
or without issuance premium so as to bring the total capital of the corporation
up to the total authorized capital in whole or in part from time to time as it
in its discretion may determine and to accept subscriptions for such shares
within a period such as determined by article 32(5) of the Company Act of August
10, 1915, as amended.
The board of directors is specifically authorized to make such issues
without reserving for the then
<PAGE>
existing shareholders a preferential or pre-emptive right to subscribe for the
shares to be issued.
The board of directors may delegate to any duly authorized person, the
duty of accepting subscriptions, receiving payment for shares representing part
or all of such increased amounts of capital, issuing shares and carrying out all
such acts and things as are necessary to document the increase in capital and,
in particular, to amend in the legally required notarial form, the present
article to reflect the capital increase.
Shares may be evidenced at the owners option, in certificates representing
single shares or in certificates representing two or more shares.
Shares may be issued in registered or bearer form, at the shareholder's
option, unless transfer restrictions or other restrictions otherwise require.
The corporation may refuse to approve a transfer of shares if it
determines that such transfer would be in violation of an existing restriction
on the transfer of shares which has been brought to its attention (it being
understood that such a refusal must not result in a situation where a
shareholder of the corporation who wishes to sell his shares to a party who has
made a bona fide offer to purchase such shares is forced to continue holding
such shares for an extended period of time) and shall notify the grounds for its
refusal to the shareholder seeking to effect the transfer.
The board of directors may delegate to any committee formed by the board
of directors the responsibility for approving or refusing to approve proposed
share transfers as contemplated by the preceding paragraph of this article 5.
The corporation may, to the extent and under the terms permitted by law,
purchase its own shares.
<PAGE>
Moreover, the board of directors is authorized to issue ordinary or
convertible bonds and notes, in registered or bearer form, with any denomination
and payable in any currencies. Any issue of convertible bonds and notes may only
be made within the limits of the authorized capital.
The board of directors shall determine the nature, the price, the interest
rate, the conditions of issue and reimbursement and any other conditions which
may be related to such bond or note issue.
If the corporation issues bonds or notes in registered form, a ledger of
the registered bondholders will be held at the registered office of the
corporation, or at such other place as the board of directors shall designate
for this purpose.
Within the limits of the authorized capital set forth above, the board of
directors is also authorized to issue warrants giving to each warrant holder a
right to subscribe for one or more shares (or for a fraction of a share, it
being understood that the corporation shall in no event be obligated to issue
any fractional shares), without reserving to the existing shareholders a
preferential right to acquire the warrants or to subscribe to shares upon the
exercise of the warrants. The board of directors is authorized to determine the
conditions under which the warrants will be issued, including without limitation
the subscription price to be paid for the shares upon the exercise of the
warrants, subject to article 26-5 (1) of the law on commercial companies, as
well as the price to be paid in consideration of the warrant, if any. The board
of directors may subject the exercise of the warrants to such conditions as it
in its discretion may determine, including restrictions, if any, as to the
disposal of the shares issued upon the exercise of the warrants.
<PAGE>
TITLE III.- MANAGEMENT
ARTICLE 6
The corporation shall be managed by a board of directors composed of at
least three members, either shareholders or not. Each director shall be
appointed for a term not exceeding six years, by a general meeting of
shareholders. Each director may be reelected and may be removed at any time by a
general meeting of shareholders.
The number of directors and their term of office shall be fixed by a
general meeting of shareholders.
In the event of a vacancy on the board of directors, the remaining
directors have the right to appoint a new director to fill the vacancy, which
appointment must be ratified by the next general meeting.
ARTICLE 7
The board of directors shall elect from among its members a chairman.
A meeting of the board of directors shall be convened at any time upon
call by the chairman or at the request of not less than two directors.
The board of directors may validly deliberate and act only if the majority
of its members are present or represented. A proxy between directors, is
permitted provided that a director may represent only one of his colleagues at a
given board meeting. A director shall be considered present at a board meeting
if he participates in the meeting by conference call. Directors may cast their
vote on the points of the agenda by letter, telegram, telex or telefax.
Resolutions in writing approved and signed by all directors shall have the same
effect as resolutions voted at the directors' meetings.
Resolutions shall require a majority vote.
In case of a tie, the chairman has a casting vote.
<PAGE>
ARTICLE 8
The board of directors shall have the broadest powers to perform all acts
of administration and disposition in compliance with the corporate object stated
in Article 4 hereof.
All powers not expressly reserved by law or by the present articles of
association to a general meeting of shareholders, shall fall within the
competence of the board of directors.
The board of directors may pay interim dividends in compliance with the
legal requirements.
ARTICLE 9
The corporation shall be bound in all circumstances by the joint signature
of two directors or by the sole signature of the managing director, if any, and
by the signature of individual(s) who have received a delegation of powers or
proxy given by the board of directors pursuant to Article 10 hereof.
ARTICLE 10
The board of directors may delegate its powers for the conduct of the
daily management of the corporation, to one or more directors, who will be
called managing directors.
The board of directors may also commit the management of all or part of
the affairs of the corporation, to one or more managers, and give special powers
for determined matters to one or more proxyholders. Such proxyholder or manager
shall not be required to be a director or a shareholder.
Delegation to a member of the board of directors is subject to a prior
authorization of the general meeting.
The board of directors may designate one or more committees.
Each committee designated by the board of directors shall consist of such
number of directors
<PAGE>
as from time to time may by fixed by the board of directors and may include
individuals who are not directors. The board of directors may also designate one
or more directors as alternate members of any such committee, who may replace
any absent or disqualified member or members at any meeting of such committee.
Thereafter, members (and alternate members, if any) of each such committee may
be designated by the board of directors. Any such committee may be abolished or
re-designated from time to time by the board of directors. Each member (and each
alternate member) of any such committee shall hold office until his or her
successor shall have been designated or until his or her earlier death,
resignation or removal.
Any committee formed by the board of directors, except as otherwise
provided in this article, shall have and may exercise such powers of the board
of directors as may be provided by resolution of the board of directors.
No committee formed by the board of directors shall have the power or
authority:
a) to approve or adopt any action or matter expressly required by the
applicable laws of the Grand-Duchy of Luxembourg to be submitted to the
stockholders for approval; or
b) adopt, amend or repeal any provision of the articles of association of the
corporation, subject to what is stated under article 5.
Each such committee may fix its own rules of procedure and may meet at
such place (within or outside the Grand-Duchy of Luxembourg), at such time and
upon such notice, if any, as it shall determine from time to time. Each such
committee may keep minutes of its proceedings and shall report such proceedings
to the board of directors at the meeting of the board of directors next
following any such proceedings.
<PAGE>
Except as may be otherwise provided in the resolution creating such committee,
at all meetings of any committee the presence of members (or alternate members)
constituting a majority of the total membership of such committee shall
constitute a quorum for the transaction of business. The act of the majority of
the members present at any meeting at which a quorum is present shall be the act
of such committee. Any action required or permitted to be taken at any meeting
of any such committee may be taken without a meeting, if all members of such
committee shall consent to such action in writing and such writing or writings
are filed with the minutes of the proceedings of the committee. The members of
any such committee shall act only as a committee, and the individual members of
such committee shall have no power as such.
Members of any committee designated by the board of directors may
participate in a meeting of such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting.
In the event of the absence or disqualification of a member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Any member (and any alternate member) of any committee may resign at any
time by delivering a written notice of resignation, signed by such member, the
chairman of the board of directors.
<PAGE>
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
Any member (and any alternate member) of any committee may be removed from
his of her position as a member (or alternate member, as the case may be) of
such committee at any time, either for or without cause, by resolution adopted
by a majority of the whole board of directors.
If any vacancy shall occur in any committee, by reason of
disqualification, death, resignation, removal or otherwise, the remaining
members (and any alternate members) shall continue to act, and any such vacancy
may be filled by the board of directors.
ARTICLE 11
Any litigation involving the corporation either as plaintiff or as
defendant, will be handled in the name of the corporation by the board of
directors, represented by its chairman or by a director delegated for such
purpose.
TITLE IV.- SUPERVISION
ARTICLE 12
The corporation shall be supervised by one or more statutory auditors,
appointed by a general meeting of shareholders which shall fix their number,
remuneration, and their term of office, such office not to exceed six years.
They may be reelected and removed at any time.
TITLE V.- GENERAL MEETING
ARTICLE 13
The annual general meeting of shareholders will be held in the commune of
the registered office at the place specified in the convening notices on the
second Tuesday of June at 11.00 a.m. and the first time in the year 2000. If
such day is a legal holiday, the annual general meeting will be held on the next
following business day.
<PAGE>
The board of directors or the statutory auditor may convene other
shareholders' meetings each time the interests of the company so require.
Shareholders' decisions may also be taken by unanimous written consent,
except where the decision involves an amendment to the articles of
incorporation.
If all the shareholders are present or represented and if they declare
that they have had knowledge of the agenda, the general meeting may take place
without previous convening notices.
TITLE VI.- ACCOUNTING YEAR, ALLOCATION 0F PROFITS
ARTICLE 14
The accounting year of the corporation shall begin on the lst of January
and shall terminate on the 3lst of December of each year, with the exception of
the first accounting year, which shall begin on the date of the formation of
the corporation and shall terminate on the 3lst of December 1999.
ARTICLE 15
After deduction of any and all expenses and amortizations of the
corporation, the credit balance represents the net profits of the corporation.
Of such net profit, five percent (5%) shall be appropriated for the compulsory
legal reserve. Such appropriation shall cease to be compulsory when the legal
reserve amounts to ten percent (10%) of the capital of the corporation, but must
be resumed until the reserve is entirely reconstituted if, at any time and for
whatever reason, the legal reserve has fallen below the required ten percent of
the capital of the corporation (10%).
The balance of the net profit is at the disposal of the general meeting.
<PAGE>
TITLE VII.- DISSOLUTION, LIQUIDATION
ARTICLE 16
The corporation may be dissolved by a resolution of the general meeting of
shareholders. The liquidation will be carried out by one or more liquidators,
appointed by the general meeting of shareholders which will specify their powers
and fix their remuneration.
TITLE VIII.- GENERAL PROVISIONS
ARTICLE 17
All matters not governed by these articles of association are to be
construed in accordance with the law of August lOth 1915 on commercial companies
and the amendments thereto.
SUIT LA TRADUCTION FRANCAISE DU TEXTE QUI PRECEDE:
TITRE IER: DENOMINATION, SIEGE SOCIAL, OBJET, DUREE
ARTICLE 1ER
Il est forme une societe anonyme sous la denomination de CARRIER 1
INTERNATIONAL S.A.
ARTICLE 2
Le siege de la societe est etabli a Strassen.
Il pourra etre transfere dans tout autre lieu de la commune par simple
decision du conseil d'administration.
Au cas ou des evenements extraordinaires d'ordre politique ou economique,
de nature a compromettre l'activite normale au siege social ou la communication
aisee de ce siege avec l'etranger se produiront ou seront imminents, le siege
social pourra etre declare transfere provisoirement a l'etranger, jusqu'a
cessation complete de ces circonstances anormales. Une telle decision n'aura
d'effet sur la nationalite de la societe. La declaration de transfert du siege
sera faite et portee a la connaissance des tiers par l'organe de
<PAGE>
la societe qui se trouvera le mieux place a cet effet dans les circonstances
donnees.
ARTICLE 3
La societe est constituee pour une duree illimitee.
ARTICLE 4
La societe peut entreprendre toutes operations permises par les lois
luxembourgeoises relatives au societes commerciales et en particulier, elle peut
effectuer toutes transactions ayant un rapport direct ou indirect avec la prise
de participations dans toute entreprise, sous quelque forme que ce soit,
exercant des activites on relation avec le domaine des telecommunications et
l'administration, la gestion, le controle, et le developpement de ces prises de
participations.
Elle pourra notamment employer ses fonds a la creation, a la creation, a
la mise en valeur et a la liquidation d'un portefeuille se composant de tous
titres et brevets de toute origine, participer a la creation, au developpement
et au controle de toute entreprise, acquerir par voie d'apport, de souscription,
de prise ferme ou d'option d'achat et de toute autre maniere, tous titres et
brevets, les realiser par voie de vente, de cession, d'echange ou autrement,
faire mettre en valeur ces affaires et brevets et accorder aux societes
auxquelles elle s'interesse tous concours, prets, avances ou garanties.
La societe pourra egalement entreprendre toutes operations commerciales,
industrielles ou financieres, toutes transactions en rapport avec la propriete
immobiliere ou mobiliere, qu'elle estimerait utile a la realisation de son
objet. Ceci comprendra sans limitation la possibilite d'emettre des warrants,
des obligations et d'autres instruments financiers et emprunter des fonds a des
<PAGE>
institutions financieres et a d'autres tierces parties.
TITRE II: CAPITAL, ACTIONS
ARTICLE 5
Le capital social est fixe a SOIXANTE MILLIONS DE DOLLARS DES ETATS-UNIS
(60.000.000.-USD) represente par TRENTE MILLIONS (30.000.000) d'actions d'une
valeur nominale de DEUX DOLLARS DES ETATS-UNIS (2.-USD) chacune.
Le capital autorise de la societe est fixe a CENT- DIX MILLIONS DOLLARS
DES ETATS UNIS (110,000,000,-USD) a diviser en CINQUANTE-CINQ MILLIONS
(55.000.000.) d'actions ayant une valeur nominale de DEUX DOLLARS DES ETATS UNIS
(2.-USD) chacune. Un maximum de QUATRE MILLIONS QUATRE-CENT QUARANTE-QUATRE
MILLE ET QUATRE-CENT QUARANTE-QUATRE DOLLARS DES ETATS UNIS (4,444,444,.-USD)
(sans compter d'autres options additionnelles offertes a Thomas Wynne ou Victor
Pelson) sont reserves aux detenteurs d'options emises sous le Share Option Plan
de 1999, approuve par le conseil d'administration a la date du 15 janvier 1999
et un maximum de HUIT MILLIONS DE DOLLARS DES ETATS UNIS (8,000,000,-USD) sont
reserves aux detenteurs de warrants emis comme partie d'une emission de la
societe de 1) USD Units, chaque USD Unit consistant en une note de un dollar
venant a echeance en 2009 et un warrant pour acquerir des actions ordinaires de
la societe et/ou 2) des Euro Units, chaque Euro Unit consistant en une note de
un euro venant a echeance en 2009 et un warrant pour acquerir des actions
ordinaires de la societe, dans chaque cas comme il sera determine par le conseil
d'administration ou son (ses) delegue(s)
Sous reserve de ce qui a ete dit plus haut, concernant le capital social
autorise reserve aux detenteurs d'options et/ou de warrants, le capital social
autorise et souscrit de la societe peut etre
<PAGE>
augmente ou reduit par une decision de l'assemblee generale d'actionnaires,
deliberant aux conditions de quorum requis pour une modification du capital
social.
Le conseil d'administration est par la presente autorise d'emettre des
actions supplementaires avec ou sans prime d'emission en vue de porter le
capital total de la societe au total du capital autorise en une fois ou en
plusieurs fois, tel qu'il le decide librement et d'accepter des souscriptions
pour ces actions endeans une periode determinee conformement aux termes de
l'article 32(5) de la loi sur les societes commerciales du 10 aout 1915, telle
que modifiee.
Le conseil d'administration est autorise plus particulierement a proceder
a des emissions sans devoir reserver pour les actionnaires existants un droit
preferentiel ou un droit de preemption de souscrire les actions qui vont etre
emises.
Le conseil d'administration pourra deleguer a une quelconque personne
valablement autorisee, le pouvoir d'accepter les souscriptions, de recevoir les
paiements pour les actions representant une partie ou le tout d'une telle
augmentation de capital, d'emettre des actions et de proceder a tous actes et
actions necessaires pour documenter l'augmentation de capital et, en
particulier, de modifier le present article pour refleter l'augmentation de
capital, sous la forme notariee telle que requise par la loi.
Les actions seront, a l'option du detenteur, exprimes en certificats
representant une seule action ou en des certificats representant deux ou
plusieurs actions.
Les actions seront emises, a l'option de l'actionnaire, comme actions
nominatives ou au porteur, sauf au cas ou des restrictions au
<PAGE>
transfert ou d'autres restrictions requierent le contraire.
La societe pourra refuser d'approuver un transfert d'actions si elle
estime qu'un tel transfert est en violation d'une restriction existante sur le
transfert d'actions qui a ete portee a sa connaissance (etant entendu que ce
refus no doit pas resulter en une situation ou un actionnaire de la societe, qui
veut vendre ses actions a une partie qui a fait une offre de benne foi
d'acquerir ces actions, est force de garder ces actions pour une periode
prolongee) et elle notifiera les raisons de son refus a l'actionnaire qui veut
proceder au transfert.
Le conseil d'administration pourra deleguer a tout comite etabli par le
conseil d'administration la responsabilite d'approuver ou de refuser les
transferts d'actions envisages conformement aux termes du paragraphe precedent
de cet article 5.
La societe pourra, dans la mesure de ce qui est permis par la loi,
acquerir ses propres actions.
De plus, le conseil d'administration est autorise d'emettre des
obligations ou notes ordinaires ou convertibles, nominatifs ou au porteur, avec
une denomination quelconque et payable en n'importe quelle devise. Toute
emission d'obligations et de notes convertibles pourra seulement etre effectuee
dans les limites du capital autorise.
Le conseil d'administration determinera la nature, le prix, le taux
d'interet, les conditions d'emission et le remboursement et toutes autres
conditions qui pourront le cas echeant etre en relation avec une telle emission
d'obligations ou de notes.
Si la societe emet des obligations ou des notes au porteur, un registre
des detenteurs d'obligations nominatives sera tenu au siege social de la
<PAGE>
societe, ou a toute autre endroit que le conseil d'administration determinera a
cet effet.
Dans le cadre des limites du capital autorise, le conseil d'administration
est egalement autorise a emettre des warrants donnant a chaque porteur le droit
de souscrire une ou plusieurs actions ( ou fraction d'action, en etant
sous-entendu que la societe no sera aucunement obligee d'emettre des fractions
d'action), sans reserver aux actionnaires existants un droit preferentiel
d'acquerir des warrants ou de souscrire des actions suite a l'exercice des
warrants.
Le conseil d'administration est autorise a determiner les conditions sous
lesquelles les warrants seront emis, y inclus sans limitation le prix de
souscription a payer pour les actions suite a l'exercice des warrants, sans
prejudice de l'article 26-5 (1) de la Loi sur les Societes Commerciales, ainsi
que le prix a payer en consideration du warrant, si applicable. Le conseil
d'administration peut soumettre l'exercice des warrants aux conditions qu'il
determine librement, y inclus des restrictions, si applicable, concernant la
disposition des actions emises suivant l'exercice des warrants.
TITRE III: ADMINISTRATION
ARTICLE 6
La societe est administree par un conseil compose de trois membres au
moins, associes ou non, nommes chacun pour un terme qui no peut exceder six
annees, par l'assemblee generale des actionnaires. Chaque administrateur peut
etre reelu et revoque a tout moment par l'assemblee generale.
Le nombre des administrateurs et la duree de leur mandat sent fixes par
l'assemblee generale de la societe.
En cas de vacance au sein du conseil d'administration, les administrateurs
restants ont
<PAGE>
le droit de nommer un nouvel administrateur, laquelle nomination devra etre
ratifiee a la prochaine assemblee.
ARTICLE 7
Le conseil d'administration choisit parmi ses membres un president.
Le conseil d'administration se reunit a tout moment, sur la convocation du
president ou sur la demande de deux administrateurs.
Le conseil d'administration no peut valablement deliberer et statuer que
si la majorite de ses membres est presente ou representee. Une procuration entre
administrateurs est permise etant entendu qu'un administrateur no peut
representer qu'un de ses collegues lors d'une reunion du conseil
d'administration.
Un administrateur sera considere comme etant present a une reunion du
conseil s'il y participe par conference telephonique. Les administrateurs
peuvent emettre leurs votes sur les points a l'ordre du jour par lettre,
telegramme, telex ou fax.
Les resolutions par ecrit approuvees et signees par tous les
administrateurs auront le meme effet que les resolutions adoptees a une reunion
du conseil d'administration.
Les resolutions sont prises a la majorite des voix.
En cas de partage, le president a une voix preponderante.
ARTICLE 8
Le conseil d'administration est investi des pouvoirs les plus etendus pour
effectuer tous actes d'administration et de disposition qui rentrent dans
l'objet social conformement a l'article 4 cidessus.
<PAGE>
Il a dans sa competence tous les actes qui ne sont pas reserves
expressement par la loi et les statuts a l'assemblee generale.
Le conseil d'administration est autorise a verser des acomptes sur
dividendes, aux conditions prevues par la loi.
ARTICLE 9
La societe est engagee en toutes circonstances par les signatures
conjointes de deux administrateurs, ou par la signature d'un
administrateur-delegue, s'il en est, et par la signature individuelle de la
(des) personne (s) qui aura (auront) recu une delegation de pouvoirs ou un
mandat confere par le conseil d'administration en vertu de l'article 10 des
statuts.
ARTICLE 10
Le conseil d'administration peut deleguer la gestion journaliere de la
societe a un ou plusieurs administrateurs qui prendront la denomination
d'administrateurs-delegues.
Le conseil d'administration peut aussi confier la direction de l'ensemble
ou de telle partie ou branche speciale des affaires sociales a un ou plusieurs
directeurs, et donner des pouvoirs speciaux pour des affaires determinees a un
ou plusieurs fondes de pouvoirs. Le fonde de pouvoir ou le directeur no doit pas
etre necessairement un administrateur ou un actionnaire.
La delegation a un membre du conseil d'administration est subordonnee a
l'autorisation prealable de l'assemblee generale.
Le conseil d'administration peut designer un ou plusieurs comites.
Chaque comite designe par le conseil d'administration comprendra autant
d'administrateurs que le conseil d'administration nommera, y compris des
personnes qui ne sont pas des administrateurs. Le conseil d'administration
<PAGE>
peut egalement designer un ou plusieurs administrateurs remplacants du comite,
dont la fonction sera de remplacer des membres absents ou disqualifies ou des
membres a toute reunion du comite. Par la suite, les membres (et les membres
remplacants, le cas echeant) de chaque comite peuvent etre designes par le
conseil d'administration. Chaque comite peut etre aboli ou re-designe de temps
en temps par le conseil d'administration. Chaque membre (et chaque membre
remplacant) de chaque comite sera en charge jusqu'a ce que son successeur ait
ete designe ou jusqu'a sa mort, sa resignation ou sa revocation, si tel
evenement se produisait a une date plus rapprochee.
Chaque comite forme par le conseil d'administration, sauf indication
contraire dans le present article, aura et exercera les pouvoirs du conseil
d'administration tel que prevu par les resolutions du conseil d'administration.
Aucun comite forme par le conseil d'administration aura le pouvoir ou
l'autorite
a) d'approuver ou d'adopter une action ou affaire dont les lois applicables du
Grand-Duche de Luxembourg requierent expressement l'approbation des actionnaires
b) d'adopter, de modifier ou d'abolir une disposition des statuts de la societe,
sans prejudice des disposition de l'article 5
Chaque comite peut fixer ses propres regles et pourra se reunir a telle
place ( au Grand-Duche de Luxembourg ou a l'etranger) , a telle heure et, le cas
echeant, selon telle convocation qu'il pourra de temps en temps determiner.
Chaque comite pourra tenir des proces-verbaux des ses reunions et fera le
rapport des ses reunions au conseil d'administration lors de la reunion du
conseil d'administration suivante.
<PAGE>
Sauf indication contraire dans les resolutions creant le comite, a chaque
reunion de chaque comite, la presence des membres (ou des membres remplacants)
constituant la majorite du total des membres de ce comite sera constitutif d'un
quorum. Les actes de la majorite des membres presents a chaque reunion lors de
laquelle un quorum est present seront consideres comme etant ceux du comite.
Toute action qui pourrait etre prise lors d'une reunion d'un comite pourra etre
prise sans reunion, si tous les membres du comite consentissent a l'action prise
par ecrit et l'ecrit ou les ecrits sent deposes avec les proces-verbaux des ses
reunions du comite. Les membres de chaque comite agiront uniquement en tant que
comite et les membres individuels d'un comite n' ont pas de pouvoir propre.
Les membres de tout comite designes par le conseil d'administration
pourront participer dans une reunion de ce comite par conference call ou voie de
communication similaire permettant a tous les personnes participant dans la
reunion de s'entendre, et la participation dans une reunion suivant cette
disposition constituera une presence en personne dans cette reunion.
En cas d'absence ou de disqualification de tout membre de tout comite, le
membre ou les membres presents a la reunion et non disqualifies de voter,
independamment du fait si il, elle ou eux constituent un quorum, pourra/ont a
l'unanimite designer un autre membre du conseil d'administration en vue d'agir
lors de la reunion en lieu et place de la personne absente ou disqualifiee.
Chaque membre (et chaque membre remplacent) de tout comite pourra
demissionner a tout moment en remettant une note ecrite de demission, signee par
le membre en question, au president du conseil
<PAGE>
d'administration. Sauf indication contraire, la demission prendra effet apres la
remise de la note. Chaque membre (et chaque membre remplacant) de tout comite
pourra etre revoque de sa position en tant que membre (ou membre remplacant, le
cas echeant) de tel comite a tout moment, avec ou sans cause, par le biais d'une
resolution prise a la majorite de l'entier conseil d'administration.
En cas de poste vacant au sein d'un comite, en raison d'une
disqualification, d'un deces, d'une demission, d'une revocation ou en raison de
toute autre cause, les membres restants (et tous les membres remplacants)
continueront d'agir, et chaque poste vacant pourra etre occupe par le conseil
d'administration.
ARTICLE 11
Les actions judiciaires concernant la societe, tant en demandant qu'en
defendant, sont suivies au nom de la societe par le conseil d'administration,
representee par son president ou un administrateur delegue a ces fins.
TITRE IV: SURVEILLANCE
ARTICLE 12
La societe est surveillee par un ou plusieurs commissaires nommes par
l'assemblee generale, qui fixe leur nombre et leur remuneration, ainsi que la
duree de leur mandat, qui no peut exceder six annees.
Ils peuvent etre reelus ou revoques a tout moment.
TITRE V: ASSEMBLEE GENERALE
ARTICLE 13
L'assemblee generale annuelle se reunit dans la commune du siege social, a
l'endroit indique dans les convocations, le second mardi du mois de juin a 11.00
heures et pour la premiere fois en 2000. Si ce jour est un jour ferie legal,
l'assemblee generale a lieu le premier jour ouvrable suivant.
<PAGE>
Le conseil d'administration ou le commissaire aux comptes peut convoquer
d'autres assemblees generales chaque fois que l'interet de de la societe le
requiere.
Les decisions d'actionnaires peuvent egalement etre prises par un
consentement ecrit et unanime, excepte lorsque de telles decisions impliquent
une modification des statuts.
Chaque action donne droit a une voix.
Si tous les actionnaires sont presents ou representes et s'ils declarent
qu'ils ont eu connaissance de l'ordre du jour, l'assemblee generale peut avoir
lieu sans convocation prealable.
TITRE VI: ANNEE SOCIALE, REPARTITION DES BENEFICES
ARTICLE 14
L'annee sociale commence le 1er janvier et finit le 31 decembre de chaque
annee.
Exceptionnellement, le premier exercice social comprendra tout le temps a
courir de la constitution de la societe jusqu'au 31 decembre 1999.
ARTICLE 15
L'excedent favorable du bilan, defalcation faite des charges sociales et
des amortissements, forme le benefice net de la societe. Sur ce benefice, il est
preleve cinq pour cent (5%) pour la formation du fonds de reserve legale
obligatoire; ce prelevement cesse d'etre obligatoire lorsque la reserve aura
atteint le dixieme du capital social, mais devrait toutefois etre repris jusqu'a
entiere reconstitution, si a un moment donne et pour quelque cause que ce soit,
le fonds de reserve devient inferieur a dix pour cent (10%) du capital de la
societe.
Le solde est a la disposition de l'assemblee generale.
<PAGE>
TITRE VII: DISSOLUTION, LIQUIDATION
ARTICLE 16
La societe peut etre dissoute par decision de l'assemblee generale. Lors
de la dissolution de la societe, la liquidation s'effectuera par les soins d'un
ou de plusieurs liquidateurs, nommes par l'assemblee generale qui determine
leurs pouvoirs et leurs emoluments.
TITRE VIII: DISPOSITIONS GENERALES
ARTICLE 17
Pour tous les points non specifies dans les presents statuts, les parties
se referent et se soumettent aux dispositions de la loi luxembourgeoise du 10
aout 1915 sur les societes commerciales et de ses lois modificatives.
POUR COPIE CONFORME DES STATUTS COORDONNES Hesperange, le 24 fevrier 1999.
[SEAL]
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CARRIER1 INTERNATIONAL S.A.,
Issuer
and
THE CHASE MANHATTAN BANK,
Trustee
Indenture
Dated as of February 19, 1999
13 1/4% Senior Dollar Notes due 2009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 310(a)(1)..................................................... 7.10
(a)(2)..................................................... 7.10
(b)........................................................ 7.03; 7.08
Section 311(a)........................................................ 7.03
(b)........................................................ 7.03
Section 312(a)........................................................ 2.04
(b)........................................................ 11.02
(c)........................................................ 11.02
Section 313(a)........................................................ 7.06
(b)(2)..................................................... 7.07
(c)........................................................ 7.05; 7.06; 11.02
(d)........................................................ 7.06
Section 314(a)........................................................ 7.05; 11.02
(a)(4)..................................................... 4.17; 11.02
(b)........................................................ 10.01
(c)(1)..................................................... 11.03
(c)(2)..................................................... 11.03
(d)........................................................ 10.01
(e)........................................................ 4.17; 11.04
Section 315(a)........................................................ 7.02
(b)........................................................ 7.05; 11.02
(c)........................................................ 7.02
(d)........................................................ 7.02
(e)........................................................ 6.11
Section 316(a)(1)(A).................................................. 6.05
(a)(1)(B).................................................. 6.04
(b)........................................................ 6.07
(c)........................................................ 9.03
Section 317(a)(1)..................................................... 6.08
(a)(2)..................................................... 6.09
(b)........................................................ 2.05
Section 318(a)........................................................ 11.01
(c)........................................................ 11.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
2
SECTION 1.01. DEFINITIONS......................................................................2
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...............................28
SECTION 1.03. RULES OF CONSTRUCTION...........................................................29
ARTICLE TWO
THE NOTES
29
SECTION 2.01. FORM AND DATING.................................................................29
SECTION 2.02. RESTRICTIVE LEGENDS.............................................................31
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS.....................................34
SECTION 2.04. REGISTRAR AND PAYING AGENT......................................................34
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST.............................................35
SECTION 2.06. TRANSFER AND EXCHANGE...........................................................36
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES..........................................37
SECTION 2.08. SPECIAL TRANSFER PROVISIONS.....................................................38
SECTION 2.09. REPLACEMENT NOTES...............................................................42
SECTION 2.10. OUTSTANDING NOTES...............................................................42
SECTION 2.11. TEMPORARY NOTES.................................................................43
SECTION 2.12. CANCELLATION....................................................................43
SECTION 2.13. CUSIP NUMBERS...................................................................43
SECTION 2.14. DEFAULTED INTEREST..............................................................43
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES....................................................44
ARTICLE THREE
REDEMPTION
44
SECTION 3.01. RIGHT OF REDEMPTION.............................................................44
SECTION 3.02. NOTICES TO TRUSTEE..............................................................45
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED...............................................45
SECTION 3.04. NOTICE OF REDEMPTION............................................................45
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION..................................................46
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.....................................................47
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION..........................................47
SECTION 3.08. NOTES REDEEMED IN PART..........................................................47
ARTICLE FOUR
COVENANTS
47
SECTION 4.01. PAYMENT OF NOTES................................................................47
</TABLE>
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Note: The Table of Contents shall not for any purposes be deemed to be a part of
the Indenture.
<PAGE>
iii
<TABLE>
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.................................................48
SECTION 4.03. LIMITATION ON INDEBTEDNESS......................................................48
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS...............................................52
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.........................................................56
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES....................................................................58
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES................58
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.....................59
SECTION 4.09. LIMITATION ON LIENS.............................................................60
SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS.......................................61
SECTION 4.11. LIMITATION ON ASSET SALES.......................................................61
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL....................................63
SECTION 4.13. EXISTENCE.......................................................................63
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS...............................................64
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE.........................................64
SECTION 4.16. NOTICE OF DEFAULTS..............................................................65
SECTION 4.17. COMPLIANCE CERTIFICATES.........................................................65
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS.......................................65
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS.........................................66
SECTION 4.20. ADDITIONAL AMOUNTS..............................................................66
ARTICLE FIVE
SUCCESSOR CORPORATION
68
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.....................................................68
SECTION 5.02. SUCCESSOR SUBSTITUTED...........................................................69
ARTICLE SIX
DEFAULT AND REMEDIES
69
SECTION 6.01. EVENTS OF DEFAULT...............................................................69
SECTION 6.02. ACCELERATION....................................................................71
SECTION 6.03. OTHER REMEDIES..................................................................72
SECTION 6.04. WAIVER OF PAST DEFAULTS.........................................................72
SECTION 6.05. CONTROL BY MAJORITY.............................................................72
SECTION 6.06. LIMITATION ON SUITS.............................................................72
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT............................................73
SECTION 6.08. COLLECTION SUIT BY TRUSTEE......................................................73
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM................................................74
SECTION 6.10. PRIORITIES......................................................................74
SECTION 6.11. UNDERTAKING FOR COSTS...........................................................74
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES..............................................75
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE..................................................75
SECTION 6.14. DELAY OR OMISSION NOT WAIVER....................................................75
</TABLE>
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ARTICLE SEVEN
TRUSTEE
75
SECTION 7.01. GENERAL.........................................................................75
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE.......................................................76
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE....................................................77
SECTION 7.04. TRUSTEE'S DISCLAIMER............................................................77
SECTION 7.05. NOTICE OF DEFAULT...............................................................77
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS...................................................77
SECTION 7.07. COMPENSATION AND INDEMNITY......................................................77
SECTION 7.08. REPLACEMENT OF TRUSTEE..........................................................78
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC................................................79
SECTION 7.10. ELIGIBILITY.....................................................................79
SECTION 7.11. MONEY HELD IN TRUST.............................................................80
ARTICLE EIGHT
DISCHARGE OF INDENTURE
80
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS............................................80
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE...........................................81
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS...............................................83
SECTION 8.04. APPLICATION OF TRUST MONEY......................................................85
SECTION 8.05. REPAYMENT TO COMPANY............................................................85
SECTION 8.06. REINSTATEMENT...................................................................85
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
86
SECTION 9.01. WITHOUT CONSENT OF HOLDERS......................................................86
SECTION 9.02. WITH CONSENT OF HOLDERS.........................................................86
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT................................................88
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES................................................88
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC.................................................88
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT.............................................89
ARTICLE TEN
SECURITY
89
SECTION 10.01. SECURITY.......................................................................89
ARTICLE ELEVEN
MISCELLANEOUS
90
SECTION 11.01. TRUST INDENTURE ACT OF 1939....................................................90
SECTION 11.02. NOTICES........................................................................91
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.............................92
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..................................92
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR....................................93
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY.........................................93
SECTION 11.07. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..................................93
SECTION 11.08. NO RECOURSE AGAINST OTHERS.....................................................93
SECTION 11.09. SUCCESSORS.....................................................................94
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 11.10. DUPLICATE ORIGINALS............................................................94
SECTION 11.11. SEPARABILITY...................................................................94
SECTION 11.12. TABLE OF CONTENTS, HEADINGS, ETC...............................................94
SECTION 11.13. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE. .................94
SECTION 11.14. JUDGMENT CURRENCY..............................................................95
SECTION 11.15. GOVERNING LAW..................................................................95
</TABLE>
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vi
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vii
<TABLE>
<S> <C>
EXHIBIT A Form of Note...................................................................A-1
EXHIBIT B Form of Certificate............................................................B-1
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Non-QIB Accredited Investors..................C-1
EXHIBIT D Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S..................................D-1
</TABLE>
<PAGE>
INDENTURE, dated as of February 19, 1999, between Carrier1 International
S.A., a societe anonyme organized under the laws of the Grand Duchy of
Luxembourg (the "COMPANY"), and The Chase Manhattan Bank, a New York banking
corporation, trustee (the "TRUSTEE").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $160,000,000 aggregate
principal amount of the Company's 13.25% Senior Dollar Notes 2009 (the "NOTES")
issuable as provided in this Indenture. The Notes will be partially secured
pursuant to the terms of a Pledge Agreement (as defined herein) by Pledged
Securities (as defined herein) as provided by Article Ten of this Indenture. The
Company has agreed to issue and sell a total of 160,000 Units (the "DOLLAR
UNITS"), each of which consists of one Note and one warrant (a "DOLLAR
WARRANT"), each Dollar Warrant initially entitling the holder thereof to
purchase 6.71013 shares of Common Stock, par value $2.00 per share ("COMMON
SHARES"), of the Company, subject to adjustment. The Notes and Dollar Warrants
included in each Dollar Unit will become separately transferable upon the
earliest to occur of (i) the date that is six months following the Closing Date,
(ii) the commencement of the Exchange Offer pursuant to the Registration Rights
Agreement, (iii) the date the Shelf Registration Statement is declared effective
and (iv) a date determined by Morgan Stanley & Co. Incorporated (the "SEPARATION
DATE"). The Company has also agreed to issue and sell a total of 85,000 Units
(the "EURO UNITS"), each of which consists of one Euro1,000 13.25% Senior Euro
Note due 2009 (a "EURO NOTE") and one warrant (a "EURO WARRANT"), each Euro
Warrant initially entitling the holder thereof to purchase 7.53614 Common
Shares, subject to adjustment. All things necessary to make this Indenture a
valid agreement of the Company, in accordance with its terms, have been done,
and the Company has done all things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, valid obligations of the Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act of 1939, as amended, that are required to be a part of
and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
ARTICLE ONE
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2
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or is merged with or consolidated
with a Restricted Subsidiary or assumed in connection with an Asset Acquisition
by a Restricted Subsidiary and not Incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"ADDITIONAL AMOUNTS" has the meaning provided in Section 4.20.
"ADDITIONAL NOTES" has the meaning provided in Section 2.15.
"ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP; PROVIDED that the
following items shall be excluded in computing Adjusted Consolidated Net Income
(without duplication):
(i) the net income (or loss) of any Person that is not a Restricted
Subsidiary, except (x) with respect to net income, to the extent of the
amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and
(y) with respect to net losses, to the extent of the amount of Investments
made by the Company or any Restricted Subsidiary in such Person during such
period;
(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04 of this Indenture (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Company or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by the Company or any of its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary other than a
Permanent Guarantor to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such
net income is not at the time permitted (after giving effect to any
effective waiver, consent or approval) by the operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary;
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3
(iv) any gains or losses attributable to Asset Sales (without regard
to clause (c) or (d) in the proviso to the definition thereof);
(v) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04, any amount paid or accrued as dividends on Preferred Stock of
the Company or any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries;
(vi) all extraordinary gains and extraordinary losses or extraordinary
charges;
(vii) any compensation expense to the extent paid or payable solely
with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock) of the Company; and
(viii) the cumulative effect of a change in accounting principles.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.
"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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means any Registrar, Co-Registrar or Paying Agent.
"AGENT MEMBERS" has the meaning provided in Section 2.07(a).
"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
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4
Subsidiary or shall be merged into or consolidated with the Company or any of
its Restricted Subsidiaries; PROVIDED that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such investment, as determined in good
faith by the Board of Directors (whose determination shall be conclusive and
evidenced by a Board Resolution) or (ii) an acquisition by the Company or any of
its Restricted Subsidiaries of the property and assets of any Person other than
the Company or any of its Restricted Subsidiaries that constitute substantially
all of a division or line of business of such Person; PROVIDED that the property
and assets acquired are related, ancillary or complementary to the businesses of
the Company and its Restricted Subsidiaries on the date of such acquisition, as
determined in good faith by the Board of Directors (whose determination shall be
conclusive and evidenced by a Board Resolution).
"ASSET DISPOSITION" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"ASSET SALE" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock of or any
other Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by Article
Five of this Indenture; PROVIDED that "Asset Sale" shall not include (a) sales,
transfers or other dispositions of Temporary Cash Investments, inventory,
receivables and other current assets, (b) sales, transfers or other dispositions
of assets constituting a Restricted Payment (or a transaction excluded from the
definition of the term "Restricted Payments") permitted to be made under Section
4.04, (c) sales, transfers or other dispositions of assets with a fair market
value (as certified in an Officers' Certificate) not in excess of $2 million in
any transaction or series of related transactions, or (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent that the consideration received
would constitute property or assets of the kind described in clause (B) of the
second paragraph of Section 4.11.
"AVERAGE LIFE" means, at any date of determination with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date
<PAGE>
5
of determination to the dates of each successive scheduled principal payment
of such Indebtedness and (b) the amount of such principal payment by (ii) the
sum of all such principal payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"BOARD RESOLUTION" means a copy of a resolution of the Board of Directors
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 adoption, delivered to the Trustee.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means the discounted present value of the
rental obligations under a Capitalized Lease.
"CHANGE OF CONTROL" means such time as (i) a "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% (50%, if the Permitted Holders hold more than 35% of the voting
power of the Voting Stock of the Company on a fully diluted basis) of the total
voting power of the Voting Stock of the Company on a fully diluted basis and
such ownership represents a greater percentage of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, than is held by Permitted
Holders on such date; or (ii) during any period of two consecutive years
beginning on or after the Closing Date, individuals who at the beginning of such
period were members of the Board of Directors (together with any new directors
whose election by the Board of Directors or whose nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
members of the Board of Directors then 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 the Board of Directors then in office.
<PAGE>
6
"CLOSING DATE" means the date on which the Notes are first issued under
this Indenture.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"COMMON SHARES" has the meaning provided in the recitals to this Indenture.
"COMMON STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation all series and classes of such common stock.
"COMPANY" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"COMPANY ORDER" means a written request or order signed in the name of the
Company by a Senior Officer and another Officer, or by two Senior Officers, and
delivered to the Trustee.
"CONSOLIDATED EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) provision for all taxes based on income, profits or capital, (iii)
depreciation expense, (iv) amortization expense (including but not limited to
amortization of goodwill and intangibles and amortization and write-off of
financing costs) and (v) all other non-cash items reducing Adjusted Consolidated
Net Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income (other than any item
reversing, offsetting or reducing any such accrual or reserve), all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; PROVIDED that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the percentage
ownership interest in the income of such Restricted Subsidiary not owned on the
last day of such period by the Company or any of its Restricted Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount
<PAGE>
7
on any Indebtedness and the interest portion of any deferred payment obligation,
calculated in accordance with the effective interest method of accounting; all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing; the net costs associated with
Interest Rate Agreements; and interest on Indebtedness that is Guaranteed or
secured by the Company or any of its Restricted Subsidiaries) and the interest
component 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, all as determined on a consolidated basis (without taking into account
Unrestricted Subsidiaries) in conformity with GAAP.
"CONSOLIDATED LEVERAGE RATIO" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) four times the amount of Consolidated EBITDA for the then most recent
fiscal quarter for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 of this
Indenture (such quarter being the "QUARTER"); PROVIDED that, in making the
foregoing calculation, (A) PRO FORMA effect shall be given, in calculating the
amount of Indebtedness outstanding on the Transaction Date, to any Indebtedness
to be Incurred on the Transaction Date, or to be repaid, repurchased, redeemed
or otherwise retired or discharged on the Transaction Date; (B) PRO FORMA effect
shall be given to Asset Dispositions and Asset Acquisitions (including giving
PRO FORMA effect to the application of proceeds of any Asset Disposition) that
occur from the beginning of the Quarter through the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) PRO FORMA effect shall be
given to asset dispositions and asset acquisitions (including giving PRO FORMA
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into, or consolidated with, the Company or any Restricted Subsidiary
during such Reference Period and that would have constituted Asset Dispositions
or Asset Acquisitions had such transactions occurred when such Person was a
Restricted Subsidiary as if such asset dispositions or asset acquisitions were
Asset Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; PROVIDED that to the extent that clause (B) or (C) of this
sentence requires that PRO FORMA effect be given to an Asset Acquisition or
Asset Disposition, such PRO FORMA calculation shall be based upon the full
fiscal quarter immediately preceding the Transaction Date of the Person, or
division or line of business of the Person, that is acquired or disposed of for
which financial information is available.
"CONSOLIDATED NET WORTH" means, at any date of determination, shareholders'
equity (plus, to the extent not otherwise included, Preferred Stock of the
Company) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for
<PAGE>
8
Indebtedness, the cost of treasury stock and the principal amount of any
promissory notes receivable from the sale of the Capital Stock of the Company or
any of its Restricted Subsidiaries, each item to be determined in conformity
with GAAP (excluding the effects of foreign currency exchange adjustments under
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52).
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 450 West 33rd Street, New York, New York 10001; Attention: Capital
Markets Fiduciary Services.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"DEPOSITARY" means The Depository Trust Company, its nominees, and their
respective successors.
"DISINTERESTED MEMBER" means, with respect to any transaction, a member of
the Board of Directors having no material financial interest in or with respect
to such transaction. A member of the Board of Directors shall not be deemed to
have such a financial interest solely by reason of such member's holding Capital
Stock of the Company or any parent thereof or any options, warrants or other
rights in respect of such Capital Stock.
"DISQUALIFIED STOCK" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; PROVIDED that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Sections 4.11 and 4.12 of this
Indenture and such Capital Stock, or the agreements or instruments governing the
redemption rights thereof, specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to the
Company's repurchase of such Notes as are required to be repurchased pursuant to
Sections 4.11 and 4.12 of this Indenture.
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9
"DOLLAR UNITS" has the meaning provided in the recitals to this Indenture.
"DOLLAR WARRANT" has the meaning provided in the recitals to this
Indenture.
"DOLLAR WARRANT AGREEMENT" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Dollar Warrants, as such agreement may be amended or modified
from time to time.
"EURO NOTE" has the meaning provided in the recitals to this Indenture (and
includes the Exchange Notes as defined in the Euro Notes Indenture).
"EURO NOTES INDENTURE" means the Indenture dated as of the Closing Date
between the Company, The Chase Manhattan Bank, trustee, relating to the Euro
Notes, as such indenture may be amended or supplemented from time to time.
"EURO UNITS" has the meaning provided in the recitals to this Indenture.
"EURO WARRANT" has the meaning provided in the recitals to this Indenture.
"EURO WARRANT AGREEMENT" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Euro Warrants, as such agreement may be amended or modified from
time to time.
"EUROPEAN UNION" means the European Union, including the countries of
Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom; as
well as any other country which at the time of determination is a member of the
European Union.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCESS PROCEEDS" has the meaning provided in Section 4.11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE NOTES" means any securities of the Company containing terms
substantially identical to the Notes (except that (i) such Exchange Notes shall
be registered under the Securities Act and shall not bear the Private Placement
Legend and (ii) certain provisions relating to an increase in the stated rate of
interest thereon shall be eliminated) that are issued and exchanged for the
Notes pursuant to the Registration Rights Agreement and this Indenture (or in
the case of Additional Notes, any registration rights agreement related
thereto).
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10
"FAIR MARKET VALUE" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; PROVIDED that for purposes of clause (viii) of
the second paragraph of Section 4.03, (x) the fair market value of any security
registered under the Exchange Act shall be the average of the closing prices,
regular way, of such security for the 20 consecutive trading days immediately
preceding the sale of Capital Stock and (y) in the event the aggregate fair
market value of any other property (other than cash or cash equivalents)
received by the Company exceeds $10 million, the fair market value of such
property shall be determined by a nationally recognized investment banking or
appraisal firm and set forth in their written opinion which shall be delivered
to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession; PROVIDED, HOWEVER, that all reports and other financial
information provided by the Company to the Holders of the Notes or the Trustee
shall be prepared in accordance with GAAP as in effect from time to time. All
ratios and computations contained or referred to in this Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of this Indenture shall be made without
giving effect to (i) the amortization or write-off of any expenses incurred in
connection with the offering of the Units and (ii) the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and
17.
"GERMAN NETWORK" means the fiber optic network to be built in Germany by
the Company or any of its Restricted Subsidiaries with affiliates of Viatel,
Inc. and Metromedia Fiber Network Inc. contemplated by the letter of intent
dated August 20, 1998.
"GERMAN NETWORK L/C" means a letter of credit in an amount not to exceed
$75 million issued to secure obligations of the Company or any of its Restricted
Subsidiaries with respect to the German Network.
"GLOBAL NOTES" has the meaning provided in Section 2.01.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any such 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
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11
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); PROVIDED that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"GUARANTEED INDEBTEDNESS" has the meaning provided in Section 4.07.
"HOLDER" or "NOTEHOLDER" means the registered holder of any Note.
"INCUR" means, with respect to any Indebtedness, to incur, create, issue,
assume, enter into any Guarantee of or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness, including an "Incurrence" by means 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 principal obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments (excluding obligations with
respect to letters of credit (including trade letters of credit) or other
similar instruments securing obligations (other than obligations described
in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the
ordinary course of business of such Person to the extent such letters of
credit are not properly honored and drawn upon or, if properly honored and
drawn upon, to the extent such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except Trade Payables;
<PAGE>
12
(v) all Capitalized Lease Obligations of such Person;
(vi) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED that the amount of such Indebtedness of such Person shall be the
lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons;
(vii) all Indebtedness of other Persons Guaranteed by such Person;
PROVIDED that the amount of Indebtedness of such Person shall be the lesser
of (A) the amount Guaranteed and (B) the amount of such Indebtedness of
such other Persons; and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements, except
if such agreements (a) are designed solely to protect the Company or its
Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder.
The amount of Indebtedness of any Person as described above at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations as described
above, the maximum liability upon the occurrence of the contingency giving rise
to the obligation, PROVIDED (A) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at the time of its issuance as determined in
conformity with GAAP, (B) that obligations for money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so
long as such money is held to secure the payment of such interest, (C) that the
amount of an obligation in respect of a letter of credit or other similar
instrument is the aggregate undrawn and unexpired amount thereof plus the
aggregate amount of drawings properly honored thereunder that have not then been
reimbursed, and (D) that "Indebtedness" shall not include any liability for
federal, state, local or other taxes. Indebtedness shall not be deemed to
include any obligation arising from the honoring of a check, draft or similar
instrument drawn against insufficient funds, PROVIDED that such obligation is
extinguished within five business days of its Incurrence.
<PAGE>
13
"INDENTURE" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST PAYMENT DATE" means each semiannual interest payment date on
February 15 and August 15 of each year, commencing August 15, 1999.
"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances, loans or other extensions of credit
to customers or suppliers in the ordinary course of business to the extent
required by GAAP to be recorded as accounts receivable, prepaid expenses or
deposits on the balance sheet of the Company or its Restricted Subsidiaries) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including, without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06; PROVIDED
that the fair market value of the Investment remaining in any Person that has
ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of
Investments previously made in such Person valued at the time such Investments
were made less the net reduction of such Investments. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04 of this Indenture, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
"JUDGMENT CURRENCY" has the meaning provided in Section 11.14.
<PAGE>
14
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"MANAGEMENT INVESTOR" means any officer, director, employee or other member
of the management of the Company or any of its Subsidiaries, or family members
or relatives thereof, or trusts or partnerships for the benefit of any of the
foregoing, or any of their heirs, executors, successors and legal
representatives.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET CASH PROCEEDS" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale when received in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, including as a consequence of any
transfer of funds in connection with the application thereof in accordance with
Section 4.11, (iii) payments made, or required to be 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 Asset Sale, (iv) all distributions and other payments
required to be made to minority interest holders in a Restricted Subsidiary or
joint venture as a result of such Asset Sale by or of such Restricted Subsidiary
or joint venture, or to any other Person (other than the Company or a Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in such Asset
Sale, and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve against any liabilities or obligations
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
<PAGE>
15
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof. In the event that any consideration for any
Asset Sale that would otherwise constitute Net Cash Proceeds is required to be
held in escrow pending determination of whether a purchase price adjustment,
indemnification or other payment or other similar adjustment will be made, such
consideration will become Net Cash Proceeds only when and to the extent released
from escrow to the Company or a Restricted Subsidiary.
"NON-U.S. PERSON" means a person who is not a "U.S. person" (as defined in
Regulation S).
"NOTES" means any of the securities, as defined in the first paragraph of
the recitals hereof, that are authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include the Notes
initially issued on the Closing Date, any Exchange Notes to be issued and
exchanged for any Notes pursuant to the Registration Rights Agreement and this
Indenture, and any Additional Notes. For purposes of this Indenture, all Notes
shall vote together as one series of Notes under this Indenture.
"NOTES GUARANTEE" means any Guarantee of the Company's obligations with
respect to the Notes by a Permanent Guarantor or any Subsidiary Guarantor.
"OFFER TO PURCHASE" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and providing notice to
each Holder stating:
(i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying
<PAGE>
16
Agent at the address specified in the notice prior to the close of business
on the Business Day immediately preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or an integral multiple
thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; PROVIDED
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or an integral multiple thereof. The Company will publicly announce
the results of an Offer to Purchase as soon as practicable after the Payment
Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The
Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase. To the extent the provisions
of any such laws or regulations conflict with the provisions of this Indenture,
the Company will comply with such laws and regulations and will not be deemed to
have breached its obligations under this Indenture by virtue thereof.
"OFFICER" means, with respect to the Company, any of (i) a member of the
Board of Directors, or the Chairman, the President, the Chief Executive Officer,
a Vice President, the Chief Operating Officer or the Chief Financial Officer of
the Company or any officer of any Restricted Subsidiary acting as chief
executive officer, chief operating officer, chief accounting officer or chief
financial officer of the Company (any Officer or other person described in this
clause (i), a "Senior Officer"), (ii) the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company or Carrier1 International
GmbH, or any officer of any Restricted Subsidiary acting as treasurer of the
Company, and (iii) any officer or employee of the
<PAGE>
17
Company or any Restricted Subsidiary designated by the Board of Directors as an
Officer for purposes of this Indenture.
"OFFICERS' CERTIFICATE" means a certificate signed by one Senior Officer
and one other Officer or two Senior Officers. Each Officers' Certificate (other
than certificates provided pursuant to TIA Section 314(a)(4)) shall include the
statements provided for in TIA Section 314(e) to the extent required thereby.
"OFFSHORE GLOBAL NOTES" has the meaning provided in Section 2.01.
"OFFSHORE PHYSICAL NOTES" has the meaning provided in Section 2.01.
"OPINION OF COUNSEL" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company or Carrier1 International GmbH,
that meets the requirements of Section 11.04 hereof. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e) to the
extent required thereby.
"PARI PASSU INDEBTEDNESS" has the meaning provided in Section 4.11.
"PAYING AGENT" has the meaning provided in Section 2.04, except that, for
the purposes of Article Eight, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"PAYMENT DATE" has the meaning provided in the definition of Offer to
Purchase.
"PERMANENT GUARANTOR" means a Restricted Subsidiary that irrevocably
guarantees the payment of the Notes on an unsubordinated basis; provided that
such guarantee may provide that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer (including by
way of merger or consolidation), to any Person not an Affiliate of the Company,
of all of the Company's and each Restricted Subsidiary's Capital Stock in, or
all or substantially all the assets of, such Restricted Subsidiary (which sale,
exchange, transfer or other transaction is not prohibited by this Indenture),
(ii) the legal or covenant defeasance of the Notes or satisfaction and discharge
of this Indenture, subject to customary contingent reinstatement provisions or
(iii) upon the merger or consolidation of the Permanent Guarantor with and into
the Company or another Permanent Guarantor that is the surviving Person in such
merger or consolidation.
"PERMANENT OFFSHORE GLOBAL NOTES" has the meaning provided in Section 2.01.
"PERMITTED HOLDER" means any of the following: any of Providence Equity
Partners L.P., Providence Equity Partners II L.P., Providence Equity Partners
III L.P., Primus Capital Fund IV
<PAGE>
18
Limited Partnership and Primus Executive Fund Limited Partnership and any of the
respective Affiliates or successors of the foregoing.
"PERMITTED INVESTMENT" means:
(i) an Investment in the Company (including the Notes or the Euro
Notes) or a Restricted Subsidiary or a Person which will, upon the making
of such Investment, become a Restricted Subsidiary or be merged or
consolidated with or into, or transfer or convey all or substantially all
its assets to, the Company or a Restricted Subsidiary; PROVIDED that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of
such Investment;
(ii) Temporary Cash Investments;
(iii) commissions, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP;
(iv) stock, obligations, securities or other Investments received (a)
in satisfaction of judgments or (b) in settlement of debts, or as a result
of foreclosure, perfection or enforcement of any Lien, in each case under
this clause (b) arising in the ordinary course of business and not in
contemplation of the acquisition of such stock, obligations, securities or
other Investments;
(v) Investments in negotiable instruments held for collection, lease,
utility and worker's compensation, performance and other similar pledges or
deposits and other pledges or deposits permitted under Section 4.09;
(vi) obligations under Interest Rate Agreements and Currency
Agreements designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in interest rates or foreign currency
exchange rates;
(vii) Investments in a joint venture to cover the Company's portion of
the cost (including the cost of design, development, acquisition,
construction, installation and improvement) of building a
telecommunications network (or network segment) in Europe, provided that
the Company or any of its Restricted Subsidiaries will directly own their
portion of such network (or network segment); and Investments in joint
ventures to acquire or maintain or otherwise relating to any rights-of-way,
wayleaves, governmental approvals, licenses, franchises or concessions
relating to any such network (or network segment);
<PAGE>
19
(viii) Investments in any Person in an aggregate amount not to exceed
25% of any gains (net of any losses) attributable to Asset Sales after the
Closing Date and prior to the date of such Investment; and
(ix) loans or advances to directors, officers or employees of the
Company or any Restricted Subsidiary that do not in the aggregate exceed $3
million at any time outstanding.
"PERMITTED JOINT VENTURE" means any joint venture between the Company or
any Restricted Subsidiary and any Person other than a Subsidiary, engaged in the
provision or sale of telecommunications services, or in any other business that
is related, ancillary or complementary to the provision or sale of
telecommunications services, as determined in good faith by the Board of
Directors (whose determination shall be conclusive if evidenced by a Board
Resolution); PROVIDED that prior to making any Investment in such a Person, the
Company's Board of Directors shall have determined that such Investment fits the
Company's strategic plan and is on terms that are fair and reasonable to the
Company.
"PERMITTED LIENS" means:
(i) Liens for taxes, assessments, governmental charges or claims not
yet delinquent, or that in the aggregate are not material, or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(ii) statutory and common law Liens of landlords, carriers,
warehousemen, mechanics, suppliers, materialmen or repairmen or other
similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or that have been bonded or are being
contested in good faith by appropriate 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 and other similar legislation or other
insurance-related obligations (including, without limitation, pledges or
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements);
(iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, licenses, obligations for utilities, statutory or
regulatory obligations, bankers' acceptances, letters of credit, surety and
appeal bonds, government or other contracts,
<PAGE>
20
completion guarantees, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(v) easements, rights-of-way, municipal and zoning ordinances, utility
agreements, reservations, encroachments, restrictions 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, renewals and replacements thereof)
upon real or personal property or assets (including leases on an
indefeasible right-to-use basis); PROVIDED that (a) such Lien is created
solely for the purpose of securing Indebtedness Incurred, in accordance
with Section 4.03, to finance or refinance the cost (including the cost of
design, development, acquisition, construction, installation, improvement,
transportation or integration) of the item of property or assets subject
thereto and the original such Lien is created prior to, at the time of or
within one year after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or
assets, (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, accessions or proceeds in respect of such item;
(vii) leases, subleases, licenses or sublicenses 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 (and
related rights) in favor of a contractor or developer, or arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
(x) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xi) Liens (including extensions, renewals and replacements thereof)
on property or assets of, or on shares of Capital Stock or Indebtedness of,
any Person existing (in the case of the original such Lien) at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary;
PROVIDED that such Liens do not extend to or cover any property or assets
of the Company or any Restricted Subsidiary other than the property,
assets, Capital
<PAGE>
21
Stock or Indebtedness so acquired (plus improvements, accessions or
proceeds (including dividends or distributions) in respect thereof);
(xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment, order,
decree or award against the Company or any Restricted Subsidiary that does
not give rise to an Event of Default;
(xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xvi) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters customary
in the industry and incurred in the ordinary course of business, in each
case, securing Indebtedness or other obligations under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
solely to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates, currencies or the price of commodities;
(xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business;
(xviii) Liens on or sales or transfers of receivables (including
related rights);
(xix) Liens that secure Indebtedness or other obligations with an
aggregate principal amount not in excess of $5 million at any time
outstanding;
(xx) Liens placed by any third party on property over which the
Company or any Restricted Subsidiary has easement or other rights or on any
leased property, or arising by reason of subordination or similar
agreements relating thereto; and Liens arising by reason of any
condemnation or eminent domain proceedings;
(xxi) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
<PAGE>
22
(xxii) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint venture
or similar arrangement pursuant to any joint venture or similar agreement;
(xxiii) Liens (including extensions, renewals and replacements
thereof) on property or assets acquired by the Company or any Restricted
Subsidiary; PROVIDED that (a) such Liens were not created in connection
with or in anticipation of such acquisition, (b) such Liens do not secure
Indebtedness other than Indebtedness assumed in connection with such
acquisition, and (c) 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 so acquired (plus improvements, accessions or proceeds in respect
thereof); and
(xxiv) Liens on cash set aside at the time of the Incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities prefund the
payment of interest on such Indebtedness and are held in an escrow account
or similar arrangement to be applied for such purpose.
"PHYSICAL NOTES" has the meaning provided in Section 2.01.
"PLEDGE ACCOUNT" means an account established with a securities
intermediary for the benefit of the Trustee pursuant to the terms of the Pledge
Agreement for the deposit of the Pledged Securities to be purchased by the
Company with a portion of the net proceeds from the sale of the Notes.
"PLEDGE AGREEMENT" means the U.S. Dollar Collateral Pledge and Security
Agreement, dated as of the Closing Date, made by the Company in favor of the
Trustee, as such agreement may be amended, restated, supplemented or otherwise
modified from time to time.
"PLEDGED SECURITIES" means the U.S. Government Securities to be purchased
by the Company and held in the Pledge Account in accordance with the Pledge
Agreement.
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
<PAGE>
23
"PRINCIPAL" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Notes in the form set forth in Section 2.02(a).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REDEMPTION DATE" means, when used with respect to any Note to be redeemed,
the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"REFINANCE" means refinance, refund, replace, renew, repay, modify,
restate, defer, substitute, supplement, reissue, resell or extend (including by
way of any exchange of Indebtedness, or pursuant to any defeasance or discharge
mechanism); and the terms "refinances," "refinanced" and "refinancing" as used
for any purpose in this Indenture shall have a correlative meaning.
"REGISTRAR" has the meaning provided in Section 2.04.
"REGISTRATION" has the meaning provided in Section 4.18.
"REGISTRATION RIGHTS AGREEMENT" means the Notes Registration Rights
Agreement, dated February 12, 1999, between the Company and Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear,
Stearns & Co. Inc. and certain permitted assigns specified therein.
"REGISTRATION STATEMENT" means the Registration Statement as defined and
described in the Registration Rights Agreement.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
means the February 1 or August 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.
"RELEASED INDEBTEDNESS" means, with respect to any Asset Sale, (i)
Indebtedness of the Company or any Restricted Subsidiary which is assumed by the
purchaser or any affiliate thereof in connection with such Asset Sale; PROVIDED
that the Company or such Restricted Subsidiary receives written, unconditional,
valid and enforceable releases from each creditor, no later than
<PAGE>
24
the closing date of such Asset Sale and (ii) Indebtedness of a Restricted
Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset
Sale; PROVIDED that neither the Company nor any other Restricted Subsidiary
thereafter Guarantees such Indebtedness.
"RELEASED LIABILITIES" has the meaning provided in Section 4.11.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
senior vice president, any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, any trust officer or assistant
trust officer, or any other officer of the Trustee in its corporate trust
department customarily performing functions similar to those performed by any of
the above-designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"RESTRICTED PAYMENTS" has the meaning provided in Section 4.04.
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY REGISTER" has the meaning provided in Section 2.04.
"SEPARATION DATE" has the meaning provided in the recitals to this
Indenture.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"STATED MATURITY" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is
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25
due and payable and (ii) with respect to any scheduled installment of principal
of or interest on any debt security, the date specified in such debt security as
the fixed date on which such installment is due and payable.
"STRATEGIC SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or
any Permanent Guarantor Incurred to finance the acquisition of a Person engaged
in a business that is related, ancillary or complementary to the business
conducted by the Company or any of its Restricted Subsidiaries, which
Indebtedness by its terms, or by the terms of any agreement or instrument
pursuant to which such Indebtedness is Incurred, (i) is expressly made
subordinate in right of payment to the Notes and (ii) provides that no payment
of principal, premium or interest on, or any other payment with respect to, such
Indebtedness may be made prior to the payment in full of all of the Company's
obligations under the Notes; PROVIDED that such Indebtedness may provide for and
be repaid at any time from the proceeds of a capital contribution or the sale of
Capital Stock (other than Disqualified Stock) of the Company after the
Incurrence of such Indebtedness.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"SUBSIDIARY GUARANTEE" has the meaning provided in Section 4.07.
"SUBSIDIARY GUARANTOR" means any Restricted Subsidiary that Guarantees the
Notes pursuant to Section 4.07.
"TAXING AUTHORITY" has the meaning provided in Section 4.20.
"TAXES" has the meaning provided in Section 4.20.
"TEMPORARY CASH INVESTMENT" means any of the following:
(i) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof;
(ii) bankers' acceptances, time deposit accounts, certificates of
deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any
foreign country recognized by the United States of America, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50 million (or the foreign currency equivalent thereof) and has
outstanding debt
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26
which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor;
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above or clause
(vi) below entered into with a bank meeting the qualifications described in
clause (ii) above;
(iv) commercial paper, maturing not more than one year after the date
of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P;
(v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or Moody's; and
(vi) direct obligations of, or obligations fully and unconditionally
guaranteed by, (a) The Netherlands, the United Kingdom, France, Germany or
Switzerland, or (b) any other member of the European Economic Community and
rated at least "A" by S&P or Moody's.
"TEMPORARY OFFSHORE GLOBAL NOTES" has the meaning provided in Section 2.01.
"TRADE PAYABLES" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"TRANSACTION DATE" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"TIA" or "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb), as amended, as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
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27
"TRUSTEE" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"UNITED STATES BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as
amended and as codified in Title 11 of the United States Code, as amended from
time to time hereafter, or any successor federal bankruptcy law.
"UNITS" means the Dollar Units and the Euro Units.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; PROVIDED that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than such
amount, such designation would be permitted under Section 4.04 of this Indenture
and (C) if applicable, the Incurrence of Indebtedness and the Investment
referred to in clause (A) of this proviso would be permitted under Sections 4.03
and 4.04 of this Indenture. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that (i) no
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such designation and (ii) all Liens and Indebtedness
of such Unrestricted Subsidiary outstanding immediately after such designation
would, if Incurred at such time, have been permitted to be Incurred (and shall
be deemed to have been Incurred) for all purposes of this Indenture. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. GLOBAL NOTES" has the meaning provided in Section 2.01.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes,
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28
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt;
PROVIDED that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of the
U.S. Government Obligation evidenced by such depository receipt.
"U.S. GOVERNMENT SECURITIES" means direct obligations of, obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the option of the
issuer thereof.
"U.S. PHYSICAL NOTES" means the Notes issued in the form of permanent
certificated Notes in registered form in substantially the form set forth in
Exhibit A to Institutional Accredited Investors which are not QIBs (excluding
Non-U.S. Persons) in accordance with Section 2.08(a).
"VOTING STOCK" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"WARRANT AGREEMENTS" means the Dollar Warrant Agreement and the Euro
Warrant Agreement.
"WARRANTS" means the Dollar Warrants and the Euro Warrants.
"WHOLLY OWNED" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder or a Noteholder;
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29
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the plural
include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of
authentication shall be substantially in the form annexed hereto as Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this
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30
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 in reliance on Rule 144A 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 "U.S. GLOBAL NOTES"),
registered in the name of 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 U.S. Global Notes may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
Notes transferred in offshore transactions in reliance on Regulation S (a)
prior to the Separation Date shall be in the form of permanent certificated
Notes in registered form substantially in the form set forth in Exhibit A
("OFFSHORE PHYSICAL NOTES"), (b) following the Separation Date but prior to
April 1, 1999, shall be in the form of one or more temporary global Notes in
registered form substantially in the form set forth in Exhibit A (the "TEMPORARY
OFFSHORE GLOBAL NOTES"), registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee and (c) following the
Separation Date and on and after April 1, 1999, shall be initially in the form
of one or more permanent global Notes in registered form substantially in the
form set forth in Exhibit A (the "PERMANENT OFFSHORE GLOBAL NOTES" and, together
with the Temporary Offshore Global Notes, the "OFFSHORE GLOBAL NOTES"),
registered in the name of the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee. The aggregate principal amount of the Offshore
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
At any time on or after the later of the Separation Date and April 1, 1999,
upon receipt by the Trustee and the Company of a certificate substantially in
the form of Exhibit B hereto, one or more Permanent Offshore Global Notes
executed by the Company and authenticated by the Trustee shall be deposited with
the Trustee, as custodian for the Depositary or its nominee, in exchange for any
Temporary Offshore Global Notes and the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the Temporary
Offshore Global
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31
Notes in an amount equal to the principal amount of the beneficial interest in
such Temporary Offshore Global Notes transferred.
Additional Notes sold in offshore transactions in reliance on Regulation S
(a) prior to the 41st day following the date such series of Additional Notes are
first issued hereunder, shall be in the form of one or more Temporary Offshore
Global Notes, registered in the name of the nominee of the Depositary, deposited
with the Trustee as custodian for the Depositary, duly executed by the Company
and authenticated by the Trustee and (b) on and after such 41st day, shall be
initially in the form of one or more Permanent Offshore Global Notes, registered
in the name of the nominee of the Depositary, deposited with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee.
Notes issued pursuant to Section 2.07 in exchange for interests in the
Offshore Global Notes shall be in the form of Offshore Physical Notes.
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "PHYSICAL NOTES." The U.S. Global Notes
and the Offshore Global Notes are sometimes referred to herein as the "GLOBAL
NOTES."
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 Officer or Officers executing such Notes, as
evidenced by the execution of such Notes.
SECTION 2.02. RESTRICTIVE LEGENDS. (a) Unless and until a Note is exchanged
for an Exchange Note or sold in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement (or in the case of
Additional Notes not initially sold pursuant to a registration statement, in
connection with another registration statement), (i) the U.S. Global Notes and
any U.S. Physical Notes shall bear the legend set forth below on the face
thereof and (ii) the Offshore Physical Notes, until the later of the Separation
Date and the 41st day after the Closing Date (or, in the case of such Additional
Notes, until the later of any separation date with respect thereto and the 41st
day after such Addition of Notes are first issued hereunder), and receipt by the
Company and the Trustee of a certificate substantially in the form of Exhibit B
hereto, and the Temporary Offshore Global Notes shall bear the legend set forth
below on the face thereof.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1)
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32
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER
RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF SUCH
TRANSFER, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF
LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) TO A PERSON
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED
TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND 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 IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
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33
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
(b) Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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 2.08 OF THE INDENTURE.
(c) Prior to the Separation Date, each Note shall bear the following legend
on the face thereof:
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF
WHICH CONSISTS OF ONE NOTE AND ONE DOLLAR WARRANT INITIALLY ENTITLING THE
HOLDER THEREOF TO PURCHASE 6.71013 SHARES OF COMMON STOCK, PAR VALUE $2.00
PER SHARE, OF CARRIER1 INTERNATIONAL S.A. (A "WARRANT"). PRIOR TO THE CLOSE
OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) AUGUST 19, 1999, (ii) THE
COMMENCEMENT OF THE EXCHANGE OFFER UNDER THE REGISTRATION RIGHTS AGREEMENT,
(iii) THE EFFECTIVE DATE OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO
RESALES OF THE NOTES AND (iv) SUCH DATE AS DETERMINED BY MORGAN STANLEY &
CO. INCORPORATED IN ITS SOLE DISCRETION, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY NOT
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34
BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
The Company shall notify the Trustee in writing upon obtaining knowledge of
the occurrence of the Separation Date. Upon the request of any Holder after the
Separation Date, the Registrar shall deliver Notes that do not bear the legend
set forth in this paragraph (c).
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. Subject to
Article Four and applicable law, the aggregate principal amount of Notes which
may be authenticated and delivered under this Indenture is unlimited. The Notes
shall be executed by one Officer of the Company. The signature of an Officer on
the Notes may be by facsimile or manual signature in the name and on behalf of
the Company.
If an Officer whose signature is on a Note no longer holds that office at
the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this Indenture,
the Trustee or an authenticating agent shall upon receipt of a Company Order
authenticate for original issue Notes in the aggregate principal amount
specified in such Company Order; PROVIDED that the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company in
connection with such authentication of Notes. Such Company Order shall specify
the amount of Notes to be authenticated and the date on which the original issue
of Notes is to be authenticated and, in case of an issuance of Notes pursuant to
Section 2.15, shall certify that such issuance is in compliance with Article
Four.
The Trustee may appoint an authenticating agent to authenticate Notes. An
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 in principal amount and any integral multiple
thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall maintain an
office or agency where Notes may be presented for registration of transfer or
for exchange (the "REGISTRAR"), an office or agency where Notes may be presented
for payment (the "PAYING AGENT")
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35
and an office or agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served, which shall be in the
Borough of Manhattan, The City of New York. The Company shall cause the
Registrar to keep a register of the Notes and of their transfer and exchange
(the "SECURITY REGISTER"). The Security Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. The Company may have one or more co-Registrars and one or more additional
Paying Agents.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar,
Paying Agent and/or agent for service of notices and demands, the Trustee shall
act as such Registrar, Paying Agent and/or agent for service of notices and
demands. The Company may remove any Agent upon written notice to such Agent and
the Trustee; PROVIDED that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent and
authenticating agent. The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee as of
each Regular Record Date and at such other times as the Trustee may reasonably
request the names and addresses of Holders as they appear in the Security
Register, including the aggregate principal amount of Notes held by each Holder.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than 11:00
a.m. (New York City time) on the Business Day prior to each due date of the
principal, premium, if any, and interest on any Notes, the Company shall deposit
with the Paying Agent money in immediately available funds sufficient to pay
such principal, premium, if any, and interest so becoming due; PROVIDED that
Pledged Securities held pursuant to the Pledge Agreement may satisfy the
provisions of this sentence. The Company shall require each Paying Agent other
than the Trustee to agree in writing that such Paying Agent shall hold in trust
for the benefit of the Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the Notes
(whether such money has been paid to it by the Company or any other obligor on
the Notes), and such Paying Agent shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any
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36
time may require a Paying Agent to pay all money held by it to the Trustee
and account for any funds disbursed, and the Trustee may at any time during
the continuance of any payment default, upon written request to a Paying
Agent, require such Paying Agent to pay all money held by it to the Trustee
and to account for any funds disbursed. Upon doing so, the Paying Agent shall
have no further liability for the money so paid over to the Trustee. If the
Company or any Subsidiary of the Company or any Affiliate of any of them acts
as Paying Agent, it will, on or before each due date of any principal of,
premium, if any, or interest on the Notes, segregate and hold in a separate
trust fund for the benefit of the Holders a sum of money sufficient to pay
such principal, premium, if any, or interest so becoming due until such sum
of money shall be paid to such Holders or otherwise disposed of as provided
in this Indenture, and will promptly notify the Trustee of its action or
failure to act.
SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable only in
registered form. The Notes shall initially be issued as part of an issue of
Dollar Units, each of which consists of one Note and one Dollar Warrant. Prior
to the Separation Date, the Notes may not be transferred or exchanged separately
from, but may be transferred or exchanged only together with, the Dollar
Warrants issued in connection with the Notes. A Holder may transfer a Note only
by written application to the Registrar stating the name of the proposed
transferee and otherwise complying with the terms of this Indenture. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Registrar in the Security Register. Prior to the registration of any
transfer by a Holder as provided herein, the Company, the Trustee, and any agent
of the Company shall treat the person in whose name the Note is registered as
the owner thereof for all purposes whether or not the Note shall be overdue, and
neither the Company, the Trustee, nor any such agent shall be affected by notice
to the contrary. Owners of beneficial interests in a Global Note will not be
entitled to have Notes registered in their names, and will not receive or be
entitled to receive Physical Notes except pursuant to Section 2.07(b).
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations (including an exchange of Notes for Exchange Notes), the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met (including that such Notes are duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Trustee and Registrar duly executed by the Holder thereof or by an
attorney who is authorized in writing to act on behalf of the Holder); PROVIDED
that no exchanges of Notes for Exchange Notes shall occur until a Registration
Statement shall have been declared effective by the Commission and that any
Notes that are exchanged for Exchange Notes shall be canceled by the Trustee. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Notes at the Registrar's
<PAGE>
37
request. No service charge shall be made for any registration of transfer or
exchange or redemption of the Notes, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or other similar
governmental charge payable upon exchanges pursuant to Section 2.11, 3.08 or
9.04).
The Registrar shall not be required (i) to issue, register the transfer of
or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The Global Notes
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
2.02.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, or the Trustee as its custodian, or under such Global
Note, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of such Global
Note in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in Global Notes may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, Physical Notes shall be transferred
to the Depositary for all beneficial owners in exchange for their beneficial
interests in the Global Notes if (i) the Depositary notifies the Company that it
is unwilling or unable to continue as Depositary for the Global Notes, and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depositary to issue Physical Notes.
(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 another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note and,
<PAGE>
38
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Note for as long as it remains such an interest.
(d) In connection with the transfer of the Global Notes in whole, to
beneficial owners pursuant to paragraph (b) of this Section 2.07, the Global
Notes shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to the
Depositary for each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Notes an equal aggregate principal
amount of Physical Notes of authorized denominations.
(d) Any U.S. Physical Note delivered in exchange for an interest in the
U.S. Global Notes pursuant to paragraph (b) or (d) of this Section 2.07 shall,
except as otherwise provided by paragraph (f) of Section 2.08, bear the legend
regarding transfer restrictions applicable to the Physical Note set forth in
Section 2.02.
(e) Any Offshore Physical Note delivered in exchange for an interest in the
Offshore Global Notes pursuant to paragraph (b) or (d) of this Section 2.07
shall, except as otherwise provided by paragraph (f) of Section 2.08, bear the
legend regarding transfer restrictions applicable to the Physical Note set forth
in Section 2.02.
(e) The registered holder of a Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS. Unless and until a Note is
exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement (or in the
case of Additional Notes not initially sold pursuant to a registration
statement, in connection with another registration statement), the following
provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following
provisions shall apply with respect to the registration of any proposed transfer
of a Note to any Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note, whether or
not such Note bears the Private Placement Legend, if (x) the requested
transfer is after the time period referred to in Rule 144(k) under the
Securities Act or (y) the proposed transferee has delivered to the
Registrar (A) a certificate substantially in the form of Exhibit C hereto
and (B) if the aggregate principal amount of the Notes being transferred is
less than $250,000, an opinion of counsel acceptable to the Company that
such transfer is in compliance with the Securities Act.
<PAGE>
39
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Notes, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) above and (y)
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 a decrease in the principal amount of the U.S. Global Notes in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Notes to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Notes of
like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with respect to
the registration of any proposed transfer of a Note to a QIB:
(i) If the Note to be transferred consists of (x) U.S. Physical 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 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 or (y) an interest in the U.S. Global
Notes, the transfer of such interest may be effected only through the book
entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Note to be
transferred consists of U.S. Physical Notes, upon receipt by the Registrar
of the documents referred to in paragraph (i) 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 U.S. Global Notes in an amount equal to the
principal amount of the U.S. Physical Notes to be transferred, and the
Trustee shall cancel the U.S. Physical Notes so transferred.
(c) TRANSFERS OF INTERESTS IN THE TEMPORARY OFFSHORE GLOBAL NOTES OR
LEGENDED OFFSHORE PHYSICAL NOTES. The following provisions shall apply with
respect to registration of any
<PAGE>
40
proposed transfer of an interest in a Temporary Offshore Global Notes or any
Offshore Physical Notes bearing the Private Placement Legend:
(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 D 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 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 an Agent Member, upon receipt by
the Registrar of the documents referred to in clause (i)(y) 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 U.S. Global Notes in an
amount equal to the principal amount of the Temporary Offshore Global Notes
or legended Offshore Physical Notes to be transferred, and the Trustee
shall decrease the amount of the Temporary Offshore Global Notes or cancel
the legended Offshore Physical Notes, as the case may be.
(d) TRANSFERS OF INTERESTS IN THE PERMANENT OFFSHORE GLOBAL NOTES OR
UNLEGENDED OFFSHORE PHYSICAL NOTES. The following provisions shall apply with
respect to any transfer of interests in Permanent Offshore Global Notes or
unlegended Offshore Physical Notes. The Registrar shall register the transfer of
any such Note without requiring any additional certification.
(e) 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
(excluding QIBs):
(i) Prior to the Separation Date and prior to April 1, 1999, the
Registrar shall register any proposed transfer of a Note to a Non-U.S.
Person only if it receives a certificate substantially in the form of
Exhibit D hereto from the proposed transferor and such transfer is in
conjunction with a transfer of the related Dollar Warrants pursuant to the
terms of the Dollar Warrant Agreement.
<PAGE>
41
(ii) On and after the Separation Date but prior to April 1, 1999, the
Registrar shall register any proposed transfer to any Non-U.S. Person upon
receipt of a certificate substantially in the form of Exhibit D hereto from
the proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Notes, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (ii) and (y)
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 U.S. Global Notes in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Notes to be transferred, and (b) if the proposed transferee is an
Agent Member and the transfer is after the Separation Date, 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 Offshore
Global Notes in an amount equal to the principal amount of the U.S.
Physical Notes or the U.S. Global Notes, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Notes.
(f) 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 (i) the
Private Placement Legend is no longer required by Section 2.02, (ii) the
circumstances contemplated by paragraph (a)(i)(x) of this Section 2.08 exist or
(iii) 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.
(g) GENERAL. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture. The
Registrar shall not register a transfer of any Note unless such transfer
complies with the restrictions on transfer of such Note set forth in this
Indenture. In connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; PROVIDED that neither the Registrar nor the Trustee shall
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.
<PAGE>
42
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.07 or this Section 2.08. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is surrendered to the
Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
PROVIDED that the requirements of this Section 2.09 are met. If required by the
Trustee or the Company, an indemnity bond must be furnished that is sufficient
in the judgment of both the Trustee and the Company to protect the Company, the
Trustee or any Agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge such Holder for its expenses and the expenses
of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed
or wrongfully taken Note has become or is about to become due and payable, the
Company in its discretion may pay such Note instead of issuing a new Note in
replacement thereof.
Every replacement Note is an additional obligation of the Company and shall
be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding
unless and until the Trustee and the Company receive proof satisfactory to them
that the replaced Note is held by a BONA FIDE purchaser.
If the Paying Agent (other than the Company or an Affiliate of the Company)
holds on the maturity date money sufficient to pay Notes payable on that date,
then on and after that date such Notes cease to be outstanding and interest on
them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of its
Affiliates holds such Note, PROVIDED, HOWEVER, that in determining whether the
Holders of the requisite principal amount of the outstanding Notes have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee has actual
knowledge to be so owned shall be so disregarded. Notes
<PAGE>
43
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 of such
other obligor.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Company may prepare and execute and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officer or Officers executing the
temporary Notes, as evidenced by their execution of such temporary Notes. If
temporary Notes are issued, the Company will cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Company designated for such
purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 2.12. CANCELLATION. The Company at any time may 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 for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure.
SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use
"CUSIP", "CINS" or "ISIN" numbers or common codes (if then generally in use),
and the Company and the Trustee shall use any such CUSIP, CINS or ISIN numbers
or common codes, as the case may be, in notices of redemption or exchange as a
convenience to Holders; PROVIDED that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of redemption or exchange and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee of any change in any such
"CUSIP", "CINS" or "ISIN" numbers or common codes for the Notes.
SECTION 2.14. DEFAULTED INTEREST. If the Company defaults in a payment of
interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on
<PAGE>
44
the defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect to
the payment of any defaulted interest, shall mean the 15th day next preceding
the date fixed by the Company for the payment of defaulted interest, whether or
not such day is a Business Day. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder and to the Trustee a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest to be paid.
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to
Article Four of this Indenture and applicable law, issue additional Notes under
this Indenture (the "ADDITIONAL NOTES"). The Notes issued on the Closing Date,
any Exchange Notes and any Additional Notes subsequently issued shall be treated
as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes are redeemable, at the
Company's option, in whole or in part, at any time or from time to time, on or
after February 15, 2004 and prior to maturity, upon not less than 30 nor more
than 60 days' prior notice mailed by first-class mail to each Holder's last
address, as it appears in the Security Register, at the following Redemption
Prices (expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an Interest Payment Date), if redeemed during
the 12-month period commencing February 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2004........................................ 106.625%
2005........................................ 104.417
2006........................................ 102.208
2007 and thereafter......................... 100.000
</TABLE>
(b) In addition, at any time prior to February 15, 2002, the Company at its
option may redeem Notes in an aggregate principal amount equal to up to 35% of
the principal amount of the Notes (including the principal amount of any
Additional Notes), with funds in an amount equal to the proceeds of one or more
sales of Capital Stock (other than Disqualified Stock) of, or capital
contributions to, the Company, at any time or from time to time in part, at a
Redemption Price (expressed as a percentage of principal amount) of 113.25%,
plus accrued and unpaid interest if any, to the Redemption Date (subject to the
rights of Holders of record on the relevant Regular
<PAGE>
45
Record Date that is prior to the Redemption Date to receive interest due on an
Interest Payment Date); PROVIDED that (i) an aggregate principal amount equal to
at least 65% of the principal amount of the initially issued Notes (plus the
principal amount of any Additional Notes) remains outstanding after each such
redemption and (ii) notice of such redemption is mailed within 60 days of each
such sale or capital contribution.
(c) In the event that (i) as a result of any change in, or amendments to,
any laws or treaties (or any regulations or rulings promulgated thereunder) or
any change in official position regarding the application of such laws,
treaties, regulations or rulings (including a holding, judgement or order by a
court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective after the Closing Date, the Company has become
or would become obligated to pay, on the next date on which any amount would be
payable under or with respect to the Notes, any Additional Amounts, and (ii) the
Company cannot reasonably arrange (without other material adverse consequences
to the Company) for another obligor to make such payment so as to avoid the
requirement to pay such Additional Amounts, then the Company may redeem all, but
not less than all, the Notes at any time at 100% of the principal amount
thereof, together with accrued interest thereon, if any, to the Redemption Date.
SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes
pursuant to Section 3.01, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed and the clause
of this Indenture pursuant to which redemption shall occur.
The Company shall give each notice provided for in this Section 3.02 in an
Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less than all of the
Notes are to be redeemed at any time, the Trustee shall select the Notes to be
redeemed in compliance with the requirements, as certified to it by the Company,
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange or
automated quotation system, by lot or in accordance with the Trustee's usual
procedures; PROVIDED that no Note of $1,000 in principal amount or less shall be
redeemed in part.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 in principal amount or any integral multiple thereof)
of Notes that have denominations larger than $1,000 in principal amount.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company and the Registrar promptly in writing of the Notes or portions of Notes
to be called for redemption.
<PAGE>
46
SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of Notes
pursuant to Section 3.01, at least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption by first-class
mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed, including the portion
of the principal amount thereof, and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Note to be redeemed and that, on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be reissued;
and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number or
common code as provided in Section 2.13, no representation is being made as
to the correctness of the CUSIP, CINS or ISIN number or common code either
as printed on the Notes or as contained in the notice of redemption and
that reliance may be placed only on the other identification numbers
printed on the Notes.
At the Company's request (which request may be revoked by the Company at
any time prior to the time at which the Trustee shall have given such notice to
the Holders), made in writing to the Trustee at least 45 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption in the name and at the expense of
the Company. If, however, the Company gives such notice to the Holders, the
Company shall concurrently deliver to the Trustee an Officers' Certificate
stating that such notice has been given.
<PAGE>
47
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of Notes held by Holders to whom such notice was properly given.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. At least one Business Day prior
to any Redemption Date, the Company shall deposit with the Paying Agent (or, if
the Company is acting as its own Paying Agent, shall segregate and hold in trust
as provided in Section 2.05) U.S. dollars in immediately available funds
sufficient to pay the Redemption Price of and accrued interest on all Notes to
be redeemed on that date other than Notes or portions thereof called for
redemption on that date that have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date (unless the
Company shall default in the payment of such Notes at the Redemption Price and
accrued interest to the Redemption Date, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Notes), such Notes shall cease to accrue interest. Upon surrender of any Note
for redemption in accordance with a notice of redemption, such Note shall be
paid and redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; PROVIDED that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any Note that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder without service charge, a new Note equal in principal
amount to the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this
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48
Indenture. An installment of principal, premium, if any, or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on
that date money designated for and sufficient to pay the installment. If the
Company or any Subsidiary of the Company or any Affiliate of any of them acts as
Paying Agent, an installment of principal, premium, if any, or interest shall be
considered paid on the due date if the entity acting as Paying Agent complies
with the last sentence of Section 2.05. As provided in Section 6.09, upon any
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent, if any, for the Notes.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at the
rate per annum specified in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in
the Borough of Manhattan, The City of New York an office or agency where Notes
may be surrendered for registration of transfer or exchange or for presentation
for payment and where notices and demands to or upon the Company in respect of
the Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.02.
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 such designations; PROVIDED that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, 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 of any change in the
location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office of the
Trustee as such office of the Company in accordance with Section 2.04.
SECTION 4.03. LIMITATION ON INDEBTEDNESS.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and the Euro Notes
(including any Exchange Notes and any Exchange Notes (as defined in the Euro
Notes Indenture), but excluding any Additional Notes or Additional Notes (as
defined in the Euro Notes Indenture), and other Indebtedness
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49
existing on the Closing Date); PROVIDED that the Company or any Permanent
Guarantor may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be greater than zero and less than 6:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal
amount not to exceed (after giving effect to any refinancing thereof) the
sum of (a) $100 million, less any amount of such Indebtedness permanently
repaid as provided under Section 4.11 of this Indenture, plus (b) an amount
equal to the lesser of (1) 80% of the consolidated book value of the
accounts receivable of the Company and its Restricted Subsidiaries
determined in accordance with GAAP (determined as of the end of the most
recently ended fiscal quarter for which reports have been filed with the
Commission or provided to the Trustee) and (2) $100 million;
(ii) Indebtedness owed (A) to the Company evidenced by a promissory
note or (B) to any Restricted Subsidiary; PROVIDED that any event which
results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than to
the Company or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii);
(iii) Indebtedness issued to refinance then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vi),
(viii), (xi) or (xii) of this paragraph) and any refinancings thereof, in
an amount not to exceed the amount so refinanced (plus premiums, accrued
interest, fees and expenses); PROVIDED that Indebtedness the proceeds of
which are used to refinance the Notes in part or Indebtedness that is PARI
PASSU with, or expressly subordinated in right of payment to, the Notes or
any Notes Guarantee shall only be permitted under this clause (iii) if (A)
in case the Notes are refinanced in part or the Indebtedness to be
refinanced is PARI PASSU with the Notes or any Notes Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
PARI PASSU with, or expressly subordinate in right of payment to, the
remaining Notes or any Notes Guarantee, (B) in case the Indebtedness to be
refinanced is expressly subordinated in right of payment to the Notes or
any Notes Guarantee, 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 or any Notes Guarantee at least to the extent that the
Indebtedness to be refinanced is subordinated to the Notes or any Notes
Guarantee and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior
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50
to the Stated Maturity of the Indebtedness to be refinanced and the Average
Life of such new Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced; and PROVIDED FURTHER that in no
event may Indebtedness of the Company be refinanced by means of any
Indebtedness of any Restricted Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety, appeal or
other similar bonds provided in the ordinary course of business and (B)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, bankers' acceptances, surety or performance bonds or other similar
instruments securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness of the Company or any Permanent Guarantor, to the
extent the net proceeds thereof are promptly (A) used to purchase Notes
tendered in an Offer to Purchase made as a result of a Change in Control or
to purchase Euro Notes tendered in an offer to purchase under the Euro
Notes Indenture or (B) deposited to defease the Notes as described under
Article Eight;
(vi) Guarantees of the Notes and Guarantees of Indebtedness of the
Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with Section 4.07; and
Guarantees of Indebtedness of any Restricted Subsidiary by any Restricted
Subsidiary provided such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a
Guarantee of payment of the Notes by such Restricted Subsidiary;
(vii) Indebtedness (including Guarantees and the German Network L/C)
Incurred to finance or refinance the cost (including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration) to acquire equipment, inventory or network
assets (including leases on an indefeasible right-to-use basis and multiple
investment units) (including acquisitions by way of Capitalized Lease and
acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment,
inventory or network assets so acquired) by the Company or a Restricted
Subsidiary;
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51
(viii) Indebtedness of the Company or any Permanent Guarantor not to
exceed, at any one time outstanding (after giving effect to any refinancing
thereof), two times the sum of (A) the Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from the
issuance and sale of its Capital Stock (other than Disqualified Stock) to a
Person that is not a Subsidiary of the Company, to the extent (I) such
capital contribution or Net Cash Proceeds have not been used pursuant to
clause (C)(2) of the first paragraph or clause (iii), (iv), (vi) or (x) of
the second paragraph of Section 4.04 to make a Restricted Payment and (II)
if such capital contribution or Net Cash Proceeds are used to consummate a
transaction pursuant to which the Company Incurs Acquired Indebtedness, the
amount of such Net Cash Proceeds exceeds one-half of the amount of Acquired
Indebtedness so Incurred and (B) 80% of the fair market value of property
(other than cash and cash equivalents) received by the Company after the
Closing Date as a capital contribution or from the sale of its Capital
Stock (other than Disqualified Stock) to a Person that is not a Subsidiary
of the Company, to the extent (I) such capital contribution or sale of
Capital Stock has not been used pursuant to clause (iii), (iv) or (vii) of
the second paragraph of Section 4.04 to make a Restricted Payment and (II)
if such capital contribution or Capital Stock is used to consummate a
transaction pursuant to which the Company Incurs Acquired Indebtedness, 80%
of the fair market value of the property received exceeds one-half of the
amount of Acquired Indebtedness so Incurred PROVIDED that such Indebtedness
does not mature prior to the Stated Maturity of the Notes and has an
Average Life longer than the Notes;
(ix) Acquired Indebtedness;
(x) Strategic Subordinated Indebtedness;
(xi) Indebtedness in respect of bankers' acceptance and letters of
credit, all in the ordinary course of business, in an aggregate amount
outstanding at any time not to exceed $10 million; and
(xii) subordinated Indebtedness of the Company or any Permanent
Guarantor (in addition to Indebtedness permitted under clauses (i) through
(xi) above) in an aggregate principal amount outstanding at any time (after
giving effect to any refinancing thereof) not to exceed $100 million.
(b) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in another currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred (or, in the case of
Indebtedness under a revolving credit facility, at the time of commitment),
PROVIDED that if such Indebtedness is Incurred to refinance other Indebtedness
denominated in a foreign
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52
currency, and such refinancing would cause the applicable Dollar-denominated
restriction to be exceeded if calculated at the relevant currency exchange rate
in effect on the date of such refinancing, such Dollar-denominated restriction
shall be deemed not to have been exceeded so long as the principal amount of
such refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness Incurred
to refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
(c) For purposes of determining any particular amount of Indebtedness under
this Section 4.03, (1) Guarantees, Liens or obligations with respect to letters
of credit, bankers' acceptances or other similar instruments supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included and (2) any Liens granted pursuant to the equal and
ratable provisions referred to in Section 4.09 of this Indenture shall not be
treated as giving rise to Indebtedness. For purposes of determining compliance
with this Section 4.03, (1) any other obligation of the obligor on such
Indebtedness arising under any Lien or letter of credit, bankers' acceptance or
other similar instrument or obligation supporting such Indebtedness shall be
disregarded to the extent that the same secures the principal amount of such
Indebtedness and (2) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses (but may
allocate portions of such Indebtedness between or among such clauses).
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y)
dividends or distributions on Capital Stock of a Restricted Subsidiary held by
minority interest holders on no more than a pro rata basis, measured by value
and based on all outstanding Capital Stock of such Restricted Subsidiary) held
by Persons other than the Company or any of its Restricted Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of (A) the Company or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person other than the Company or any Wholly Owned Restricted Subsidiary or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
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53
Indebtedness of the Company that is expressly subordinated in right of payment
to the Notes or any Notes Guarantee or (iv) make any Investment, other than a
Permitted Investment, in any other Person (such payments or any other actions
described in clauses (i) through (iv) above being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and be
continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of Section 4.03 or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made after the Closing Date shall exceed the
sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount
of such loss) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the fiscal quarter beginning
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 PLUS (2)
the aggregate Net Cash Proceeds received by the Company after the Closing Date
as a capital contribution or from the issuance and sale permitted by this
Indenture of its Capital Stock (other than Disqualified Stock) to a Person who
is not a Subsidiary of the Company, including the proceeds of an issuance or
sale permitted by this Indenture of Indebtedness of the Company for cash
subsequent to the Closing Date upon the conversion of such Indebtedness into
Capital Stock (other than Disqualified Stock) of the Company, or from the
issuance to a Person who is not a Subsidiary of the Company of any options,
warrants or other rights to acquire Capital Stock of the Company (in each case,
exclusive of any Disqualified Stock or any options, warrants or other rights
that are redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Notes), in each case except to the extent
such Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii)
of the second paragraph under Section 4.03 PLUS (3) an amount equal to the net
reduction in Investments (other than reductions in Permitted Investments and
Investments under clause (vi), (viii) or (xii) of the second paragraph of this
Section 4.04) in any Person resulting from payments of interest on Indebtedness,
dividends, distributions, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale or other disposition of any such Investment (except,
in each case, to the extent of any gain on such sale or other disposition that
would be included in the calculation of Adjusted Consolidated Net Income for
purposes of clause (C)(1) above), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
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54
(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 or any Notes Guarantee, including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (iii) of the second paragraph of Section
4.03;
(iii) the repurchase, redemption or other acquisition of Capital Stock
of the Company or any Subsidiary of the Company (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a capital contribution or a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock);
(iv) the making of any principal payment on or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to
the Notes in exchange for, or out of the proceeds of a capital contribution
or a substantially concurrent offering of, shares of the Capital Stock
(other than Disqualified Stock) of the Company (or options, warrants or
other rights to acquire such Capital Stock);
(v) payments or distributions to dissenting shareholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of Article Five of
this Indenture;
(vi) any Investment in any Person the primary business of which is
related, ancillary or complementary to the business of the Company and its
Restricted Subsidiaries on the date of such Investment; PROVIDED that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) $25 million, plus (b) the amount of Net Cash Proceeds
received by the Company after the Closing Date as a capital contribution or
from the sale of its Capital Stock (other than Disqualified Stock) to a
Person who is not a Subsidiary of the Company, except to the extent such
Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii)
of the second paragraph under Section 4.03 or to make Restricted Payments
pursuant to clause (C)(2) of the first paragraph, or clauses (iii), (iv) or
(x) of this paragraph, of this Section 4.04, plus (c) the net reduction in
Investments made pursuant to this clause (vi) resulting from distributions
on or repayments of such Investments or from the Net Cash Proceeds from the
sale or other disposition of any such Investment (except in each case to
the extent of any gain on such sale or other disposition that would be
included in the calculation of Adjusted Consolidated Net Income for
purposes of clause (C)(1) above) or from such Person
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55
becoming a Restricted Subsidiary (valued in each case as provided in the
definition of "Investments"), PROVIDED that the net reduction in any
Investment shall not exceed the amount of such Investment;
(vii) Investments acquired as a capital contribution to or in exchange
for Capital Stock (other than Disqualified Stock) of the Company;
(viii) Investments in Permitted Joint Ventures not exceeding, at the
time of the Investment, the sum of (A) $10 million and (B) the net
reduction in Investments made pursuant to this clause (viii) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from the sale or other disposition of any such Investment (except
in each case to the extent of any gain on such sale or disposition that
would be included in the calculation of Adjusted Consolidated Net Income
for purposes of clause (C)(1) above) or from such Person becoming a
Restricted Subsidiary (valued in each case as provided in the definition of
"Investments"), PROVIDED that the net reduction in any Investment shall not
exceed the amount of such Investment;
(ix) repurchases of Warrants pursuant to a Repurchase Offer or within
ten days of their expiration in accordance with the terms of the Warrant
Agreements in effect on the Closing Date, and any purchase of any
fractional shares of Common Stock (or other Capital Stock of the Company
issuable upon exercise of the Warrants) in connection with an exercise of
the Warrants and any payments in connection with the anti-dilution
provisions of the Warrant Agreements;
(x) the purchase, redemption, retirement or other acquisition for
value of shares of Capital Stock of the Company or options, warrants or
other rights to purchase such shares held by Management Investors upon
death, disability, retirement, termination of employment or pursuant to the
terms of any agreement under which such shares of Capital Stock or options,
warrants or other rights were issued; PROVIDED that the aggregate
consideration paid for such purchase, redemption, retirement or other
acquisition for value of such shares or options, warrants or other rights
after the Closing Date does not in the aggregate exceed (A) $5 million,
plus (B) the aggregate Net Cash Proceeds received by the Company after the
Closing Date as a capital contribution from, or from the issuance or sale
to, Management Investors of Capital Stock of the Company or any options,
warrants or other rights to acquire such Capital Stock, plus (C) the
proceeds of insurance policies used to effect any such purchase,
redemption, retirement or other acquisition;
(xi) any purchase, redemption, retirement or other acquisition of
Capital Stock deemed to occur upon the exercise of options, warrants or
other rights if such Capital Stock represents a portion of the exercise
price thereof; or
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56
(xii) other Restricted Payments in an aggregate amount not to exceed
$5 million plus the net reduction in Investments made pursuant to this
clause (xii) resulting from distributions on or repayments of such
Investments or from the Net Cash Proceeds from the sale or other
disposition of any such Investment (except in each case to the extent of
any gain on such sale or disposition that would be included in the
calculation of Adjusted Consolidated Net Income for purposes of clause
(C)(1) above) or from such Person becoming a Restricted Subsidiary (valued
in each case as provided in the definition of "Investments"), PROVIDED that
the net reduction in any Investment shall not exceed the amount of such
Investment;
PROVIDED that, except in the case of clauses (i), (iii) and (xi), no Default or
Event of Default shall have occurred and be continuing or occur as a consequence
of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof, an Investment referred to in clause (vii) thereof
and a purchase, redemption, retirement or other acquisition of Capital Stock
referred to in clause (xi) thereof), and the Net Cash Proceeds from any capital
contribution or any issuance of Capital Stock referred to in clauses (iii), (iv)
and (vi) thereof, shall be included in calculating whether the conditions of
clause (C) of the first paragraph of this Section 4.04 have been met with
respect to any subsequent Restricted Payments.
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date, including under this Indenture, the
Euro Notes Indenture or any other agreements or instruments in effect on
the Closing Date, and any refinancings of such agreements or instruments;
PROVIDED that the encumbrances and restrictions in any such refinancings
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
refinanced;
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57
(ii) existing under or by reason of applicable law or any requirement
of any applicable governmental regulatory authority;
(iii) existing with respect to any Person, or any property or assets,
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 (A) in the case of an
acquisition of such Person, to any other Person or (B) in the case of an
acquisition of such property or assets, any other property or assets;
(iv) in the case of clause (iv) (and, solely with respect to clauses
(A), (B) and (D) of this clause (iv), clause (i)) of the first paragraph of
this Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject to,
a lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by this Indenture, (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 (D) arising under the terms of Indebtedness
Incurred under clause (vii) of the second paragraph of Section 4.03 that
restrict the transfer of the property or assets acquired with such
Indebtedness;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary;
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued, or any agreement relating
to the sale, disposition or financing of receivables, if (A) either (1) the
encumbrance or restriction applies only in the event of a payment default
or a default with respect to a financial covenant contained in the terms of
such Indebtedness or agreement or (2) the Company in good faith determines
(as set forth in a Board Resolution) that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes and (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the
Notes than is customary in comparable financings (as determined by the
Company in good faith);
(vii) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
or
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(viii) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted under Section 4.09 or (2) restricting the
sale or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except:
(i) to the Company or a Wholly Owned Restricted Subsidiary;
(ii) issuances of director's qualifying shares or issuances or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
to such issuance or sale would have been permitted to be made under Section
4.04 if made on the date of such issuance or sale; or
(iv) issuances or sales of Common Stock of a Restricted Subsidiary,
provided that the Company or such Restricted Subsidiary applies the Net
Cash Proceeds, if any, of any such sale in accordance with clause (A) or
(B) of Section 4.11 of this Indenture.
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES. The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company or any Subsidiary
Guarantor which is PARI PASSU with or expressly subordinate in right of payment
to the Notes or any Notes Guarantee ("Guaranteed Indebtedness"), unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee (a "Subsidiary Guarantee")
of payment of the Notes by such Restricted Subsidiary and (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee, until payment in full of the outstanding principal amount of such
Notes and any premium or accrued and unpaid interest thereon then due and owing;
PROVIDED that this paragraph
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shall not be applicable to any Guarantee of any Restricted Subsidiary (a) that
existed at the time such Person became a Restricted Subsidiary and was not
Incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary or (b) of Indebtedness Incurred pursuant to clause (i) of
the second paragraph of Section 4.03. If the Guaranteed Indebtedness is (A) PARI
PASSU with the Notes, then the Guarantee of such Guaranteed Indebtedness shall
be PARI PASSU with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
(including by way of merger or consolidation), to any Person not an Affiliate of
the Company, of all of the Company's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale, exchange, transfer or other transaction is not prohibited by this
Indenture), (ii) the legal or covenant defeasance of the Notes or satisfaction
and discharge of this Indenture, subject to customary contingent reinstatement
provisions, (iii) the release or discharge of the Guarantee which resulted in
the creation of such Subsidiary Guarantee, except a discharge or release by or
as a result of payment under such Guarantee or (iv) upon the merger or
consolidation of such Subsidiary Guarantor with and into the Company or another
Subsidiary Guarantor that is the surviving Person in such merger or
consolidation.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into, renew or extend any transaction (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 with any Affiliate of
the Company or any Restricted Subsidiary, except upon fair and reasonable terms
that taken as a whole are no less favorable to the Company or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which the Company or a
Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized investment banking or appraisal firm stating that the
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view, or is upon terms that taken as a whole are no less
favorable to
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the Company or such Restricted Subsidiary than could be obtained in a
comparable arm's-length transaction;
1 (ii) any transaction solely between or among the Company and any of
its Wholly Owned Restricted Subsidiaries or solely between or among Wholly
Owned Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes;
(v) any Restricted Payments (or a transaction excluded from the
definition of the term "Restricted Payments") not prohibited by Section
4.04;
(vi) transactions consisting of or pursuant to employment or benefit
agreements, plans, programs or arrangements for or with, or indemnification
or contribution obligations to, employees, officers or directors in the
ordinary course of business;
(vii) the entering into of the Securities Purchase and Cancellation
Agreement, the 1999 Share Option Plan, the Securities Purchase Agreement,
the Registration Rights Agreement and the Securityholders' Agreement, as
described in the Offering Memorandum dated February 12, 1999 as amended or
supplemented, and performance of the obligations and the transactions
contemplated thereby; or
(viii) issuances or sales of Capital Stock (other than Disqualified
Stock) of the Company or options, warrants or other rights to acquire such
Capital Stock.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this Section 4.08 and not covered by clauses
(ii) through (viii) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
SECTION 4.09. LIMITATION ON LIENS. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character (including, without
limitation, licenses), or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the Notes
and all other amounts due under this Indenture to be directly secured equally
and ratably
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61
with (or, if the obligation or liability to be secured by such Lien is expressly
subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such
other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is permitted to be Incurred
under clause (iii) of the second paragraph of Section 4.03 to refinance
secured Indebtedness; PROVIDED that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other
than the property or assets securing the Indebtedness being refinanced;
(v) Liens on the Capital Stock of, or any property or assets of, a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
(or obligations in respect thereof) permitted under Section 4.03; or
(vi) Permitted Liens.
SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company will
not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties more than one year after acquiring
such assets or properties and then or thereafter leases such assets or
properties or any part thereof or any other assets or properties which the
Company or such Restricted Subsidiary, as the case may be, intends to use for
substantially the same purpose or purposes as the assets or properties sold or
transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the
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62
net proceeds received from such sale in accordance with clause (A) or (B) of the
second paragraph of Section 4.11 of this Indenture.
SECTION 4.11. LIMITATION ON ASSET SALES. The Company will not, and will not
permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary (including
any Released Indebtedness and including by way of relief from or by any other
Person assuming responsibilities for any liabilities other than Indebtedness
("Released Liabilities")) is at least equal to the fair market value of the
assets sold or disposed of; PROVIDED that this clause (i) shall not apply to any
sale, transfer or other disposition arising from foreclosure, condemnation or
similar action with respect to any assets and (ii) at least 75% of the
consideration received (including any Released Indebtedness and Released
Liabilities) consists of cash, Temporary Cash Investments or Released
Indebtedness and Released Liabilities; PROVIDED, HOWEVER, that this clause (ii)
shall not apply to long-term assignments in capacity in a telecommunications
network or other transfers of indefeasible rights of use, multiple investment
units or dark fibers.
In the event and to the extent that the Net Cash Proceeds received by the
Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission or provided to the Trustee pursuant to Section 4.18), then
the Company shall or shall cause the relevant Restricted Subsidiary to:
(i) within 12 months after the date Net Cash Proceeds so received
exceed 10% of Adjusted Consolidated Net Tangible Assets
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company, or any
Restricted Subsidiary providing a Notes Guarantee or Indebtedness of
any other Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A), (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement) in property
or assets (other than current assets) of a nature or type or that are
used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such
investment (as
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63
determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution)
and
(ii) apply (no later than the end of the 12-month period referred
to in clause (i)) such excess Net Cash Proceeds (to the extent not
applied or committed to be applied pursuant to clause (i)) as provided
in the following paragraph of this Section 4.11.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied or committed to be applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $5 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders of the Notes (and if and to the extent required by the
terms of any Indebtedness that is PARI PASSU with the Notes or any Notes
Guarantee ("Pari Passu Indebtedness"), purchase, redeem or repay such Pari Passu
Indebtedness) on a PRO RATA basis an aggregate principal amount of Notes (and an
amount of Pari Passu Indebtedness) equal to the Excess Proceeds on such date, at
a purchase price equal to 100% of the principal amount of the Notes (and the
required amount of Pari Passu Indebtedness), plus accrued interest (if any) to
the Payment Date. If the aggregate principal amount of the Notes and aggregate
principal amount of such Pari Passu Indebtedness validly tendered and not
withdrawn (or otherwise subject to purchase, redemption or repayment) exceeds
such Excess Proceeds, such Excess Proceeds will be apportioned between the Notes
and such Pari Passu Indebtedness, with the portion of such Excess Proceeds
payable in respect of the Notes to equal the lesser of (x) the Excess Proceeds
amount multiplied by a fraction, the numerator of which is the aggregate
principal amount of the Notes and the denominator of which is the sum of the
aggregate principal amount of the Notes and the aggregate principal amount of
such Pari Passu Indebtedness and (y) the aggregate principal amount of Notes
validly tendered and not withdrawn.
Any Excess Proceeds remaining after such Offer to Purchase is completed may
be applied to fund any general corporate purpose not prohibited by the
Indenture.
For purposes of the first paragraph of this Section 4.11, (1) securities
received by the Company or any Restricted Subsidiary in any Asset Sale that are
converted by the Company or such Restricted Subsidiary into cash within 12
months after such Asset Sale and (2) consideration consisting of Indebtedness of
the Company or any Restricted Subsidiary, shall be deemed to be cash.
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company
shall commence, within 30 days of the occurrence of a Change of Control, and
consummate an Offer
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64
to Purchase for all Notes then outstanding, at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
Payment Date.
SECTION 4.13. EXISTENCE. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each Restricted Subsidiary and the
rights (whether pursuant to charter, partnership certificate, agreement, statute
or otherwise), licenses and franchises of the Company and each Restricted
Subsidiary; PROVIDED that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is, in the judgment of the Company, no
longer desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole.
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge and shall cause each of its Restricted Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the
income or profits of any such Restricted Subsidiary which is a corporation or
(c) the property of the Company or any such Restricted Subsidiary and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a lien upon the property of the Company or any such Restricted
Subsidiary; PROVIDED that the Company shall not be required to pay or discharge,
or cause to be paid or discharged, any such tax, assessment, charge or claim (x)
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings and for which adequate reserves have been established
to the extent required by generally accepted accounting principles or (y) if
failure to do so would not (as determined by the Company in good faith)
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Company and its Restricted
Subsidiaries taken as a whole or (z) if any resulting Lien constitutes a
Permitted Lien or otherwise complies with Section 4.09.
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company will
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED that nothing in
this Section 4.15 shall prevent the Company or any Restricted Subsidiary from
omitting to take such action or discontinuing the use, operation or maintenance
of any of such properties or disposing of any of them, if such omission,
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65
discontinuance or disposal is, in the judgment of the Company, desirable in the
conduct of the business of the Company or such Restricted Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers, in such amounts, with such deductibles and by such methods as shall be
customary for corporations similarly situated in the industry in which the
Company or any such Restricted Subsidiary, as the case may be, is then
conducting business; PROVIDED that in the judgment of the Company such insurance
is available to the Company on commercially reasonable terms and is desirable.
SECTION 4.16. NOTICE OF DEFAULTS. In the event that any Officer becomes
aware of any Default or Event of Default, the Company shall promptly deliver to
the Trustee an Officers' Certificate specifying such Default or Event of
Default.
SECTION 4.17. COMPLIANCE CERTIFICATES. The Company shall deliver to the
Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that occurred during such fiscal quarter. Such certificate shall contain
a certification from the principal executive officer, principal financial
officer or principal accounting officer of the Company that a review has been
conducted of the activities of the Company and its Restricted Subsidiaries and
the Company's and its Restricted Subsidiaries' performance under this Indenture
and that the Company has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.17, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If any of the officers of the Company signing
such certificate has knowledge of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. At all times from
and after the earlier of (i) the date of the commencement of an Exchange Offer
or the effectiveness of a Shelf Registration Statement (the "Registration") and
(ii) the date that is six months after the Closing Date, in either case, whether
or not the Company is then required to file reports with the Commission, the
Company shall file with the Commission to the extent then permitted by the
Securities Exchange Act of 1934, as amended, and by the Commission, all such
information on an appropriate available form as it would be required to file
with the Commission by Sections 13(a) or 15(d) under the Securities Exchange Act
of 1934 as if it were a U.S. company and subject thereto, including information
required by annual, quarterly and current reports, whether or not required to be
so filed. The Company shall supply the Trustee and each Holder or shall supply
to the Trustee for forwarding to all Holders, without cost to such Holders,
copies of such reports and other information. In addition, at all times prior to
the earlier of the date of the Registration and the date that is six months
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66
after the Closing Date, the Company shall, at its cost, supply the Trustee and
each Holder or shall supply to the Trustee for forwarding to all Holders,
without cost to such Holders, quarterly and annual reports substantially
equivalent to those described above or which would otherwise be required by the
Exchange Act commencing with the report for the fiscal quarter ending
immediately after the Closing Date; provided that the Company may deliver copies
of the registration statement (including pre-effective amendments thereto) with
respect to the Exchange Offer to the extent it contains the information that
would have been required in such reports. In addition, at all times prior to the
Registration, upon the request of any Holder or any prospective purchaser of the
Notes designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.20. ADDITIONAL AMOUNTS. All payments made by the Company under or
with respect to the Notes shall be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment, or other governmental charge (including penalties,
interest and other liabilities related thereto) (collectively, "TAXES") imposed
or levied by or on behalf of Luxembourg or any other jurisdiction in which the
Company is organized or is a resident for tax purposes or by any government
authority or political subdivision or territory or possession or agency therein
or thereof having the power to tax (each, a "TAXING AUTHORITY"), unless the
Company is required to withhold or deduct Taxes by law or by the interpretation
or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes imposed by a Taxing Authority within Luxembourg or within any
other jurisdiction in which the Company is organized or is a resident for tax
purposes, from any payment made under or with respect to the Notes, the Company
shall pay such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary so
that the net amount received by each Holder of Notes after such withholding or
deduction will not be less than the amount the Holder and beneficial owner would
have received if such Taxes had not been withheld or deducted; PROVIDED that no
Additional Amounts shall be payable with respect to a payment made to a Holder
of Notes or to a third party on behalf of a
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Holder, with respect to (a) any Taxes that would not have been so imposed but
for the existence of any present or former connection between such Holder and
the jurisdiction imposing such tax (other than the mere receipt of such payment
or the ownership or holding outside of Luxembourg of such Note); (b) any estate,
inheritance, gift, sales, excise, transfer, personal property tax or similar
tax, assessment or governmental charge; (c) any Taxes payable otherwise than by
deduction or withholding from payments of principal of, premium, if any, or
interest on such Note; or (d) Taxes that would not have been imposed but for the
failure of the Holder or beneficial owner of a Note to comply, upon written
request therefor furnished by the Company to the Trustee, with any
certification, identification, information, or other documentation requirement
under law, regulation, administrative practice or an applicable treaty that is a
precondition to exemption from, or reduction in the rate of the imposition,
deduction or withholding of Taxes; nor shall Additional Amounts be paid: (i) if
the payment under or with respect to the Notes could have been made by another
paying agent without such deduction or withholding, (ii) if the payment under or
with respect to the Notes could have been made without such deduction or
withholding if the beneficiary of the payment had presented the Note for payment
within 30 days after (A) the date on which such payment or such Note became due
and payable or (B) the date on which payment thereof is duly provided for,
whichever is later (except to the extent that the holder would have been
entitled to Additional Amounts had the Note been presented on the last day of
such 30 day period), (iii) with respect to any payment under or with respect to
the Notes to any holder who is a fiduciary or partnership or any person other
than the sole beneficial owner of such payment, to the extent that a beneficiary
or settlor with respect to such fiduciary, a member of such a partnership or the
beneficial owner of such payment would not have been entitled to the Additional
Amounts had such beneficiary, settlor, member or beneficial owner been the
actual holder of such Note.
The Company shall also (i) make such withholding or deduction and (ii)
remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. The Company shall use its reasonable efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes. The Company
will supply to the Trustee for forwarding to all Holders, without cost to such
Holders, within 60 days after the date the payment of any Taxes so deducted or
withheld is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Company or if, notwithstanding the Company's
efforts to obtain such receipts, the same are not obtainable, other evidence of
such payments by the Company.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company shall be obligated to
pay Additional Amounts with respect to such payment, the Company shall deliver
to the Trustee an Officers' Certificate stating the fact that such Additional
Amounts will be payable, the amounts so payable and shall set forth such other
information as is necessary to enable the Trustee to pay such Additional Amounts
to holders of Notes on the payment date.
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The foregoing provisions shall survive any termination or the discharge of
this Indenture and shall apply MUTATIS MUTANDIS to any jurisdiction in which any
successor Person to the Company is organized or is engaged in business for tax
purposes or any political subdivision or taxing authority or agency thereof or
therein.
In addition, the Company shall pay any stamp, issue, registration,
documentary or other similar taxes and duties, including interest and penalties,
payable in Luxembourg or any political subdivision thereof or therein in respect
of the creation, issue and offering of the Notes.
Whenever in this Indenture or the Notes there is mentioned in any context,
the payment of amounts based upon principal of, premium, if any, or interest or
of any other amount payable under or with respect to any of the Notes, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of
the Company shall be a corporation organized and validly existing under the
laws of the Kingdom of the Netherlands (including the Netherlands
Antilles), Bermuda, Canada, Switzerland, any member state of the European
Union or the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on the Notes and under
this Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of
the Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the
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Company immediately prior to such transaction; PROVIDED that this clause
(iii) shall only apply to a sale of less than all of the assets of the
Company;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Company, or any Person becoming the successor obligor on
such Notes, as the case may be, could Incur at least $1.00 of Indebtedness
under the first paragraph of Section 4.03; PROVIDED that this clause (iv)
shall not apply to a consolidation, merger or sale of all (but not less
than all) of the assets of the Company if all Liens and Indebtedness of the
Company or any Person becoming the successor obligor of the Notes, as the
case may be, and its Restricted Subsidiaries outstanding immediately after
such transaction would, if Incurred at such time, have been permitted to be
Incurred (and all such Liens and Indebtedness, other than Liens and
Indebtedness of the Company and its Restricted Subsidiaries outstanding
immediately prior to the transaction, shall be deemed to have been
Incurred) for all purposes of this Indenture; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv) above) and Opinion of Counsel, in each case to the
effect that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for in this paragraph relating to such transaction have been
complied with;
PROVIDED, HOWEVER, that (x) in giving any such opinion such counsel may rely on
an Officers' Certificate as to compliance with the foregoing clauses (ii), (iii)
and (iv) and as to any matters of fact and (y) clauses (iii) and (iv) above will
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 jurisdiction of
organization of the Company, and such transaction does not have as one of its
purposes the evasion of the foregoing limitations.
SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; PROVIDED that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. Any of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days; PROVIDED that a failure to make any of the first five scheduled
interest payments on the Notes on the applicable Interest Payment Date will
constitute an Event of Default with no grace or cure period;
(c) default in the performance or breach of the provisions of Article
Five of this Indenture or the failure to make or consummate an Offer to
Purchase when required in accordance with Section 4.11 or 4.12 of this
Indenture;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) or the
Pledge Agreement and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 consecutive days
following
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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 $10 million during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 30 consecutive
days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of
Default specified in clause (g) or (h) of Section 6.01 that occurs with respect
to the Company) occurs and is continuing under this Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the Holders), may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, and accrued interest on the
Notes to be immediately due and payable. Upon a declaration of acceleration,
such principal of, premium, if any, and accrued and unpaid interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied or cured by the Company or the relevant
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) of Section 6.01 occurs with
respect
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to the Company, the principal of, premium, if any, and accrued and unpaid
interest on the Notes then outstanding shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after such declaration of acceleration, but before a judgment
or decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past Defaults
and rescind and annul a declaration of acceleration and its consequences if (a)
the Company has paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances (if any) of the Trustee, its
agents and counsel, (ii) all overdue interest on all Notes, (iii) the principal
of and premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest, if any, at the rate
prescribed therefor by such Notes, (b) all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and accrued interest
on the Notes that have become due solely by such declaration of acceleration,
have been cured or waived and (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may, and, subject to Section 7.02(iv), at the direction
of the Holders of at least a majority in principal amount of the outstanding
Notes shall, pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of, premium, if any, or interest on the Notes
or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07 and
9.02, the Holders of at least a majority in principal amount of the outstanding
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, or interest on any Note as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
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SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority in
aggregate principal amount of the outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and provided
further that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. LIMITATION ON SUITS. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) the Holder has previously given the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes shall have made a written request to the Trustee to
pursue such remedy;
(iii) such Holder or Holders offer the Trustee indemnity reasonably
satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request.
For purposes of Section 6.05 of this Indenture and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such
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payment, on or after the due date expressed in the Notes, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in payment
of principal, premium or interest specified in clause (a), (b) or (c) of Section
6.01 occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company or any other obligor of
the Notes for the whole amount of principal, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal, premium,
if any, and, to the extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate specified in the
Notes, and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances (if any) of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor of the Notes), its creditors or its property and
shall be entitled and empowered to collect and receive any monies, securities or
other property payable or deliverable upon conversion or exchange of the Notes
or upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. Nothing herein contained shall be deemed to empower
the Trustee to authorize or consent to, or accept or adopt on behalf of any
Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according
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to the amounts due and payable on such Notes for principal, premium, if
any, and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court may require any party litigant
in such suit to file an undertaking to pay the costs of the suit, and the court
may assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit
by Holders of more than 10% in principal amount of the outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the 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
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
wrongfully taken Notes in Section 2.09, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee shall
be as provided by the TIA and as set forth herein. All rights (including the
right to indemnification) stated in this Article Seven shall also be conferred
on any Registrar or Paying Agent. Notwithstanding the foregoing, no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not herein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a)
through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper person;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 11.04. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any attorney
or agent appointed with due care by it hereunder;
(iv) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers, provided that the Trustee's conduct does not constitute
negligence or bad faith;
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(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(vii) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document; and
(viii) the Trustee shall not be charged with knowledge of any
documentation other than this Indenture or documentation to which it is a
party.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no representation
as to the validity or adequacy of this Indenture, the Pledge Agreement or the
Notes, (ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured;
PROVIDED, HOWEVER, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May
15, beginning with May 15, 1999, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed by the Company with the
Commission and each stock exchange on which the Securities are listed in
accordance with TIA Section 313(d). The Company shall
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promptly notify the Trustee when the Securities are listed on any stock exchange
or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services
hereunder. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances (if
any) incurred or made by the Trustee without negligence or bad faith on its
part. Such expenses shall include the reasonable compensation and expenses of
the Trustee's agents and counsel.
The Company shall indemnify the Trustee (which for purposes of this Section
7.07 shall include its directors, officers, employees and agents) for, and hold
it harmless against, any loss or liability or expense incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Notes. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder, unless the Company is materially prejudiced thereby. At the Trustee's
request, the Company shall defend the claim and the Trustee shall cooperate in
the defense. Unless otherwise set forth herein, the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust, pursuant to the Pledge Agreement or otherwise, to pay principal
of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses
and the compensation for the services will be intended to constitute expenses of
administration under Title 11 of the United States Bankruptcy Code or any
applicable federal or state law for the relief of debtors.
The provisions of this Section 7.07 shall survive the termination of this
Indenture, the payment of the Notes and the resignation or removal of the
Trustee.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
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SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
The Trustee may resign at any time by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if: (i) the Trustee
is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may, at the expense
of the Company, petition any court of competent jurisdiction for the appointment
of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after the delivery of
such written acceptance, subject to the lien provided in Section 7.07, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder. No successor Trustee shall accept
its appointment unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
If the Trustee is no longer eligible under Section 7.10 or shall fail to
comply with TIA Section 310(b), any Holder who satisfies the requirements of TIA
Section 310(b) may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.08, the Trustee shall resign immediately in the manner and with the
effect provided in this Section.
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The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligation under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein, provided such corporation shall be otherwise qualified and eligible
under this Article.
SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee who
satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a
combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition that is subject to the requirements
of applicable Federal or state supervising or examining authority. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in this Article.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes that are
paid pursuant to Section 4.01 or Notes for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder;
or
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(ii) (A) the Notes mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
as trust funds solely for the benefit of the Holders for that purpose,
money or U.S. Government Obligations sufficient (in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Notes to maturity or
redemption, as the case may be, (C) no Default or Event of Default with
respect to the Notes shall have occurred and be continuing on the date of
such deposit, (D) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other material
agreement or instrument to which the Company is a party or by which it is
bound and (E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations under
Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 4.20, 7.07, 7.08 and 8.06, and the rights, powers,
trusts, duties and immunities of the Trustee hereunder, shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07 and 8.06, and the Trustee's obligations under Sections 8.04 and
8.05, shall survive. After any such irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same if:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10)
and conveyed all right, title and interest to the Trustee for the benefit
of the Holders, under the terms of an irrevocable trust agreement in form
and substance reasonably satisfactory to the Trustee as trust funds in
trust, specifically pledged to the Trustee for the benefit of the Holders
as security for payment of the principal of, premium, if any, and interest,
if any, on the Notes, and dedicated solely to, the benefit of the Holders,
in and to (1) money in an amount, (2) U.S. Government Obligations that,
through the payment of interest, premium, if any, and principal in respect
thereof in
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accordance with their terms, will provide money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Notes on the Stated
Maturity of such principal or interest or on any earlier Redemption Date;
PROVIDED that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to the
payment of such principal, premium, if any, and interest with respect to
the Notes and, with respect to any Redemption Date, the Company shall have
provided the Trustee with irrevocable instructions to redeem all of the
Notes on such Redemption Date;
(B) the Company has delivered to the Trustee (1) either (x) an
Opinion of Counsel to the effect that Holders will not recognize income,
gain or loss for federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.02 and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised, which Opinion of Counsel shall be based upon (and accompanied by
a copy of) a ruling of the Internal Revenue Service to the same effect
unless there has been a change in applicable federal income tax law after
the Closing Date such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service to the
same effect as the aforementioned Opinion of Counsel and (2) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and that after the passage of
123 days following the deposit (except, with respect to any trust funds for
the account of any Holder who may be deemed to be an "insider" for purposes
of the United States Bankruptcy Code, after one year following the
deposit), the trust funds will not be subject to the effect of Section 547
of the United States Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (II) if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, (a) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute and (b) the
Holders will be entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used in such case or
proceeding;
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(C) immediately after giving effect to such deposit, on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day
after such date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other material
agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;
(D) if the Notes are then listed on a national securities exchange,
the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with (which Opinion of
Counsel may rely on any Officers certificate as to matters of fact,
including, to the extent applicable, compliance with the foregoing clauses
(A),(B), (C) and (D)).
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (B)(2) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 4.20, 8.06, and the rights, powers, trusts, duties and
immunities of the Trustee hereunder shall survive until the Notes are no longer
outstanding. Thereafter, only the Company's obligations in Sections 7.07 and
8.06, and the Trustee's obligations under Sections 8.04 and 8.05, shall survive.
If and when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (B)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's obligations under Section 4.01, then the Company's obligations under
such Section 4.01 shall cease upon delivery to the Trustee of such ruling or
Opinion of Counsel and compliance with the other conditions precedent provided
for herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit to
comply with any term, provision or condition set forth in clauses (iii) and (iv)
of Section 5.01 and Sections 4.03 through 4.12 and clause (c) of Section 6.01
with respect to clauses (iii) and (iv) of Section 5.01 and with respect to
Sections 4.11 and 4.12, clause (d) of Section 6.01 with respect
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84
to Sections 4.02 through 4.10 and 4.13 through 4.19 and clauses (e) and (f) of
Section 6.01 shall be deemed not to be Events of Default, in each case with
respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10)
and conveyed all right, title and interest to the Trustee for the benefit
of the Holders, under the terms of an irrevocable trust agreement in form
and substance reasonably satisfactory to the Trustee as trust funds in
trust, specifically pledged to the Trustee for the benefit of the Holders
as security for payment of the principal of, premium, if any, and interest,
if any, on the Notes, and dedicated solely to, the benefit of the Holders,
in and to (A) money in an amount, (B) U.S. Government Obligations that,
through the payment of interest, premium, if any, and principal in respect
thereof in accordance with their terms, will provide, money in an amount or
(C) a combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Notes (i) on the Stated
Maturity of such principal or interest or (ii) on any earlier Redemption
Date; PROVIDED that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to the
payment of such principal, premium, if any, and interest with respect to
the Notes and, with respect to any Redemption Date, the Company shall have
provided the Trustee with irrevocable instructions to redeem all of the
Notes on such Redemption Date;
(ii) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) after the passage of 123
days following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (1) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule under
any such law in any case or proceeding that the trust funds remained
property of the Company, (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States
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85
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute) and (y) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding, (C) the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain covenants
and Events of Default and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (D) the Trustee,
for the benefit of the Holders, has a valid first-priority security
interest in the trust funds;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day after such date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under any other
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(iv) if the Notes are then listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with (which Opinion of
Counsel may rely on any Officers certificate as to matters of fact,
including, to the extent applicable, compliance with the foregoing clauses
(i),(ii), (iii) and (iv)).
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.06, the
Trustee shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply
the deposited money and the money from U.S. Government Obligations in accordance
with the Notes and this Indenture to the payment of principal of, premium, if
any, and interest on the Notes; but such money need not be segregated from other
funds except to the extent required by law.
SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 8.01, 8.02 and
8.03, the Trustee shall promptly pay to the Company upon request set forth in an
Officers' Certificate any excess money held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee
shall pay to the Company upon request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for two years.
After payment to the Company, Holders entitled to such money must look to the
Company
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86
for payment as general creditors unless an applicable law designates another
Person, and all liability of the Trustee with respect to such money shall cease.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or
8.03, as the case may be; PROVIDED that, if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized by a
resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not, in the
good faith opinion of the Board of Directors as evidenced by a Board
Resolution, adversely affect the interests of the Holders in any material
respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
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(6) to add one or more Subsidiary Guarantees on the terms required
by this Indenture; or
(7) to make any change that, in the good faith opinion of the Board
of Directors as evidenced by a Board Resolution, does not materially and
adversely affect the rights of any Holder.
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and 6.07
and without prior notice to the Holders, the Company, when authorized by its
Board of Directors (as evidenced by a Board Resolution delivered to the
Trustee), and the Trustee may amend this Indenture, the Pledge Agreement and the
Notes with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding, and the Holders of a
majority in aggregate principal amount of the Notes then outstanding by written
notice to the Trustee may waive future compliance by the Company with any
provision of this Indenture, the Pledge Agreement or the Notes.
Notwithstanding the provisions of this Section 9.02, without the consent of
each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, premium, if any, or interest
on any Note;
(iii) change any place or currency of payment of principal of,
premium, if any, or interest on, any Note;
(iv) impair the right of such Holder to institute suit for the
enforcement of any payment of principal, premium or interest on or after
the Stated Maturity (or, in the case of redemption, on or after the
Redemption Date) of any Note;
(v) reduce the percentage or principal amount of outstanding Notes
the consent of whose Holders is necessary to modify or amend this Indenture
or to waive compliance with certain provisions of or certain Defaults under
this Indenture;
(vi) waive a default in the payment of principal of, premium, if
any, or interest on, any Note;
(vii) modify the Pledge Agreement to release any collateral subject
to the Pledge Agreement (other than as contemplated thereby); or
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(viii) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company will mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, subject to the last paragraph
of this Section 9.03, any such Holder or subsequent Holder may revoke the
consent as to its Note or portion of its Note. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver. An
amendment, supplement or waiver becomes effective on the later of the date of
receipt of such certificate and the date specified in such amendment, supplement
or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it is of the type described in the second paragraph of
Section 9.02. In case of an amendment or waiver of the type described in the
second paragraph of Section 9.02, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent Holder of a Note that evidences the
same indebtedness as the Note of the consenting Holder.
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SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment, supplement
or waiver changes the terms of a Note, the Trustee may require the Holder to
deliver such Note to the Trustee. At the Company's expense, the Trustee may
place an appropriate notation on the Note about the changed terms and return it
to the Holder and the Trustee may place an appropriate notation on any Note
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Failure to make
the appropriate notation, or issue a new Note, shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company. Subject to the
preceding sentence, the Trustee shall sign such amendment, supplement or waiver
if the same does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. SECURITY. (a) On the Closing Date, the Company shall (i)
enter into the Pledge Agreement and comply with the terms and provisions thereof
and (ii) purchase the Pledged Securities to be pledged to the Trustee 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 five
scheduled interest payments due on the Notes. In the event the Pledged
Securities to be purchased on the Closing Date are for any reason not purchased
by the Company, the Company shall purchase and deliver to the Trustee additional
Pledged Securities in such amount as will be sufficient upon receipt of
scheduled interest and/or principal payments of all Pledged Securities
thereafter held in the Pledge Account, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide
payment for the first five scheduled interest payments due on the Notes. The
Pledged Securities shall be pledged by the Company to the Trustee for the
benefit of
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90
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 will do or cause to be done all such acts
and things as may be necessary 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, upon request of the Trustee, any and all actions
reasonably required to cause the Pledge Agreement to create and maintain (to the
maximum extent permitted by law), 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 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 Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Pledge Agreement, to be complied with. The
Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such instruments.
(e) The Trustee may, in its sole discretion and without the consent of the
Holders, 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
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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 ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939. Prior to the effectiveness of
the Registration Statement, this Indenture shall incorporate and be governed by
the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 11.02. NOTICES. Any notice or communication hereunder shall be
sufficiently given if in writing, in English, and delivered in person, mailed by
first-class mail or sent by telecopier transmission addressed as follows:
IF TO THE COMPANY:
Carrier1 International S.A.
c/o Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
IF TO THE TRUSTEE:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
<PAGE>
92
Any notice or communication mailed to a Holder shall be mailed to it at its
address as it appears on the Security Register by first-class mail and shall be
sufficiently given to him if so mailed within the time prescribed. Any notice or
communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee and each Agent at the
same time.
Failure to mail a notice or communication to a Holder as provided herein or
any defect in any such notice or communication shall not affect its sufficiency
with respect to other Holders. Except for a notice to the Trustee, which is
deemed given only when received, and except as otherwise provided in this
Indenture, if a notice or communication is mailed in the manner provided in this
Section 11.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any
request or application by the Company to the Trustee to take any action under
this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate to the effect that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel to the effect that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
Notwithstanding the foregoing, in the case of any such request or
application as to which the furnishing of any Officers' Certificate or Opinion
of Counsel is specifically required by any
<PAGE>
93
provision of this Indenture relating to such particular request or application,
no additional certificate or opinion need be furnished.
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Subject to
the last paragraph of Section 11.03, each certificate or opinion with respect to
compliance with a condition or covenant provided for in this Indenture (except
for certificates provided for in Section 4.16) shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
PROVIDED, HOWEVER, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; PROVIDED that
no interest shall accrue for the period from and after such Interest Payment
Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the
case may be.
SECTION 11.07. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
<PAGE>
94
SECTION 11.08. NO RECOURSE AGAINST OTHERS. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company contained in this
Indenture or in any of the Notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or against any past,
present or future partner, shareholder, other equityholder, officer, director,
employee or controlling person, as such, of the Company or of any successor
Person, either directly or through the Company or any successor Person, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Notes.
SECTION 11.09. SUCCESSORS. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 11.10. DUPLICATE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 11.11. SEPARABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.12. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
SECTION 11.13. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR
SERVICE. (a) With respect to any suit, action, or proceeding that may be brought
in connection with this Indenture or the Notes or any Guarantee, if any, the
Company irrevocably consents to the jurisdiction of any United States federal or
New York state court sitting in the Borough of Manhattan, The City of New York,
the State of New York and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding and any claim of inconvenient forum, and
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding.
(b) The Company (i) irrevocably designates and appoints CT Corporation
System, 1633 Broadway, New York, NY 10019 (together with any successor, the
"AUTHORIZED AGENT"),
<PAGE>
95
as its authorized agent upon which process may be served in any suit, action or
proceeding described in the first sentence of this Section 11.13 and represents
and warrants that the Authorized Agent has accepted such designation and (ii)
agrees that service of process upon the Authorized Agent and written notice of
said service to the Company (mailed or delivered to its General Counsel at its
executive office at Militarstrasse 36, CH-8004, Zurich, Switzerland), shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the Authorized Agent in full force and effect so long as any of the Notes shall
be outstanding.
(c) To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under the
above-referenced documents, to the extent permitted by law.
SECTION 11.14. JUDGMENT CURRENCY. The Company hereby agrees to
indemnify the Trustee, its directors, its officers and each person, if any, who
controls the Trustee within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any loss incurred by such person as a
result of any judgment or order being made or given against the Company for any
U.S. dollar amount due under this Agreement and such judgment or order being
express and paid in a currency (the "JUDGMENT CURRENCY") other than U.S. dollars
and as a result of any variation as between (i) the rate of exchange at which
the U.S. dollar amount is converted into the Judgment Currency for the purpose
of such judgment or order and (ii) the spot rate of exchange in The City of New
York on which such party on the date of payment of such judgment or order is
able to purchase U.S. dollars with the amount of the Judgment Currency actually
received by such party. The foregoing indemnity shall continue in full force and
effect notwithstanding any such judgment or order. The term "spot rate of
exchange" shall include any premiums or costs of exchange payable in connection
with the purchase of, or conversion into U.S. dollars.
SECTION 11.15. 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 THE EXCHANGE NOTES OR THE EFFECTIVENESS OF THE SHELF
REGISTRATION STATEMENT, THIS INDENTURE SHALL BE SUBJECT TO THE PROVISIONS OF THE
TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED TO BE PART OF THIS
INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
<PAGE>
96
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
CARRIER1 INTERNATIONAL S.A.
By: /s/ Glenn M. Creamer
---------------------------------
Name: Glenn M. Creamer
Title: Director
By: /s/ Mark A. Pelson
---------------------------------
Name: Mark A. Pelson
Title: Director
THE CHASE MANHATTAN BANK, Trustee
By: /s/ William Potes
---------------------------------
Name: William Potes
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
[FACE OF NOTE]
CARRIER1 INTERNATIONAL S.A.
13 1/4% Senior Dollar Note due 2009
[CUSIP] [CINS] [ISIN] [ ]
----------
No. $
---- ---------
CARRIER1 INTERNATIONAL S.A., a societe anonyme organized under the laws of
the Grand Duchy of Luxembourg (the "Company", which term includes any successor
under the Indenture hereinafter referred to), for value received, promises to
pay to _____________, or its registered assigns, the principal sum of
____________ ($____________________) on February 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing August 15,
1999.
Regular Record Dates: February 1 and August 1.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CARRIER1 INTERNATIONAL S.A.
By:
----------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 13 1/4% Senior Dollar Notes due 2009 described in the
within-mentioned Indenture.
Date: THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------
Authorized Signatory
<PAGE>
A-3
[REVERSE SIDE OF NOTE]
CARRIER1 INTERNATIONAL S.A.
13 1/4% Senior Dollar Note due 2009
1. PRINCIPAL AND INTEREST.
The Company will pay the principal of this Note on February 15, 2009.
The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate per annum shown
above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the February 1 or August 1 immediately
preceding the Interest Payment Date) on each Interest Payment Date.
[If an exchange offer (the "Exchange Offer") registered under the
Securities Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Notes is not declared effective by the Commission, on or before August 19, 1999
in accordance with the terms of the Registration Rights Agreement dated February
12, 1999 between the Company, Morgan Stanley & Co. Incorporated, Salomon Smith
Barney Inc., Warburg Dillon Read LLC and Bear, Stearns & Co. Inc., the annual
interest rate borne by the Notes shall be increased by 0.5% from the rate shown
above accruing from August 19, 1999, payable in cash semiannually, in arrears,
on each Interest Payment Date, commencing February 15, 2000 until the Exchange
Offer is consummated or the Shelf Registration Statement is declared effective.
The Holder of this Note is entitled to the benefits of such Registration Rights
Agreement.]*
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from February 19, 1999;
PROVIDED that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
- --------
* To be omitted from Exchange Notes. Substantially similar language to be
included or omitted, as the case may be with respect to Additional Notes,
MUTATIS MUTANDI.
<PAGE>
A-4
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
Under certain circumstances described in the Indenture, the Company also
shall pay Additional Amounts to the Holders of Notes equal to an amount that the
Company may be required to withhold or deduct for or on account of Taxes imposed
by a Taxing Authority, from any payment made under or with respect to the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each February 15 and August 15,
commencing August 15, 1999 to the persons who are Holders (as reflected in the
Security Register at the close of business on the February 1 or August 1
immediately preceding the Interest Payment Date), in each case, even if the Note
is canceled on registration of transfer or registration of exchange after such
record date; PROVIDED that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after February 15, 2009.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of February 19,
1999 (the "Indenture"), between the Company and The Chase Manhattan Bank,
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The
<PAGE>
A-5
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company except to the
extent set forth in Article Ten of the Indenture and the Pledge Agreement.
The Company may, subject to Article Four of the Indenture and applicable
law, issue Additional Notes under the Indenture.
5. OPTIONAL REDEMPTION.
The Notes are redeemable, at the Company's option, in whole or in part, at
any time or from time to time, on or after February 15, 2004 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
February 15 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2004............. 106.625%
2005............. 104.417
2006............. 102.208
2007 and thereafter 100.000
</TABLE>
At any time prior to February 15, 2002, the Company at its option may
redeem Notes in an aggregate principal amount equal to up to 35% of the
principal amount of the Notes (including the principal amount of any Additional
Notes), with funds in an amount equal to the proceeds of one or more sales of
Capital Stock (other than Disqualified Stock) of, or capital contributions to,
the Company, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 113.25%, plus accrued and
unpaid interest, if any, to the Redemption Date (subject to the rights of
Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); PROVIDED
that (i) an aggregate principal amount equal to at least 65% of the principal
amount of the initially
<PAGE>
A-6
issued Notes (plus the principal amount of any Additional Notes) remains
outstanding after each such redemption and (ii) notice of such redemption is
mailed within 60 days of each such sale or capital contribution.
In the event that (i) as a result of any change in, or amendments to, any
laws or treaties (or any regulations or rulings promulgated thereunder) or any
change in official position regarding the application of such laws, treaties,
regulations or rulings (including a holding, judgement or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective after the Closing Date, the Company has become or would become
obligated to pay, on the next date on which any amount would be payable under or
with respect to the Notes, any Additional Amounts, and (ii) the Company cannot
reasonably arrange (without other material adverse consequences to the Company)
for another obligor to make such payment so as to avoid the requirement to pay
such Additional Amounts, then the Company may redeem all, but not less than all,
the Notes at any time at 100% of the principal amount thereof, together with
accrued interest thereon, if any, to the Redemption Date.
Notes in original denominations larger than $1,000 may be redeemed in part.
On and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called for redemption, unless the Company defaults in the payment of
the Redemption Price.
6. REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Payment Date").
A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the purchase price.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
of principal amount and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer or exchange
<PAGE>
A-7
of any Notes for a period of 15 days before the day of mailing of a notice of
redemption of Notes selected for redemption.
8. PERSONS DEEMED OWNERS.
A Holder shall be treated as the owner of a Note for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee will pay the money back to the Company at
its request. After that, Holders entitled to the money must look to the Company
for payment, unless an abandoned property law designates another Person, and all
liability of the Trustee with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain provisions thereof, and (b) to the Stated Maturity,
the Company will be discharged from certain covenants set forth in the
Indenture.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Pledge Agreement or the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
materially and adversely affect the rights of any Holder.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, suffer to exist restrictions on the
ability of Restricted Subsidiaries to make certain payments to the Company,
issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the
Company, engage in transactions with Affiliates, suffer to exist or incur Liens,
enter into sale-leaseback transactions, use the proceeds from Asset Sales, or
merge, consolidate or transfer substantially
<PAGE>
A-8
all of its assets. Within 90 days after the end of each fiscal year, the Company
shall deliver to the Trustee an Officers' Certificate stating whether or not the
signers thereof know of any Default or Event of Default under such restrictive
covenants.
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.
14. DEFAULTS AND REMEDIES.
Any of the following events constitutes an "Event of Default" under the
Indenture:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days; PROVIDED that a failure to make any of the first five scheduled
interest payments on the relevant series of Notes on the applicable
Interest Payment Date will constitute an Event of Default with no grace or
cure period;
(c) default in the performance or breach of the provisions of
Article Five of the Indenture or the failure to make or consummate an Offer
to Purchase when required in accordance with Section 4.11 or 4.12 of the
Indenture;
(d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in the Indenture or under the
Notes (other than a default specified in clause (a), (b) or (c) above) or
the Pledge Agreement and such default or breach continues for a period of
30 consecutive days after written notice by the Trustee or the Holders of
25% or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full
or such acceleration has not been rescinded or annulled within 30 days of
such acceleration and/or (II) the failure to make a principal payment at
the final (but not any interim) fixed maturity and
<PAGE>
A-9
such defaulted payment shall not have been made, waived or extended within
30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 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 $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 30 consecutive
days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and effect
or enforceable in accordance with its terms, other than in accordance with
its terms.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable. If a bankruptcy or insolvency default with
respect to the Company occurs and is continuing, the Notes automatically become
due and payable. Holders may not enforce the Indenture or the Notes except as
provided in the
<PAGE>
A-10
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
at least a majority in principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.
15. SECURITY.
The Company has entered into the Pledge Agreement for the purchase and
pledge to the Trustee for the benefit of the Holders, Pledged Securities in an
amount sufficient upon receipt of scheduled interest and principal payments on
such securities to provide for payment in full of the first five scheduled
interest payments due on the Notes. The Pledged Securities will be pledged by
the Company to the Trustee for the benefit of the Holders and will be held by
the Trustee in the Pledge Account pending disbursement pursuant to the Pledge
Agreement.
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No incorporator or any past, present or future partner, shareholder, other
equityholder, officer, director, employee or controlling person, as such, of the
Company or of any successor Person shall have any liability for any obligations
of the Company under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
18. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE>
A-11
The Company will furnish a copy of the Indenture to any Holder upon
written request and without charge. Requests may be made to Carrier1
International S.A, c/o Carrier1 International GmbH, Militarstrasse 36, CH-8004
Zurich, Switzerland; Attention: Kees van Ophem, Vice President Purchase and
General Counsel.
20. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE.
In connection with the Indenture or the Notes or any Guarantee, if any,
the Company irrevocably consents to the jurisdiction of any court of the
State of New York or any United States federal court sitting in the Borough
of Manhattan, The City of New York, the State of New York and irrevocably
waives, to the fullest extent permitted by law, any objection to any suit,
action, or proceeding that may be brought which it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding and any
claim of inconvenient forum, and irrevocably submits to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding. In
connection with any Guarantee, the Company shall use reasonable efforts to
cause the issuer of any Guarantee to submit to jurisdiction to substantially
the same extent.
The Company (i) irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, NY 10019 (together with any successor, the "Authorized
Agent"), as its authorized agent upon which process may be served in any such
suit, action or proceeding and (ii) agrees that service of process upon the
Authorized Agent and written notice of said service to the Company (mailed or
delivered to its General Counsel at its executive office at Militarstrasse 36,
CH-8004, Zurich, Switzerland), shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, it hereby
irrevocably waives such immunity in respect of its obligations under the
Indenture or the Notes, to the extent permitted by law.
THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
A-12
[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 said 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 AND UNLEGENDED NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) 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.
<PAGE>
A-13
If none 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 2.08 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.
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
<PAGE>
A-14
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.11 or 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or 4.12 of the Indenture, state the amount (in
principal amount):
$
-------------------.
Date:
-------------------
Your Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------------
<PAGE>
EXHIBIT B
Form of Certificate
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR DOLLAR NOTES DUE 2009 (THE "NOTES")
Dear Sirs:
This letter relates to U.S.$________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02(a)
of the Indenture dated as of February 19, 1999 (the "Indenture") relating to
the Notes, we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are hereby
requested to exchange the legended certificate for an unlegended certificate
representing an identical principal amount of Notes, all in the manner
provided for in 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 Signatory
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
__________, __
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR DOLLAR NOTES DUE 2009 (THE "NOTES")
Dear Sirs:
In connection with our proposed purchase of $___________ aggregate
principal amount of the Notes, in accordance with Section 2.08(a) of the
Indenture referred to below, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Indenture dated as of
February 19, 1999 (the "Indenture") relating to the Notes and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes within the time period
referred to in Rule 144(k) of the Securities Act, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of an aggregate principal amount of Notes
<PAGE>
C-2
at the time of transfer of less than $250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act, (D)
to a person outside the United States in an offshore transaction in compliance
with Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available) or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
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.
Very truly yours,
[Name of Transferee]
By:
--------------------------------------------
Authorized Signatory
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
__________, __
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR DOLLAR NOTES DUE 2009 (THE "NOTES")
Dear Sirs:
In connection with our proposed sale of U.S.$_________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes (and any Units of which they may form a part)
was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transfer is not part of a plan or scheme to evade the registration
requirements of the U.S. Securities Act of 1933.
<PAGE>
D-2
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 Transferor]
By:
---------------------------
Authorized Signatory
<PAGE>
Exhibit 4.3
================================================================================
CARRIER1 INTERNATIONAL S.A.,
Issuer
and
THE CHASE MANHATTAN BANK,
Trustee
-------------
Indenture
Dated as of February 19, 1999
-------------
13 1/4% Senior Euro Notes due 2009
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
TIA SECTIONS INDENTURE SECTIONS
<S> <C> <C>
Section 310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(b)............................................... 7.03; 7.08
Section 311(a)............................................... 7.03
(b)............................................... 7.03
Section 312(a)............................................... 2.04
(b)............................................... 11.02
(c)............................................... 11.02
Section 313(a)............................................... 7.06
(b)(2)............................................ 7.07
(c)............................................... 7.05; 7.06; 11.02
(d)............................................... 7.06
Section 314(a)............................................... 7.05; 11.02
(a)(4)............................................ 4.17; 11.02
(b)............................................... 10.01
(c)(1)............................................ 11.03
(c)(2)............................................ 11.03
(d)............................................... 10.01
(e)............................................... 4.17; 11.04
Section 315(a)............................................... 7.02
(b)............................................... 7.05; 11.02
(c)............................................... 7.02
(d)............................................... 7.02
(e)............................................... 6.11
Section 316(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.04
(b)............................................... 6.07
(c)............................................... 9.03
Section 317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.05
Section 318(a)............................................... 11.01
(c)............................................... 11.01
</TABLE>
- ---------------------------
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part
of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS*
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. DEFINITIONS...........................................................2
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT....................29
SECTION 1.03. RULES OF CONSTRUCTION................................................29
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING......................................................30
SECTION 2.02. RESTRICTIVE LEGENDS..................................................31
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS..........................34
SECTION 2.04. REGISTRAR AND PAYING AGENT...........................................35
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST..................................36
SECTION 2.06. TRANSFER AND EXCHANGE................................................37
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES...............................38
SECTION 2.08. SPECIAL TRANSFER PROVISIONS..........................................39
SECTION 2.09. REPLACEMENT NOTES....................................................43
SECTION 2.10. OUTSTANDING NOTES....................................................43
SECTION 2.11. TEMPORARY NOTES......................................................44
SECTION 2.12. CANCELLATION.........................................................44
SECTION 2.13. CUSIP NUMBERS........................................................44
SECTION 2.14. DEFAULTED INTEREST...................................................45
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES.........................................45
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION..................................................45
SECTION 3.02. NOTICES TO TRUSTEE...................................................46
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED....................................46
SECTION 3.04. NOTICE OF REDEMPTION.................................................47
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION.......................................48
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE..........................................48
</TABLE>
- --------------------------
Note: The Table of Contents shall not for any purposes be deemed to be a part of
the Indenture.
<PAGE>
ii
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION...............................48
SECTION 3.08. NOTES REDEEMED IN PART...............................................48
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.....................................................49
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY......................................49
SECTION 4.03. LIMITATION ON INDEBTEDNESS...........................................50
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS....................................53
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES....................................................57
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES...............................................................59
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES.....59
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES..........60
SECTION 4.09. LIMITATION ON LIENS..................................................62
SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS............................62
SECTION 4.11. LIMITATION ON ASSET SALES............................................63
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL.........................65
SECTION 4.13. EXISTENCE............................................................65
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS....................................65
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE..............................65
SECTION 4.16. NOTICE OF DEFAULTS...................................................66
SECTION 4.17. COMPLIANCE CERTIFICATES..............................................66
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS............................66
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS..............................67
SECTION 4.20. ADDITIONAL AMOUNTS...................................................67
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC..........................................69
SECTION 5.02. SUCCESSOR SUBSTITUTED................................................70
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT....................................................71
SECTION 6.02. ACCELERATION.........................................................72
SECTION 6.03. OTHER REMEDIES.......................................................73
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.04. WAIVER OF PAST DEFAULTS..............................................73
SECTION 6.05. CONTROL BY MAJORITY..................................................74
SECTION 6.06. LIMITATION ON SUITS..................................................74
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.................................75
SECTION 6.08. COLLECTION SUIT BY TRUSTEE...........................................75
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.....................................75
SECTION 6.10. PRIORITIES...........................................................75
SECTION 6.11. UNDERTAKING FOR COSTS................................................76
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES...................................76
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE.......................................76
SECTION 6.14. DELAY OR OMISSION NOT WAIVER.........................................76
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL..............................................................77
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE............................................77
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.........................................78
SECTION 7.04. TRUSTEE'S DISCLAIMER.................................................78
SECTION 7.05. NOTICE OF DEFAULT....................................................78
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS........................................78
SECTION 7.07. COMPENSATION AND INDEMNITY...........................................79
SECTION 7.08. REPLACEMENT OF TRUSTEE...............................................80
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.....................................81
SECTION 7.10. ELIGIBILITY..........................................................81
SECTION 7.11. MONEY HELD IN TRUST..................................................81
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.................................81
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE................................82
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS....................................85
SECTION 8.04. APPLICATION OF TRUST MONEY...........................................86
SECTION 8.05. REPAYMENT TO COMPANY.................................................86
SECTION 8.06. REINSTATEMENT........................................................87
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS...........................................87
</TABLE>
<PAGE>
iv
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.02. WITH CONSENT OF HOLDERS..............................................88
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT.....................................89
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES.....................................90
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC......................................90
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT..................................90
ARTICLE TEN
SECURITY
SECTION 10.01. SECURITY............................................................90
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939.........................................92
SECTION 11.02. NOTICES.............................................................92
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT..................94
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.......................94
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR.........................95
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY..............................95
SECTION 11.07. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.......................95
SECTION 11.08. NO RECOURSE AGAINST OTHERS..........................................95
SECTION 11.09. SUCCESSORS..........................................................95
SECTION 11.10. DUPLICATE ORIGINALS.................................................96
SECTION 11.11. SEPARABILITY........................................................96
SECTION 11.12. TABLE OF CONTENTS, HEADINGS, ETC....................................96
SECTION 11.13. METHOD OF PAYMENT...................................................96
SECTION 11.14. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE. ......97
SECTION 11.15. JUDGMENT CURRENCY...................................................97
SECTION 11.16. GOVERNING LAW.......................................................98
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Non-QIB Accredited Investors
EXHIBIT D-1 Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S
EXHIBIT D-2 Form of Certificate to Be Delivered by Transferees in Connection
with Transfers Pursuant to Regulation S
</TABLE>
<PAGE>
INDENTURE, dated as of February 19, 1999, between Carrier1 International
S.A., a societe anonyme organized under the laws of the Grand Duchy of
Luxembourg (the "COMPANY"), and The Chase Manhattan Bank, a New York banking
corporation, trustee (the "TRUSTEE").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to Euro 85,000,000
aggregate principal amount of the Company's 13.25% Senior Euro Notes due 2009
(the "NOTES") issuable as provided in this Indenture. The Company has agreed to
issue and sell a total of 85,000 Units (the "EURO UNITS"), each of which
consists of one Note and one warrant (a "EURO WARRANT"), each Euro Warrant
initially entitling the holder thereof to purchase 7.53614 hares of Common
Stock, par value $2.00 per share ("COMMON SHARES"), of the Company, subject to
adjustment. The Notes and Euro Warrants included in each Euro Unit will become
separately transferable upon the earliest to occur of (i) the date that is six
months following the Closing Date, (ii) the commencement of the Exchange Offer
pursuant to the Registration Rights Agreement, (iii) the date the Shelf
Registration Statement is declared effective and (iv) a date determined by
Morgan Stanley & Co. Incorporated (the "SEPARATION DATE"). The Company has also
agreed to issue and sell a total of 160,000 Units (the "DOLLAR UNITS"), each of
which consists of one $1,000 13.25% Senior Dollar Note due 2009 (a "DOLLAR
NOTE") and one warrant (a "DOLLAR WARRANT"), each Dollar Warrant initially
entitling the holder thereof to purchase 6.71013 Common Shares, subject to
adjustment. The Notes will be partially secured pursuant to the terms of a
Pledge Agreement (as defined herein) by Pledged Securities (as defined herein)
as provided by Article Ten of this Indenture. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee hereunder
and duly issued by the Company, valid obligations of the Company as hereinafter
provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act of 1939, as amended, that are required to be a part of
and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
<PAGE>
2
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or is merged with or consolidated
with a Restricted Subsidiary or assumed in connection with an Asset Acquisition
by a Restricted Subsidiary and not Incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"ADDITIONAL AMOUNTS" has the meaning provided in Section 4.20.
"ADDITIONAL NOTES" has the meaning provided in Section 2.15.
"ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in conformity with GAAP; PROVIDED that the
following items shall be excluded in computing Adjusted Consolidated Net Income
(without duplication):
(i) the net income (or loss) of any Person that is not a Restricted
Subsidiary, except (x) with respect to net income, to the extent of the
amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and
(y) with respect to net losses, to the extent of the amount of Investments
made by the Company or any Restricted Subsidiary in such Person during such
period;
(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04 of this Indenture (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Company or any of its Restricted
Subsidiaries or all or substantially all of the property and assets of such
Person are acquired by the Company or any of its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary other than a
Permanent Guarantor to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such
net income is not at the time permitted (after giving effect to any
effective waiver, consent or approval) by the operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary;
<PAGE>
3
(iv) any gains or losses attributable to Asset Sales (without regard
to clause (c) or (d) in the proviso to the definition thereof);
(v) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04, any amount paid or accrued as dividends on Preferred Stock of
the Company or any Restricted Subsidiary owned by Persons other than the
Company and any of its Restricted Subsidiaries;
(vi) all extraordinary gains and extraordinary losses or extraordinary
charges;
(vii) any compensation expense to the extent paid or payable solely
with Capital Stock (other than Disqualified Stock) of the Company or any
options, warrants or other rights to acquire Capital Stock (other than
Disqualified Stock) of the Company; and
(viii) the cumulative effect of a change in accounting principles.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.
"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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means any Registrar, Co-Registrar or Paying Agent.
"AGENT MEMBERS" has the meaning provided in Section 2.07(a).
<PAGE>
4
"ASSET ACQUISITION" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment, as
determined in good faith by the Board of Directors (whose determination shall be
conclusive and evidenced by a Board Resolution) or (ii) an acquisition by the
Company or any of its Restricted Subsidiaries of the property and assets of any
Person other than the Company or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person;
PROVIDED that the property and assets acquired are related, ancillary or
complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such acquisition, as determined in good faith by the Board of
Directors (whose determination shall be conclusive and evidenced by a Board
Resolution).
"ASSET DISPOSITION" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"ASSET SALE" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock of or any
other Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by Article
Five of this Indenture; PROVIDED that "Asset Sale" shall not include (a) sales,
transfers or other dispositions of Temporary Cash Investments, inventory,
receivables and other current assets, (b) sales, transfers or other dispositions
of assets constituting a Restricted Payment (or a transaction excluded from the
definition of the term "Restricted Payments") permitted to be made under Section
4.04, (c) sales, transfers or other dispositions of assets with a fair market
value (as certified in an Officers' Certificate) not in excess of $2 million in
any transaction or series of related transactions, or (d) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent that the consideration received
would constitute property or assets of the kind described in clause (B) of the
second paragraph of Section 4.11.
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5
"AVERAGE LIFE" means, at any date of determination with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such Indebtedness and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"BOARD RESOLUTION" means a copy of a resolution of the Board of Directors
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 adoption, delivered to the Trustee.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, in Frankfurt, in the city of the
Corporate Trust Office of the Trustee or in the city in which any Paying Agent
or Registrar is located are authorized by law to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means the discounted present value of the
rental obligations under a Capitalized Lease.
"CEDEL BANK" means Cedel Bank, societe anonyme, and any successor thereto.
"CHANGE OF CONTROL" means such time as (i) a "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% (50%, if the Permitted Holders hold more than 35% of the voting
power of the Voting Stock of the Company on a fully diluted basis) of the total
voting power of the Voting Stock of the Company on a fully diluted basis and
such ownership represents a greater percentage of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, than is held by Permitted
Holders on such date; or (ii) during any period of two consecutive years
beginning on or after the Closing Date, individuals who at the beginning of such
period were members of the Board of Directors (together with any
<PAGE>
6
new directors whose election by the Board of Directors or whose nomination for
election by the Company's shareholders was approved by a vote of at least a
majority of the members of the Board of Directors then 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 the Board of Directors then in
office.
"CLOSING DATE" means the date on which the Notes are first issued under
this Indenture.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"COMMON DEPOSITARY" means Chase Manhattan Bank London Branch or any of its
successors acting in the capacity of common depositary for Euroclear and Cedel
Bank.
"COMMON SHARES" has the meaning provided in the recitals to this Indenture.
"COMMON STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation all series and classes of such common stock.
"COMPANY" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"COMPANY ORDER" means a written request or order signed in the name of the
Company by a Senior Officer and another Officer, or by two Senior Officers, and
delivered to the Trustee.
"CONSOLIDATED EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) provision for all taxes based on income, profits or capital, (iii)
depreciation expense, (iv) amortization expense (including but not limited to
amortization of goodwill and intangibles and amortization and write-off of
financing costs) and (v) all other non-cash items reducing Adjusted Consolidated
Net Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income (other than any item
reversing, offsetting or reducing any such accrual or reserve), all as
determined on
<PAGE>
7
a consolidated basis for the Company and its Restricted Subsidiaries in
conformity with GAAP; PROVIDED that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to
the extent not otherwise reduced in accordance with GAAP) by an amount equal
to (A) the amount of the Adjusted Consolidated Net Income attributable to
such Restricted Subsidiary multiplied by (B) the percentage ownership
interest in the income of such Restricted Subsidiary not owned on the last
day of such period by the Company or any of its Restricted Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
on Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and the interest component 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, all as determined on
a consolidated basis (without taking into account Unrestricted Subsidiaries) in
conformity with GAAP.
"CONSOLIDATED LEVERAGE RATIO" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) four times the amount of Consolidated EBITDA for the then most recent
fiscal quarter for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 of this
Indenture (such quarter being the "QUARTER"); PROVIDED that, in making the
foregoing calculation, (A) PRO FORMA effect shall be given, in calculating the
amount of Indebtedness outstanding on the Transaction Date, to any Indebtedness
to be Incurred on the Transaction Date, or to be repaid, repurchased, redeemed
or otherwise retired or discharged on the Transaction Date; (B) PRO FORMA effect
shall be given to Asset Dispositions and Asset Acquisitions (including giving
PRO FORMA effect to the application of proceeds of any Asset Disposition) that
occur from the beginning of the Quarter through the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) PRO FORMA effect shall be
given to asset dispositions and asset acquisitions (including giving PRO FORMA
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into, or consolidated with, the Company or any Restricted Subsidiary
during such Reference Period and that would have constituted Asset Dispositions
or Asset Acquisitions had such transactions occurred when such Person was a
Restricted Subsidiary as if such asset dispositions or asset acquisitions were
Asset Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; PROVIDED that to the extent that clause (B) or (C) of this
sentence requires that PRO FORMA effect be given to an Asset Acquisition or
Asset Disposition, such PRO FORMA calculation shall be based upon
<PAGE>
8
the full fiscal quarter immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed of for which financial information is available.
"CONSOLIDATED NET WORTH" means, at any date of determination, shareholders'
equity (plus, to the extent not otherwise included, Preferred Stock of the
Company) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at Trinity Tower, 9 Thomas More St., London E1 917T; Attention: Manager
Global Trust Operation, with respect to all Notes other than the Global DTC
Notes, and located at 450 West 33rd Street, New York, New York 10001; Attention:
Capital Markets Fiduciary Services, with respect to the Global DTC Notes.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"DEPOSITARY" means, with respect to the Global Notes other than the Global
DTC Notes, Euroclear and Cedel Bank and, with respect to the Global DTC Notes,
DTC.
"DISINTERESTED MEMBER" means, with respect to any transaction, a member of
the Board of Directors having no material financial interest in or with respect
to such transaction. A member of the Board of Directors shall not be deemed to
have such a financial interest solely by reason of such member's holding Capital
Stock of the Company or any parent thereof or any options, warrants or other
rights in respect of such Capital Stock.
"DISQUALIFIED STOCK" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior
<PAGE>
9
to the Stated Maturity of the Notes or (iii) convertible into or exchangeable
for Capital Stock referred to in clause (i) or (ii) above or Indebtedness having
a scheduled maturity prior to the Stated Maturity of the Notes; PROVIDED that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Notes shall
not constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 4.11 and 4.12 of
this Indenture and such Capital Stock, or the agreements or instruments
governing the redemption rights thereof, specifically provides that such Person
will not repurchase or redeem any such stock pursuant to such provision prior to
the Company's repurchase of such Notes as are required to be repurchased
pursuant to Sections 4.11 and 4.12 of this Indenture.
"DOLLAR NOTE" has the meaning provided in the recitals to this Indenture
(and includes the Exchange Notes as defined in the Dollar Notes Indenture).
"DOLLAR NOTES INDENTURE" means the Indenture dated as of the Closing Date
between the Company, The Chase Manhattan Bank, trustee, relating to the Dollar
Notes, as such indenture may be amended or supplemented from time to time.
"DOLLAR UNITS" has the meaning provided in the recitals to this Indenture.
"DOLLAR WARRANT" has the meaning provided in the recitals to this
Indenture.
"DOLLAR WARRANT AGREEMENT" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Dollar Warrants, as such agreement may be amended or modified
from time to time.
"DTC" means The Depository Trust Company, its nominees, and their
respective successors.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York (Brussels
office) as operator of the Euroclear system and any successor thereto.
"EUROPEAN GOVERNMENT OBLIGATIONS" means securities that are direct and
unconditional obligations of the Belgium, Dutch, French, German or Swiss
government and are not callable or redeemable at the option of the issuer
thereof; PROVIDED that at the time of determination the conversion rate between
the sovereign currency of such country and the Euro is fixed, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such European Government Obligation or a specific payment of
interest on or principal of any such European Government Obligation held by such
custodian for the account of the holder of a
<PAGE>
10
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 European Government Obligation or the specific payment of interest on or
principal of the European Government Obligation evidenced by such depository
receipt.
"EUROPEAN GOVERNMENT SECURITIES" means securities that are direct and
unconditional obligations of the German government meeting the requirements of
the Pledge Agreement relating to the Euro Notes.
"EUROPEAN UNION" means the European Union, including the countries of
Austria, Belgium, Denmark, France, Finland, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom; as
well as any other country which at the time of determination is a member of the
European Union.
"EURO UNITS" has the meaning provided in the recitals to this Indenture.
"EURO WARRANT" has the meaning provided in the recitals to this Indenture.
"EURO WARRANT AGREEMENT" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Euro Warrants, as such agreement may be amended or modified from
time to time.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCESS PROCEEDS" has the meaning provided in Section 4.11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE NOTES" means any securities of the Company containing terms
substantially identical to the Notes (except that (i) such Exchange Notes shall
be registered under the Securities Act and shall not bear the Private Placement
Legend and (ii) certain provisions relating to an increase in the stated rate of
interest thereon shall be eliminated) that are issued and exchanged for the
Notes pursuant to the Registration Rights Agreement and this Indenture (or in
the case of Additional Notes, any registration rights agreement related
thereto).
"FAIR MARKET VALUE" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; PROVIDED that for purposes of clause (viii) of
the second paragraph of Section 4.03, (x) the fair market value of any security
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11
registered under the Exchange Act shall be the average of the closing prices,
regular way, of such security for the 20 consecutive trading days immediately
preceding the sale of Capital Stock and (y) in the event the aggregate fair
market value of any other property (other than cash or cash equivalents)
received by the Company exceeds $10 million, the fair market value of such
property shall be determined by a nationally recognized investment banking or
appraisal firm and set forth in their written opinion which shall be delivered
to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession; PROVIDED, HOWEVER, that all reports and other financial
information provided by the Company to the Holders of the Notes or the Trustee
shall be prepared in accordance with GAAP as in effect from time to time. All
ratios and computations contained or referred to in this Indenture shall be
computed in conformity with GAAP applied on a consistent basis, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of this Indenture shall be made without
giving effect to (i) the amortization or write-off of any expenses incurred in
connection with the offering of the Units and (ii) the amortization of any
amounts required or permitted by Accounting Principles Board Opinion Nos. 16 and
17.
"GERMAN NETWORK" means the fiber optic network to be built in Germany by
the Company or any of its Restricted Subsidiaries with affiliates of Viatel,
Inc. and Metromedia Fiber Network Inc. contemplated by the letter of intent
dated August 20, 1998.
"GERMAN NETWORK L/C" means a letter of credit in an amount not to exceed
$75 million issued to secure obligations of the Company or any of its Restricted
Subsidiaries with respect to the German Network.
"GLOBAL DTC NOTES" has the meaning provided in Section 2.01.
"GLOBAL NOTES" has the meaning provided in Section 2.01.
"GUARANTEE" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any such obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business),
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12
to take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); PROVIDED that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"GUARANTEED INDEBTEDNESS" has the meaning provided in Section 4.07.
"HOLDER" or "NOTEHOLDER" means the registered holder of any Note.
"INCUR" means, with respect to any Indebtedness, to incur, create, issue,
assume, enter into any Guarantee of or otherwise become liable for or with
respect to, or become responsible for, the payment of, contingently or
otherwise, such Indebtedness, including an "Incurrence" by means 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 principal obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments (excluding obligations with
respect to letters of credit (including trade letters of credit) or other
similar instruments securing obligations (other than obligations described
in (i) or (ii) above or (v), (vi) or (vii) below) entered into in the
ordinary course of business of such Person to the extent such letters of
credit are not properly honored and drawn upon or, if properly honored and
drawn upon, to the extent such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except Trade Payables;
(v) all Capitalized Lease Obligations of such Person;
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13
(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 of such Person shall be the
lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons;
(vii) all Indebtedness of other Persons Guaranteed by such Person;
PROVIDED that the amount of Indebtedness of such Person shall be the lesser
of (A) the amount Guaranteed and (B) the amount of such Indebtedness of
such other Persons; and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements, except
if such agreements (a) are designed solely to protect the Company or its
Restricted Subsidiaries against fluctuations in foreign currency exchange
rates or interest rates and (b) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder.
The amount of Indebtedness of any Person as described above at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations as described
above, the maximum liability upon the occurrence of the contingency giving rise
to the obligation, PROVIDED (A) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at the time of its issuance as determined in
conformity with GAAP, (B) that obligations for money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of the interest on such Indebtedness shall not be deemed to be "Indebtedness" so
long as such money is held to secure the payment of such interest, (C) that the
amount of an obligation in respect of a letter of credit or other similar
instrument is the aggregate undrawn and unexpired amount thereof plus the
aggregate amount of drawings properly honored thereunder that have not then been
reimbursed, and (D) that "Indebtedness" shall not include any liability for
federal, state, local or other taxes. Indebtedness shall not be deemed to
include any obligation arising from the honoring of a check, draft or similar
instrument drawn against insufficient funds, PROVIDED that such obligation is
extinguished within five business days of its Incurrence.
"INDENTURE" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
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14
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST PAYMENT DATE" means each semiannual interest payment date on
February 15 and August 15 of each year, commencing August 15, 1999.
"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances, loans or other extensions of credit
to customers or suppliers in the ordinary course of business to the extent
required by GAAP to be recorded as accounts receivable, prepaid expenses or
deposits on the balance sheet of the Company or its Restricted Subsidiaries) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including, without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06; PROVIDED
that the fair market value of the Investment remaining in any Person that has
ceased to be a Restricted Subsidiary shall not exceed the aggregate amount of
Investments previously made in such Person valued at the time such Investments
were made less the net reduction of such Investments. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04 of this Indenture, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
"JUDGMENT CURRENCY" has the meaning provided in Section 11.15.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
<PAGE>
15
"MANAGEMENT INVESTOR" means any officer, director, employee or other member
of the management of the Company or any of its Subsidiaries, or family members
or relatives thereof, or trusts or partnerships for the benefit of any of the
foregoing, or any of their heirs, executors, successors and legal
representatives.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET CASH PROCEEDS" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale when received in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, including as a consequence of any
transfer of funds in connection with the application thereof in accordance with
Section 4.11, (iii) payments made, or required to be 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 Asset Sale, (iv) all distributions and other payments
required to be made to minority interest holders in a Restricted Subsidiary or
joint venture as a result of such Asset Sale by or of such Restricted Subsidiary
or joint venture, or to any other Person (other than the Company or a Restricted
Subsidiary) owning a beneficial interest in the assets disposed of in such Asset
Sale, and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary as a reserve against any liabilities or obligations
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof. In the event that any consideration for any
Asset Sale that would otherwise constitute Net Cash Proceeds is required to be
held in escrow pending determination of whether a purchase price adjustment,
indemnification or other payment or other similar adjustment will
<PAGE>
16
be made, such consideration will become Net Cash Proceeds only when and to the
extent released from escrow to the Company or a Restricted Subsidiary.
"NON-U.S. PERSON" means a person who is not a "U.S. person" (as defined in
Regulation S).
"NOTES" means any of the securities, as defined in the first paragraph of
the recitals hereof, that are authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include the Notes
initially issued on the Closing Date, any Exchange Notes to be issued and
exchanged for any Notes pursuant to the Registration Rights Agreement and this
Indenture, and any Additional Notes. For purposes of this Indenture, all Notes
shall vote together as one series of Notes under this Indenture.
"NOTES GUARANTEE" means any Guarantee of the Company's obligations with
respect to the Notes by a Permanent Guarantor or any Subsidiary Guarantor.
"OFFER TO PURCHASE" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and providing notice to
each Holder stating:
(i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately
<PAGE>
17
preceding the Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; PROVIDED, that each Note purchased and each new Note
issued shall be in a principal amount of Euro1,000 or an integral multiple
thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; PROVIDED
that each Note purchased and each new Note issued shall be in a principal amount
of Euro1,000 or an integral multiple thereof. The Company will publicly announce
the results of an Offer to Purchase as soon as practicable after the Payment
Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The
Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase. To the extent the provisions
of any such laws or regulations conflict with the provisions of this Indenture,
the Company will comply with such laws and regulations and will not be deemed to
have breached its obligations under this Indenture by virtue thereof.
"OFFICER" means, with respect to the Company, any of (i) a member of the
Board of Directors, or the Chairman, the President, the Chief Executive Officer,
a Vice President, the Chief Operating Officer or the Chief Financial Officer of
the Company, or any officer of any Restricted Subsidiary acting as chief
executive officer, chief operating officer, chief accounting officer or chief
financial officer of the Company (any Officer or other person described in this
clause (i), a "Senior Officer"), (ii) the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company or Carrier1 International
GmbH, or any officer of any Restricted Subsidiary acting as treasurer of the
Company, and (iii) any officer or employee of the Company or any Restricted
Subsidiary designated by the Board of Directors as an Officer for purposes of
the Indenture.
"OFFICERS' CERTIFICATE" means a certificate signed by one Senior Officer
and one other Officer or two Senior Officers. Each Officers' Certificate (other
than certificates provided
<PAGE>
18
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e) to the extent required thereby.
"OFFSHORE GLOBAL NOTES" has the meaning provided in Section 2.01.
"OFFSHORE PHYSICAL NOTES" has the meaning provided in Section 2.01.
"OPINION OF COUNSEL" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company or Carrier1 International GmbH,
that meets the requirements of Section 11.04 hereof. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e) to the
extent required thereby.
"PARI PASSU INDEBTEDNESS" has the meaning provided in Section 4.11.
"PAYING AGENT" has the meaning provided in Section 2.04, except that, for
the purposes of Article Eight, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"PAYMENT DATE" has the meaning provided in the definition of Offer to
Purchase.
"PERMANENT GUARANTOR" means a Restricted Subsidiary that irrevocably
guarantees the payment of the Notes on an unsubordinated basis; provided that
such guarantee may provide that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer (including by
way of merger or consolidation), to any Person not an Affiliate of the Company,
of all of the Company's and each Restricted Subsidiary's Capital Stock in, or
all or substantially all the assets of, such Restricted Subsidiary (which sale,
exchange, transfer or other transaction is not prohibited by this Indenture),
(ii) the legal or covenant defeasance of the Notes or satisfaction and discharge
of this Indenture, subject to customary contingent reinstatement provisions or
(iii) upon the merger or consolidation of the Permanent Guarantor with and into
the Company or another Permanent Guarantor that is the surviving Person in such
merger or consolidation.
"PERMITTED HOLDER" means any of the following: any of Providence Equity
Partners L.P., Providence Equity Partners II L.P., Providence Equity Partners
III L.P., Primus Capital Fund IV Limited Partnership and Primus Executive Fund
Limited Partnership and any of the respective Affiliates or successors of the
foregoing.
"PERMITTED INVESTMENT" means:
(i) an Investment in the Company (including the Notes or the Dollar
Notes) or a Restricted Subsidiary or a Person which will, upon the making
of such Investment,
<PAGE>
19
become a Restricted Subsidiary or be merged or consolidated with or into,
or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; PROVIDED that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and
its Restricted Subsidiaries on the date of such Investment;
(ii) Temporary Cash Investments;
(iii) commissions, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP;
(iv) stock, obligations, securities or other Investments received (a)
in satisfaction of judgments or (b) in settlement of debts, or as a result
of foreclosure, perfection or enforcement of any Lien, in each case under
this clause (b) arising in the ordinary course of business and not in
contemplation of the acquisition of such stock, obligations, securities or
other Investments;
(v) Investments in negotiable instruments held for collection, lease,
utility and worker's compensation, performance and other similar pledges or
deposits and other pledges or deposits permitted under Section 4.09;
(vi) obligations under Interest Rate Agreements and Currency
Agreements designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in interest rates or foreign currency
exchange rates;
(vii) Investments in a joint venture to cover the Company's portion of
the cost (including the cost of design, development, acquisition,
construction, installation and improvement) of building a
telecommunications network (or network segment) in Europe, provided that
the Company or any of its Restricted Subsidiaries will directly own their
portion of such network (or network segment); and Investments in joint
ventures to acquire or maintain or otherwise relating to any rights-of-way,
wayleaves, governmental approvals, licenses, franchises or concessions
relating to any such network (or network segment);
(viii) Investments in any Person in an aggregate amount not to exceed
25% of any gains (net of any losses) attributable to Asset Sales after the
Closing Date and prior to the date of such Investment; and
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20
(ix) loans or advances to directors, officers or employees of the
Company or any Restricted Subsidiary that do not in the aggregate exceed $3
million at any time outstanding.
"PERMITTED JOINT VENTURE" means any joint venture between the Company or
any Restricted Subsidiary and any Person other than a Subsidiary, engaged in the
provision or sale of telecommunications services, or in any other business that
is related, ancillary or complementary to the provision or sale of
telecommunications services, as determined in good faith by the Board of
Directors (whose determination shall be conclusive if evidenced by a Board
Resolution); PROVIDED that prior to making any Investment in such a Person, the
Company's Board of Directors shall have determined that such Investment fits the
Company's strategic plan and is on terms that are fair and reasonable to the
Company.
"PERMITTED LIENS" means:
(i) Liens for taxes, assessments, governmental charges or claims not
yet delinquent, or that in the aggregate are not material, or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(ii) statutory and common law Liens of landlords, carriers,
warehousemen, mechanics, suppliers, materialmen or repairmen or other
similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or that have been bonded or are being
contested in good faith by appropriate 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 and other similar legislation or other
insurance-related obligations (including, without limitation, pledges or
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements);
(iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, licenses, obligations for utilities, statutory or
regulatory obligations, bankers' acceptances, letters of credit, surety and
appeal bonds, government or other contracts, completion guarantees,
performance and return-of-money bonds and other obligations of a similar
nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money);
<PAGE>
21
(v) easements, rights-of-way, municipal and zoning ordinances, utility
agreements, reservations, encroachments, restrictions 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, renewals and replacements thereof)
upon real or personal property or assets (including leases on an
indefeasible right-to-use basis); PROVIDED that (a) such Lien is created
solely for the purpose of securing Indebtedness Incurred, in accordance
with Section 4.03, to finance or refinance the cost (including the cost of
design, development, acquisition, construction, installation, improvement,
transportation or integration) of the item of property or assets subject
thereto and the original such Lien is created prior to, at the time of or
within one year after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or
assets, (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, accessions or proceeds in respect of such item;
(vii) leases, subleases, licenses or sublicenses 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 (and
related rights) in favor of a contractor or developer, or arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
(x) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xi) Liens (including extensions, renewals and replacements thereof)
on property or assets of, or on shares of Capital Stock or Indebtedness of,
any Person existing (in the case of the original such Lien) at the time
such Person becomes, or becomes a part of, any Restricted Subsidiary;
PROVIDED that such Liens do not extend to or cover any property or assets
of the Company or any Restricted Subsidiary other than the property,
assets, Capital Stock or Indebtedness so acquired (plus improvements,
accessions or proceeds (including dividends or distributions) in respect
thereof);
(xii) Liens in favor of the Company or any Restricted Subsidiary;
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22
(xiii) Liens arising from the rendering of a final judgment, order,
decree or award against the Company or any Restricted Subsidiary that does
not give rise to an Event of Default;
(xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xvi) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters customary
in the industry and incurred in the ordinary course of business, in each
case, securing Indebtedness or other obligations under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
solely to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates, currencies or the price of commodities;
(xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business;
(xviii) Liens on or sales or transfers of receivables (including
related rights);
(xix) Liens that secure Indebtedness or other obligations with an
aggregate principal amount not in excess of $5 million at any time
outstanding;
(xx) Liens placed by any third party on property over which the
Company or any Restricted Subsidiary has easement or other rights or on any
leased property, or arising by reason of subordination or similar
agreements relating thereto; and Liens arising by reason of any
condemnation or eminent domain proceedings;
(xxi) Liens on Capital Stock or other securities of an Unrestricted
Subsidiary that secure Indebtedness or other obligations of such
Unrestricted Subsidiary;
(xxii) any encumbrance or restriction (including, but not limited to,
put and call agreements) with respect to Capital Stock of any joint venture
or similar arrangement pursuant to any joint venture or similar agreement;
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23
(xxiii) Liens (including extensions, renewals and replacements
thereof) on property or assets acquired by the Company or any Restricted
Subsidiary; PROVIDED that (a) such Liens were not created in connection
with or in anticipation of such acquisition, (b) such Liens do not secure
Indebtedness other than Indebtedness assumed in connection with such
acquisition, and (c) 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 so acquired (plus improvements, accessions or proceeds in respect
thereof); and
(xxiv) Liens on cash set aside at the time of the Incurrence of any
Indebtedness, or government securities purchased with such cash, in either
case to the extent that such cash or government securities prefund the
payment of interest on such Indebtedness and are held in an escrow account
or similar arrangement to be applied for such purpose.
"PHYSICAL NOTES" has the meaning provided in Section 2.01.
"PLEDGE ACCOUNT" means an account established with a securities
intermediary for the benefit of the Trustee pursuant to the terms of the Pledge
Agreement for the deposit of the Pledged Securities to be purchased by the
Company with a portion of the net proceeds from the sale of the Notes.
"PLEDGE AGREEMENT" means the Euro Collateral Pledge and Security Agreement,
dated as of the Closing Date, made by the Company in favor of the Trustee, as
such agreement may be amended, restated, supplemented or otherwise modified from
time to time.
"PLEDGED SECURITIES" means the European Government Securities to be
purchased by the Company and held in the Pledge Account in accordance with the
Pledge Agreement.
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
"PRINCIPAL" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.
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24
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Notes in the form set forth in Section 2.02(a).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REDEMPTION DATE" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"REFINANCE" means refinance, refund, replace, renew, repay, modify,
restate, defer, substitute, supplement, reissue, resell or extend (including by
way of any exchange of Indebtedness, or pursuant to any defeasance or discharge
mechanism); and the terms "refinances," "refinanced" and "refinancing" as used
for any purpose in this Indenture shall have a correlative meaning.
"REGISTRAR" has the meaning provided in Section 2.04.
"REGISTRATION" has the meaning provided in Section 4.18.
"REGISTRATION RIGHTS AGREEMENT" means the Notes Registration Rights
Agreement, dated February 12, 1999, between the Company and Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear,
Stearns & Co. Inc. and certain permitted assigns specified therein.
"REGISTRATION STATEMENT" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date means the February 1 or August 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.
"RELEASED INDEBTEDNESS" means, with respect to any Asset Sale, (i)
Indebtedness of the Company or any Restricted Subsidiary which is assumed by the
purchaser or any affiliate thereof in connection with such Asset Sale; PROVIDED
that the Company or such Restricted Subsidiary receives written, unconditional,
valid and enforceable releases from each creditor, no later than the closing
date of such Asset Sale and (ii) Indebtedness of a Restricted Subsidiary that is
no
<PAGE>
25
longer a Restricted Subsidiary as a result of such Asset Sale; PROVIDED that
neither the Company nor any other Restricted Subsidiary thereafter Guarantees
such Indebtedness.
"RELEASED LIABILITIES" has the meaning provided in Section 4.11.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
senior vice president, any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, any trust officer or assistant
trust officer, or any other officer of the Trustee in its corporate trust
department customarily performing functions similar to those performed by any of
the above-designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"RESTRICTED PAYMENTS" has the meaning provided in Section 4.04.
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY REGISTER" has the meaning provided in Section 2.04.
"SEPARATION DATE" has the meaning provided in the recitals to this
Indenture.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"STATED MATURITY" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is
<PAGE>
26
due and payable and (ii) with respect to any scheduled installment of principal
of or interest on any debt security, the date specified in such debt security as
the fixed date on which such installment is due and payable.
"STRATEGIC SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company
or any Permanent Guarantor Incurred to finance the acquisition of a Person
engaged in a business that is related, ancillary or complementary to the
business conducted by the Company or any of its Restricted Subsidiaries, which
Indebtedness by its terms, or by the terms of any agreement or instrument
pursuant to which such Indebtedness is Incurred, (i) is expressly made
subordinate in right of payment to the Notes and (ii) provides that no payment
of principal, premium or interest on, or any other payment with respect to, such
Indebtedness may be made prior to the payment in full of all of the Company's
obligations under the Notes; PROVIDED that such Indebtedness may provide for and
be repaid at any time from the proceeds of a capital contribution or the sale
of Capital Stock (other than Disqualified Stock) of the Company after the
Incurrence of such Indebtedness.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"SUBSIDIARY GUARANTEE" has the meaning provided in Section 4.07.
"SUBSIDIARY GUARANTOR" means any Restricted Subsidiary that Guarantees
the Notes pursuant to Section 4.07.
"TAXING AUTHORITY" has the meaning provided in Section 4.20.
"TAXES" has the meaning provided in Section 4.20.
"TEMPORARY CASH INVESTMENT" means any of the following:
(i) direct obligations of the United States of America or
any agency thereof or obligations fully and unconditionally guaranteed
by the United States of America or any agency thereof;
(ii) bankers' acceptances, time deposit accounts,
certificates of deposit and money market deposits maturing within one
year of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the
United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or
the foreign currency equivalent thereof) and has
<PAGE>
27
outstanding debt which is rated "A" (or such similar equivalent rating)
or higher by at least one nationally recognized statistical rating
organization or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor;
(iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i)
above or clause (vi) below entered into with a bank meeting the
qualifications described in clause (ii) above;
(iv) commercial paper, maturing not more than one year after
the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P;
(v) securities with maturities of six months or less from
the date of acquisition issued or fully and unconditionally guaranteed
by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or Moody's; and
(vi) direct obligations of, or obligations fully and
unconditionally guaranteed by, (a) The Netherlands, the United Kingdom,
France, Germany or Switzerland, or (b) any other member of the European
Economic Community and rated at least "A" by S&P or Moody's.
"TRADE PAYABLES" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"TRANSACTION DATE" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"TIA" or "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb), as amended, as in effect on the date this
Indenture was executed, except as provided in Section 9.06.
"TRUSTEE" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
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28
"UNITED STATES BANKRUPTCY CODE" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"UNITS" means the Dollar Units and the Euro Units.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; PROVIDED that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than such
amount, such designation would be permitted under Section 4.04 of this Indenture
and (C) if applicable, the Incurrence of Indebtedness and the Investment
referred to in clause (A) of this proviso would be permitted under Sections 4.03
and 4.04 of this Indenture. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that (i) no
Default or Event of Default shall have occurred and be continuing at the time of
or after giving effect to such designation and (ii) all Liens and Indebtedness
of such Unrestricted Subsidiary outstanding immediately after such designation
would, if Incurred at such time, have been permitted to be Incurred (and shall
be deemed to have been Incurred) for all purposes of this Indenture. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. GLOBAL DTC NOTES" has the meaning provided in Section 2.01.
"U.S. GLOBAL NOTES" has the meaning provided in Section 2.01.
"U.S. PHYSICAL NOTES" means the Notes issued in the form of permanent
certificated Notes in registered form in substantially the form set forth in
Exhibit A to Institutional Accredited Investors which are not QIBs (excluding
Non-U.S. Persons) in accordance with Section 2.08(a).
"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.
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29
"WARRANT AGREEMENTS" means the Dollar Warrant Agreement and the Euro
Warrant Agreement.
"WARRANTS" means the Dollar Warrants and the Euro Warrants.
"WHOLLY OWNED" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder or a Noteholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee; and
"OBLIGOR" on the indenture securities means the Company or
any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
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30
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained in
this Indenture shall be computed in accordance with the definition of
GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate
of authentication shall be substantially in the form annexed hereto as Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange agreements to which the
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 in reliance on Rule 144A 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 "U.S. GLOBAL NOTES"),
registered in the name of the nominee of the Depositary, deposited with the
Common Depositary, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. The aggregate principal amount of the U.S. Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Registrar in accordance with the instructions given by the Holder
thereof, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S and Notes transferred in offshore transactions in reliance on
Regulation S prior to February 19, 2000 shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A ("OFFSHORE PHYSICAL NOTES"). At any time after February 19, 2000, upon
receipt by the Trustee and the Company of a certificate substantially in the
form of Exhibit B
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31
hereto one or more permanent global Notes in registered form substantially in
the form set forth in Exhibit A (the "OFFSHORE GLOBAL NOTES"), registered in the
name of the nominee of the Depositary, duly executed by the Company and
authenticated by the Trustee, may be deposited with the Common Depositary in
exchange for any Offshore Physical Notes and the Registrar shall cancel the
Offshore Physical Notes so exchanged. The aggregate principal amount of the
Offshore Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Registrar, in accordance with the
instructions given by the Holder thereof, as hereinafter provided.
If a Holder of a U.S. Global Note notifies the Trustee in writing, in
accordance with Section 11.02, that a holder of a beneficial interest in such
Note wishes to hold such interest through DTC, one or more permanent global
Notes in registered form, substantially in the form set forth in Exhibit A (the
"U.S. GLOBAL DTC NOTES") registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee shall be deposited with
the Trustee as custodian for the Depositary or its nominee and the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Note. The aggregate principal amount of the Global DTC
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.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" of Euroclear and "The
General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel
Bank shall be applicable to interests in the Offshore Global Notes that are held
by Agent Members through Euroclear and Cedel Bank.
Notes issued pursuant to Section 2.07 in exchange for interests in the
Offshore Global Notes shall be in the form of Offshore Physical Notes.
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "PHYSICAL NOTES." The U.S. Global Notes
and the Offshore Global Notes are sometimes referred to herein as the "GLOBAL
NOTES."
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 Officer or Officers executing such Notes, as
evidenced by the execution of such Notes.
SECTION 2.02. RESTRICTIVE LEGENDS. (a) Unless and until a Note is
exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement (or in the
case of Additional Notes not initially sold pursuant to
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32
a registration statement, in connection with another registration statement),
(i) the U.S. Global Notes, any U.S. Global DTC Note and any U.S. Physical Notes
shall bear the legend set forth below on the face thereof and (ii) the Offshore
Physical Notes, until the later of February 19, 2000 (or, in the case of such
Additional Notes, until the later of any separation date with respect thereto
and the 41st day after such Additional Notes are first issued thereunder), and
receipt by the Company and the Trustee of a certificate substantially in the
form of Exhibit B hereto, shall bear the legend set forth below on the face
thereof.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF SUCH TRANSFER,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES OF LESS THAN EURO 250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) TO A PERSON OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT THAT, FOR ANY TRANSFER PRIOR TO FEBRUARY 19, 2000,
FURNISHES TO THE TRUSTEE PRIOR TO SUCH TRANSFER, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTES (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE), (E) PURSUANT TO THE EXEMPTION FROM
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33
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 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.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
HEDGING TRANSACTIONS WITH REGARD TO THIS NOTE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
(b) Each Global Note (other than a Global DTC Note), whether or
not an Exchange Note, shall also bear the following legend on the face thereof:
THIS NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.08 OF THE INDENTURE,
(2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.07 OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE
INDENTURE AND (4) THIS GLOBAL NOTE MAY BE DELIVERED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
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34
(c) Each Global DTC Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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 2.08 OF THE INDENTURE.
(d) Prior to the Separation Date, each Note shall bear the
following legend on the face thereof:
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF
WHICH CONSISTS OF ONE NOTE AND ONE WARRANT INITIALLY ENTITLING THE
HOLDER THEREOF TO PURCHASE 7.53614 SHARES OF COMMON STOCK, PAR VALUE
$2.00 PER SHARE, OF CARRIER1 INTERNATIONAL S.A. (A "WARRANT"). PRIOR TO
THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) AUGUST 19,
1999, (ii) THE COMMENCEMENT OF THE EXCHANGE OFFER UNDER THE
REGISTRATION RIGHTS AGREEMENT, (iii) THE EFFECTIVE DATE OF A SHELF
REGISTRATION STATEMENT WITH RESPECT TO RESALES OF THE NOTES AND (iv)
SUCH DATE AS DETERMINED BY MORGAN STANLEY & CO. INCORPORATED IN ITS
SOLE DISCRETION, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.
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35
THE TRANSFER RESTRICTIONS APPLICABLE TO THIS NOTE ARE ALSO APPLICABLE
TO THE UNIT OF WHICH THIS NOTE FORMS A PART.
The Company shall notify the Trustee in writing upon obtaining
knowledge of the occurrence of the Separation Date. Upon the request of any
Holder after the Separation Date, the Registrar shall deliver Notes that do not
bear the legend set forth in this paragraph (d).
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. Subject to
Article Four and applicable law, the aggregate principal amount of Notes which
may be authenticated and delivered under this Indenture is unlimited. The Notes
shall be executed by one Officer of the Company. The signature of an Officer on
the Notes may be by facsimile or manual signature in the name and on behalf of
the Company.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; PROVIDED that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes. Such Company Order
shall specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and, in case of an issuance of
Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons and
only in denominations of Euro1,000 in principal amount and any integral multiple
thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Notes may be presented for registration of transfer
or for exchange (the "REGISTRAR"), an office or agency where Notes may be
presented for payment (the "PAYING AGENT")
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36
and an office or agency where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served, which shall be in London
(in the case of all Notes other than the Global DTC Notes) in the Borough of
Manhattan, The City of New York (in the case of the Global DTC Notes) and, in
the event the Notes are included on the Frankfurt over-the-counter market, in
Frankfurt. The Company shall cause the Registrar to keep a register of the Notes
and of their transfer and exchange (the "SECURITY REGISTER"). The Security
Register shall be in written form or any other form capable of being converted
into written form within a reasonable time. The Company may have one or more
co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; PROVIDED that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Company initially appoints the Trustee (through its London branch,
in the case of all Notes other than Global DTC Notes) as Registrar, Paying Agent
and authenticating agent and the Chase Manhattan Bank London Branch as London
Paying Agent. The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee as of each Regular
Record Date and at such other times as the Trustee may reasonably request the
names and addresses of Holders as they appear in the Security Register,
including the aggregate principal amount of Notes held by each Holder.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than
10:00 a.m. (London time) on the Business Day immediately prior to each due
date of the principal, premium, if any, and interest on any Notes, the
Company shall deposit with the London Paying Agent money in immediately
available funds sufficient to pay such principal, premium, if any, and
interest so becoming due; PROVIDED that Pledged Securities held pursuant to
the Pledge Agreement may satisfy the provisions of this sentence. The Company
shall require each Paying Agent other than the Trustee to agree in writing
that such Paying Agent shall hold in trust for the benefit of
<PAGE>
37
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Notes (whether such money has
been paid to it by the Company or any other obligor on the Notes), and such
Paying Agent shall promptly notify the Trustee of any default by the Company (or
any other obligor on the Notes) in making any such payment. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any Subsidiary of the Company or any Affiliate of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if any,
or interest on the Notes, segregate and hold in a separate trust fund for the
benefit of the Holders a sum of money sufficient to pay such principal, premium,
if any, or interest so becoming due until such sum of money shall be paid to
such Holders or otherwise disposed of as provided in this Indenture, and will
promptly notify the Trustee of its action or failure to act.
SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable only in
registered form. The Notes shall initially be issued as part of an issue of Euro
Units, each of which consists of one Note and one Euro Warrant. Prior to the
Separation Date, the Notes may not be transferred or exchanged separately from,
but may be transferred or exchanged only together with, the Euro Warrants issued
in connection with the Notes. A Holder may transfer a Note only by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a Holder only
upon, final acceptance and registration of the transfer by the Registrar in the
Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Note is registered as the owner thereof for
all purposes whether or not the Note shall be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.
Owners of beneficial interests in a Global Note will not be entitled to have
Notes registered in their names, and will not receive or be entitled to receive
Physical Notes except pursuant to Section 2.07(b). Furthermore, any Holder of a
Global Note shall, by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Note may be effected only through a book
entry system maintained by the Holder of such Global Note (or its agent) and
that ownership of a beneficial interest in the Note shall be required to be
reflected in a book entry. When Notes are presented to the Registrar or a
co-Registrar with a request to register the transfer or to exchange them for an
equal principal amount of Notes of other authorized denominations (including an
exchange of Notes for Exchange Notes), the Registrar shall register the transfer
or make the exchange as requested if its requirements for such transactions are
met (including that such Notes are duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and Registrar duly
executed by the Holder thereof or by an attorney who is authorized in writing to
act on behalf of the Holder);
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38
PROVIDED that no exchanges of Notes for Exchange Notes shall occur until a
Registration Statement shall have been declared effective by the Commission and
that any Notes that are exchanged for Exchange Notes shall be canceled by the
Trustee. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange or
redemption of the Notes, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The Global
Notes 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 Common Depositary and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as Common Depositary, or under
such Global Note, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of
such Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees, or transfers between the Depositary for the Global
DTC Notes and the Depositary for the other Global Notes. Interests of beneficial
owners in Global Notes may be transferred in accordance with the rules and
procedures of each Depositary and the provisions of Section 2.08. In addition,
Physical Notes shall be transferred to the Depositary for all beneficial owners
in exchange for their beneficial interests in the relevant Global Notes if (i)
the Depositary, with respect to such Global Note, notifies the Company that it
is unwilling or unable to continue as Depositary for such Global Notes, and a
successor depositary is not appointed by the Company within 90 days of such
notice
<PAGE>
39
or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the Depositary to issue Physical Notes.
(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 another
Global Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in such other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures applicable
to beneficial interests in such other Global Note for as long as it remains such
an interest.
(d) In connection with the transfer of the Global Notes in whole,
to beneficial owners pursuant to paragraph (b) of this Section 2.07, the Global
Notes shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to the
Depositary for each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Notes an equal aggregate principal
amount of Physical Notes of authorized denominations.
(e) Any U.S. Physical Note delivered in exchange for an interest
in the U.S. Global Notes or U.S. Global DTC Notes pursuant to paragraph (b) or
(d) of this Section 2.07 shall, except as otherwise provided by paragraph (f) of
Section 2.08, bear the legend regarding transfer restrictions applicable to the
Physical Note set forth in Section 2.02.
(f) Any Offshore Physical Note delivered in exchange for an
interest in the Offshore Global Notes pursuant to paragraph (b) or (d) of this
Section 2.07 shall, except as otherwise provided by paragraph (f) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Physical
Note set forth in Section 2.02.
(g) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS. Unless and until a Note is
exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement (or in the
case of Additional Notes not initially sold pursuant to a registration
statement, in connection with another registration statement), the following
provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Note to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
<PAGE>
40
(i) The Registrar shall register the transfer of any Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the time period referred to in Rule 144(k)
under the Securities Act or (y) the proposed transferee has delivered
to the Registrar (A) a certificate substantially in the form of Exhibit
C hereto and (B) if the aggregate principal amount of the Notes being
transferred is less than Euro250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities
Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Notes or the U.S. Global DTC
Notes, upon receipt by the Registrar of (x) the documents, if any,
required by paragraph (i) above and (y) 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 a
decrease in the principal amount of the U.S. Global Notes or U.S.
Global DTC Notes in an amount equal to the principal amount of the
beneficial interest in such Global Notes to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more U.S. Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note to a QIB:
(i) If the Note to be transferred consists of (x) U.S.
Physical 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 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 or (y) an interest in the U.S.
Global Notes or the U.S. Global DTC Notes, the transfer of such
interest may be effected only through the book entry system maintained
by either or both Depositaries.
(ii) If the proposed transferee is an Agent Member, and the
Note to be transferred consists of U.S. Physical Notes, upon receipt by
the Registrar of the documents referred to in paragraph (i) above and
instructions given in accordance with the
<PAGE>
41
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 U.S. Global Notes or the U.S. Global DTC Notes in
an amount equal to the principal amount of the U.S. Physical Notes to
be transferred, and the Trustee shall cancel the U.S. Physical Notes so
transferred.
(c) TRANSFERS OF INTERESTS IN LEGENDED OFFSHORE PHYSICAL NOTES. The
following provisions shall apply with respect to registration of any proposed
transfer of any Offshore Physical Notes bearing the Private Placement Legend:
(i) The Registrar shall register the transfer of any Note
(x)(A) 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 D-1 hereto from the proposed transferor and (B)
if it receives a certificate substantially in the form of Exhibit D-2
hereto from the proposed transferee 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 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 an Agent Member, upon
receipt by the Registrar of the documents referred to in clause (i)(y)
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
U.S. Global Notes, or U.S. Global DTC Notes in an amount equal to the
principal amount of the legended Offshore Physical Notes to be
transferred, and the Trustee shall cancel the legended Offshore
Physical Notes.
(d) TRANSFERS OF INTERESTS IN THE OFFSHORE GLOBAL NOTES OR UNLEGENDED
OFFSHORE PHYSICAL NOTES. The following provisions shall apply with respect to
any transfer of interests in Offshore Global Notes or unlegended Offshore
Physical Notes. The Registrar shall register the transfer of any such Note
without requiring any additional certification.
(e) 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 (excluding QIBs):
<PAGE>
42
(i) Prior to the Separation Date and prior to February 19,
2000, the Registrar shall register any proposed transfer of a Note to a
Non-U.S. Person only (x) if it receives a certificate substantially in
the form of Exhibit D-1 hereto from the proposed transferor, (y) if it
receives a certificate substantially in the form of Exhibit D-2 from
the proposed transferee and (z) such transfer is in conjunction with a
transfer of the related Euro Warrants pursuant to the terms of the Euro
Warrant Agreement.
(ii) On or after the Separation Date but prior to February
19, 2000, the Registrar shall register any proposed transfer to any
Non-U.S. Person (x) upon receipt of a certificate substantially in the
form of Exhibit D-1 hereto from the proposed transferor and (y) if it
receives a certificate substantially in the form of Exhibit D-2 from
the proposed transferee.
(iii) After February 19, 2000, the Registrar shall register
any proposed transfer to any Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit D-1 hereto from the
proposed transferor.
(iv) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Notes or the U.S. DTC
Global Note, upon receipt by the Registrar of (x) the documents, if
any, required by paragraph (iii) and (y) instructions in accordance
with the relevant 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 such Global Notes in an amount
equal to the principal amount of the beneficial interest in such Global
Notes to be transferred, and (b) if the proposed transferee is an Agent
Member and the transfer is after the Separation Date and February 19,
2000, 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 Offshore Global Notes in an amount equal to the
principal amount of the U.S. Physical Notes, the U.S. Global Notes or
U.S. Global DTC Notes, as the case may be, to be transferred, and the
Trustee shall cancel the Physical Note, if any, so transferred or
decrease the amount of the U.S. Global Notes or U.S. Global DTC Notes,
as the case may be.
(f) 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 (i) the Private Placement Legend is no longer required by Section 2.02,
(ii) the circumstances contemplated by paragraph (a)(i)(x) of this Section 2.08
exist or (iii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the
<PAGE>
43
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.
(g) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; PROVIDED that neither the Registrar nor the Trustee shall
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 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is surrendered to
the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
PROVIDED that the requirements of this Section 2.09 are met. If required by the
Trustee or the Company, an indemnity bond must be furnished that is sufficient
in the judgment of both the Trustee and the Company to protect the Company, the
Trustee or any Agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge such Holder for its expenses and the expenses
of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed
or wrongfully taken Note has become or is about to become due and payable, the
Company in its discretion may pay such Note instead of issuing a new Note in
replacement thereof.
Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
2.10 as not outstanding.
<PAGE>
44
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a BONA FIDE purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note, PROVIDED, HOWEVER, that in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee has actual
knowledge to be so owned shall be so disregarded. Notes so owned which have been
pledged in good faith may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Company may prepare and execute and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officer or Officers executing the
temporary Notes, as evidenced by their execution of such temporary Notes. If
temporary Notes are issued, the Company will cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Company designated for such
purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall be entitled to the same benefits under this
Indenture as definitive Notes.
SECTION 2.12. CANCELLATION. The Company at any time may 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 for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer,
<PAGE>
45
exchange, payment or cancellation and shall destroy them in accordance with its
normal procedure.
SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use
"CUSIP", "CINS" or "ISIN" numbers or common codes (if then generally in use),
and the Company and the Trustee shall use any such CUSIP, CINS or ISIN numbers
or common codes, as the case may be, in notices of redemption or exchange as a
convenience to Holders; PROVIDED that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of redemption or exchange and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee of any change in any such
"CUSIP", "CINS" or "ISIN" numbers or common codes for the Notes.
SECTION 2.14. DEFAULTED INTEREST. If the Company defaults in a payment
of interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date. A special
record date, as used in this Section 2.14 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to
Article Four of this Indenture and applicable law, issue additional Notes under
this Indenture (the "ADDITIONAL NOTES"). The Notes issued on the Closing Date,
any Exchange Notes and any Additional Notes subsequently issued shall be treated
as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes are redeemable, at the
Company's option, in whole or in part, at any time or from time to time, on or
after February 15, 2004 and prior to maturity, upon not less than 30 nor more
than 60 days' prior notice mailed by first-class mail to each Holder's last
address, as it appears in the Security Register, at the following Redemption
Prices (expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on an
<PAGE>
46
Interest Payment Date), if redeemed during the 12-month period commencing
February 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ------------
<S> <C>
2004........................................106.625%
2005........................................104.417
2006........................................102.208
2007 and thereafter.........................100.000
</TABLE>
(b) In addition, at any time prior to February 15, 2002, the
Company at its option may redeem Notes in an aggregate principal amount equal to
up to 35% of the principal amount of the Notes (including the principal amount
of any Additional Notes), with funds in an amount equal to the proceeds of one
or more sales of Capital Stock (other than Disqualified Stock) of, or capital
contributions to, the Company, at any time or from time to time in part, at a
Redemption Price (expressed as a percentage of principal amount) of 113.25%,
plus accrued and unpaid interest if any, to the Redemption Date (subject to the
rights of Holders of record on the relevant Regular Record Date that is prior to
the Redemption Date to receive interest due on an Interest Payment Date);
PROVIDED that (i) an aggregate principal amount equal to at least 65% of the
principal amount of the initially issued Notes (plus the principal amount of any
Additional Notes) remains outstanding after each such redemption and (ii) notice
of such redemption is mailed within 60 days of each such sale or capital
contribution.
(c) In the event that (i) as a result of any change in, or amendments
to, any laws or treaties (or any regulations or rulings promulgated thereunder)
or any change in official position regarding the application of such laws,
treaties, regulations or rulings (including a holding, judgement or order by a
court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective after the Closing Date, the Company has become
or would become obligated to pay, on the next date on which any amount would be
payable under or with respect to the Notes, any Additional Amounts, and (ii) the
Company cannot reasonably arrange (without other material adverse consequences
to the Company) for another obligor to make such payment so as to avoid the
requirement to pay such Additional Amounts, then the Company may redeem all, but
not less than all, the Notes at any time at 100% of the principal amount
thereof, together with accrued interest thereon, if any, to the Redemption Date.
SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes
pursuant to Section 3.01, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed and the clause
of this Indenture pursuant to which redemption shall occur.
<PAGE>
47
The Company shall give each notice provided for in this Section 3.02 in
an Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less than all of
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed in compliance with the requirements, as certified to it by the
Company, of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not listed on a national securities
exchange or automated quotation system, by lot or in accordance with the
Trustee's usual procedures; PROVIDED that no Note of Euro1,000 in principal
amount or less shall be redeemed in part.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of Euro1,000 in
principal amount may only be redeemed in whole. The Trustee may select for
redemption portions (equal to Euro1,000 in principal amount or any integral
multiple thereof) of Notes that have denominations larger than Euro1,000 in
principal amount. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company and the Registrar promptly in writing of the Notes or
portions of Notes to be called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of
Notes pursuant to Section 3.01, at least 30 days but not more than 60 days
before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed, including the
portion of the principal amount thereof, and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right of
the Holders is to receive payment of the Redemption Price plus accrued
interest to the Redemption Date upon surrender of the Notes to the
Paying Agent;
<PAGE>
48
(vi) that, if any Note is being redeemed in part, the
portion of the principal amount (equal to Euro1,000 in principal amount
or any integral multiple thereof) of such Note to be redeemed and that,
on and after the Redemption Date, upon surrender of such Note, a new
Note or Notes in principal amount equal to the unredeemed portion
thereof will be reissued; and
(vii) that, if any Note contains a CUSIP, CINS or ISIN
number or common code as provided in Section 2.13, no representation is
being made as to the correctness of the CUSIP, CINS or ISIN number or
common code either as printed on the Notes or as contained in the
notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes.
At the Company's request (which request may be revoked by the Company
at any time prior to the time at which the Trustee shall have given such notice
to the Holders), made in writing to the Trustee at least 45 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holders to whom such notice was properly
given.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. At least one Business Day
prior to any Redemption Date, the Company shall deposit with the Paying Agent
(or, if the Company is acting as its own Paying Agent, shall segregate and hold
in trust as provided in Section 2.05) Euros in immediately available funds
sufficient to pay the Redemption Price of and accrued interest on all Notes to
be redeemed on that date other than Notes or portions thereof called for
redemption on that date that have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date
<PAGE>
49
(unless the Company shall default in the payment of such Notes at the Redemption
Price and accrued interest to the Redemption Date, in which case the principal,
until paid, shall bear interest from the Redemption Date at the rate prescribed
in the Notes), such Notes shall cease to accrue interest. Upon surrender of any
Note for redemption in accordance with a notice of redemption, such Note shall
be paid and redeemed by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; PROVIDED that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders registered as such at the close of business on the
relevant Regular Record Date.
SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any Note that
is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder without service charge, a new Note equal
in principal amount to the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum specified in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in London (in the case of all Notes other than the Global DTC Notes),
in the Borough of Manhattan, The City of New York (in the case of the Global DTC
Notes) and, in the event the Notes are included on the Frankfurt
over-the-counter market, in Frankfurt, an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and
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50
any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.02.
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 such designations; PROVIDED
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in London (in the case of all
Notes other than the Global DTC Notes), in the Borough of Manhattan, The City of
New York (in the case of the Global DTC Notes) and, in the event the Notes are
included on the Frankfurt over-the-counter market, in Frankfurt for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby initially designates the Corporate Trust Office of
the Trustee as such office of the Company in accordance with Section 2.04.
SECTION 4.03. LIMITATION ON INDEBTEDNESS.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and the Dollar
Notes (including any Exchange Notes and any Exchange Notes (as defined in the
Dollar Notes Indenture), but excluding any Additional Notes or Additional Notes
(as defined in the Dollar Notes Indenture)), and other Indebtedness existing on
the Closing Date); PROVIDED that the Company or any Permanent Guarantor may
Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be greater than zero and less than 6:1.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate
principal amount not to exceed (after giving effect to any refinancing
thereof) the sum of (a) $100 million, less any amount of such
Indebtedness permanently repaid as provided under Section 4.11 of this
Indenture, plus (b) an amount equal to the lesser of (1) 80% of the
consolidated book value of the accounts receivable of the Company and
its Restricted Subsidiaries determined in accordance with GAAP
(determined as of the end of the most recently ended fiscal quarter for
which reports have been filed with the Commission or provided to the
Trustee) and (2) $100 million;
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51
(ii) Indebtedness owed (A) to the Company evidenced by a promissory
note or (B) to any Restricted Subsidiary; PROVIDED that any event which
results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than to
the Company or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii);
(iii) Indebtedness issued to refinance then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vi),
(viii), (xi) or (xii) of this paragraph) and any refinancings thereof, in
an amount not to exceed the amount so refinanced (plus premiums, accrued
interest, fees and expenses); PROVIDED that Indebtedness the proceeds of
which are used to refinance the Notes in part or Indebtedness that is PARI
PASSU with, or expressly subordinated in right of payment to, the Notes or
any Notes Guarantee shall only be permitted under this clause (iii) if (A)
in case the Notes are refinanced in part or the Indebtedness to be
refinanced is PARI PASSU with the Notes or any Notes Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
PARI PASSU with, or expressly subordinate in right of payment to, the
remaining Notes or any Notes Guarantee, (B) in case the Indebtedness to be
refinanced is expressly subordinated in right of payment to the Notes or
any Notes Guarantee, 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 or any Notes Guarantee at least to the extent that the
Indebtedness to be refinanced is subordinated to the Notes or any Notes
Guarantee 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 and the Average Life of such
new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced; and PROVIDED FURTHER that in no event may
Indebtedness of the Company be refinanced by means of any Indebtedness of
any Restricted Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety, appeal or
other similar bonds provided in the ordinary course of business and (B)
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, bankers' acceptances, surety or performance bonds or other similar
instruments securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal
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52
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness of the Company or any Permanent Guarantor, to the
extent the net proceeds thereof are promptly (A) used to purchase Notes
tendered in an Offer to Purchase made as a result of a Change in Control or
to purchase Dollar Notes tendered in an offer to purchase under the Dollar
Notes Indenture or (B) deposited to defease the Notes as described under
Article Eight;
(vi) Guarantees of the Notes and Guarantees of Indebtedness of the
Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with Section 4.07; and
Guarantees of Indebtedness of any Restricted Subsidiary by any Restricted
Subsidiary provided such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a
Guarantee of payment of the Notes by such Restricted Subsidiary;
(vii) Indebtedness (including Guarantees and the German Network L/C)
Incurred to finance or refinance the cost (including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration) to acquire equipment, inventory or network
assets (including leases on an indefeasible right-to-use basis and multiple
investment units) (including acquisitions by way of Capitalized Lease and
acquisitions of the Capital Stock of a Person that becomes a Restricted
Subsidiary to the extent of the fair market value of the equipment,
inventory or network assets so acquired) by the Company or a Restricted
Subsidiary;
(viii) Indebtedness of the Company or any Permanent Guarantor not to
exceed, at any one time outstanding (after giving effect to any refinancing
thereof), two times the sum of (A) the Net Cash Proceeds received by the
Company after the Closing Date as a capital contribution or from
the issuance and sale of its Capital Stock (other than Disqualified Stock)
to a Person that is not a Subsidiary of the Company, to the extent (I) such
capital contribution or Net Cash Proceeds have not been used pursuant to
clause (C)(2) of the first paragraph or clause (iii), (iv), (vi) or (x) of
the second paragraph of Section 4.04 to make a Restricted Payment and (II)
if such capital contribution or Net Cash Proceeds are used to consummate a
transaction pursuant to which the Company Incurs Acquired Indebtedness, the
amount of such Net Cash Proceeds exceeds one-half of the amount of Acquired
Indebtedness so Incurred and (B) 80% of the fair market value of property
(other than cash and cash equivalents) received by the Company after the
Closing Date as a capital contribution or from the sale of its Capital
Stock (other than Disqualified Stock) to a Person that is not a Subsidiary
of the Company, to the extent (I) such capital contribution or sale of
Capital Stock has not been used pursuant to clause (iii), (iv) or (vii) of
the second paragraph of Section 4.04 to make a Restricted Payment and (II)
if such
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53
capital contribution or Capital Stock is used to consummate a transaction
pursuant to which the Company Incurs Acquired Indebtedness, 80% of the fair
market value of the property received exceeds one-half of the amount of
Acquired Indebtedness so Incurred PROVIDED that such Indebtedness does not
mature prior to the Stated Maturity of the Notes and has an Average Life
longer than the Notes;
(ix) Acquired Indebtedness;
(x) Strategic Subordinated Indebtedness;
(xi) Indebtedness in respect of bankers' acceptance and letters of
credit, all in the ordinary course of business, in an aggregate amount
outstanding at any time not to exceed $10 million; and
(xii) subordinated Indebtedness of the Company or any Permanent
Guarantor (in addition to Indebtedness permitted under clauses (i) through
(xi) above) in an aggregate principal amount outstanding at any time (after
giving effect to any refinancing thereof) not to exceed $100 million.
(b) For purposes of determining compliance with any Dollar-denominated
restriction on the Incurrence of Indebtedness denominated in another currency,
the Dollar-equivalent principal amount of such Indebtedness Incurred pursuant
thereto shall be calculated based on the relevant currency exchange rate in
effect on the date that such Indebtedness was Incurred (or, in the case of
Indebtedness under a revolving credit facility, at the time of commitment),
PROVIDED that if such Indebtedness is Incurred to refinance other Indebtedness
denominated in a foreign currency, and such refinancing would cause the
applicable Dollar-denominated restriction to be exceeded if calculated at the
relevant currency exchange rate in effect on the date of such refinancing, such
Dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency exchange rate applicable to the currencies in which such
respective Indebtedness is denominated that is in effect on the date of such
refinancing.
(c) For purposes of determining any particular amount of Indebtedness under
this Section 4.03, (1) Guarantees, Liens or obligations with respect to letters
of credit, bankers' acceptances or other similar instruments supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included and (2) any Liens granted pursuant to the equal and
ratable provisions referred to in Section 4.09 of this Indenture shall not be
treated as giving rise to Indebtedness. For purposes of determining compliance
with this Section 4.03,
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54
(1) any other obligation of the obligor on such Indebtedness arising under any
Lien or letter of credit, bankers' acceptance or other similar instrument or
obligation supporting such Indebtedness shall be disregarded to the extent that
the same secures the principal amount of such Indebtedness and (2) in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Company, in its sole
discretion, shall classify, and from time to time may reclassify, such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses (but may allocate portions of such
Indebtedness between or among such clauses).
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y)
dividends or distributions on Capital Stock of a Restricted Subsidiary held by
minority interest holders on no more than a pro rata basis, measured by value
and based on all outstanding Capital Stock of such Restricted Subsidiary) held
by Persons other than the Company or any of its Restricted Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of (A) the Company or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person other than the Company or any Wholly Owned Restricted Subsidiary or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is expressly subordinated in right of payment
to the Notes or any Notes Guarantee or (iv) make any Investment, other than a
Permitted Investment, in any other Person (such payments or any other actions
described in clauses (i) through (iv) above being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and be
continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of Section 4.03 or (C) the aggregate amount of all
Restricted Payments (the amount, if other than in cash, to be determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) made after the Closing Date shall exceed the
sum of (1) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount
of such loss) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the fiscal quarter beginning
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 PLUS (2)
the aggregate Net Cash Proceeds received by the Company after the Closing Date
as a capital contribution or from
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55
the issuance and sale permitted by this Indenture of its Capital Stock (other
than Disqualified Stock) to a Person who is not a Subsidiary of the Company,
including the proceeds of an issuance or sale permitted by this Indenture of
Indebtedness of the Company for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other than Disqualified
Stock) of the Company, or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes), in each case except to the extent such Net Cash Proceeds are used to
Incur Indebtedness pursuant to clause (viii) of the second paragraph under
Section 4.03 PLUS (3) an amount equal to the net reduction in Investments (other
than reductions in Permitted Investments and Investments under clause (vi),
(viii) or (xii) of the second paragraph of this Section 4.04) in any Person
resulting from payments of interest on Indebtedness, dividends, distributions,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary or from the Net Cash Proceeds from the
sale or other disposition of any such Investment (except, in each case, to the
extent of any gain on such sale or other disposition that would be included in
the calculation of Adjusted Consolidated Net Income for purposes of clause
(C)(1) above), or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
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 or any Notes Guarantee, including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (iii) of the second paragraph of Section
4.03;
(iii) the repurchase, redemption or other acquisition of Capital Stock
of the Company or any Subsidiary of the Company (or options, warrants or
other rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a capital contribution or a substantially concurrent offering
of, shares of Capital Stock (other than Disqualified Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock);
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56
(iv) the making of any principal payment on or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to
the Notes in exchange for, or out of the proceeds of a capital contribution
or a substantially concurrent offering of, shares of the Capital Stock
(other than Disqualified Stock) of the Company (or options, warrants or
other rights to acquire such Capital Stock);
(v) payments or distributions to dissenting shareholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of Article Five of
this Indenture;
(vi) any Investment in any Person the primary business of which is
related, ancillary or complementary to the business of the Company and its
Restricted Subsidiaries on the date of such Investment; PROVIDED that the
aggregate amount of Investments made pursuant to this clause (vi) does not
exceed the sum of (a) $25 million, plus (b) the amount of Net Cash Proceeds
received by the Company after the Closing Date as a capital contribution or
from the sale of its Capital Stock (other than Disqualified Stock) to a
Person who is not a Subsidiary of the Company, except to the extent such
Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii)
of the second paragraph under Section 4.03 or to make Restricted Payments
pursuant to clause (C)(2) of the first paragraph, or clauses (iii), (iv) or
(x) of this paragraph, of this Section 4.04, plus (c) the net reduction in
Investments made pursuant to this clause (vi) resulting from distributions
on or repayments of such Investments or from the Net Cash Proceeds from the
sale or other disposition of any such Investment (except in each case to
the extent of any gain on such sale or other disposition that would be
included in the calculation of Adjusted Consolidated Net Income for
purposes of clause (C)(1) above) or from such Person becoming a Restricted
Subsidiary (valued in each case as provided in the definition of
"Investments"), PROVIDED that the net reduction in any Investment shall not
exceed the amount of such Investment;
(vii) Investments acquired as a capital contribution to or in exchange
for Capital Stock (other than Disqualified Stock) of the Company;
(viii) Investments in Permitted Joint Ventures not exceeding, at the
time of the Investment, the sum of (A) $10 million and (B) the net
reduction in Investments made pursuant to this clause (viii) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from the sale or other disposition of any such Investment (except
in each case to the extent of any gain on such sale or disposition that
would be included in the calculation of Adjusted Consolidated Net Income
for purposes of clause (C)(1) above) or from such Person becoming a
Restricted Subsidiary (valued in
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57
each case as provided in the definition of "Investments"), PROVIDED that
the net reduction in any Investment shall not exceed the amount of such
Investment;
(ix) repurchases of Warrants pursuant to a Repurchase Offer or within
ten days of their expiration in accordance with the terms of the Warrant
Agreements in effect on the Closing Date, and any purchase of any
fractional shares of Common Stock (or other Capital Stock of the Company
issuable upon exercise of the Warrants) in connection with an exercise of
the Warrants, and any payments in connection with the anti-dilution
provisions of the Warrant Agreements;
(x) the purchase, redemption, retirement or other acquisition for
value of shares of Capital Stock of the Company or options, warrants or
other rights to purchase such shares held by Management Investors upon
death, disability, retirement, termination of employment or pursuant to the
terms of any agreement under which such shares of Capital Stock or options,
warrants or other rights were issued; PROVIDED that the aggregate
consideration paid for such purchase, redemption, retirement or other
acquisition for value of such shares or options, warrants or other rights
after the Closing Date does not in the aggregate exceed (A) $5 million,
plus (B) the aggregate Net Cash Proceeds received by the Company after the
Closing Date as a capital contribution from, or from the issuance or sale
to, Management Investors of Capital Stock of the Company or any options,
warrants or other rights to acquire such Capital Stock, plus (C) the
proceeds of insurance policies used to effect any such purchase,
redemption, retirement or other acquisition;
(xi) any purchase, redemption, retirement or other acquisition of
Capital Stock deemed to occur upon the exercise of options, warrants or
other rights if such Capital Stock represents a portion of the exercise
price thereof; or
(xii) other Restricted Payments in an aggregate amount not to exceed
$5 million plus the net reduction in Investments made pursuant to this
clause (xii) resulting from distributions on or repayments of such
Investments or from the Net Cash Proceeds from the sale or other
disposition of any such Investment (except in each case to the extent of
any gain on such sale or disposition that would be included in the
calculation of Adjusted Consolidated Net Income for purposes of clause
(C)(1) above) or from such Person becoming a Restricted Subsidiary (valued
in each case as provided in the definition of "Investments"), PROVIDED that
the net reduction in any Investment shall not exceed the amount of such
Investment;
PROVIDED that, except in the case of clauses (i), (iii) and (xi), 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.
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Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof, an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof, an Investment referred to in clause (vii) thereof
and a purchase, redemption, retirement or other acquisition of Capital Stock
referred to in clause (xi) thereof), and the Net Cash Proceeds from any capital
contribution or any issuance of Capital Stock referred to in clauses (iii), (iv)
and (vi) thereof, shall be included in calculating whether the conditions of
clause (C) of the first paragraph of this Section 4.04 have been met with
respect to any subsequent Restricted Payments.
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date, including under this Indenture, the
Dollar Notes Indenture or any other agreements or instruments in effect on
the Closing Date, and any refinancings of such agreements or instruments;
PROVIDED that the encumbrances and restrictions in any such refinancings
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
refinanced;
(ii) existing under or by reason of applicable law or any requirement
of any applicable governmental regulatory authority;
(iii) existing with respect to any Person, or any property or assets,
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 (A) in the case of an
acquisition of such Person, to any other Person or (B) in the case of an
acquisition of such property or assets, any other property or assets;
(iv) in the case of clause (iv) (and, solely with respect to clauses
(A), (B) and (D) of this clause (iv), clause (i)) of the first paragraph of
this Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject to,
a lease, license, conveyance or contract or similar property
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59
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, (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 (D) arising under the terms of Indebtedness
Incurred under clause (vii) of the second paragraph of Section 4.03 that
restrict the transfer of the property or assets acquired with such
Indebtedness;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary;
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued, or any agreement relating
to the sale, disposition or financing of receivables, if (A) either (1) the
encumbrance or restriction applies only in the event of a payment default
or a default with respect to a financial covenant contained in the terms of
such Indebtedness or agreement or (2) the Company in good faith determines
(as set forth in a Board Resolution) that any such encumbrance or
restriction will not materially affect the Company's ability to make
principal or interest payments on the Notes and (B) the encumbrance or
restriction is not materially more disadvantageous to the Holders of the
Notes than is customary in comparable financings (as determined by the
Company in good faith);
(vii) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
or
(viii) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted under Section 4.09 or (2) restricting the
sale or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except:
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(i) to the Company or a Wholly Owned Restricted Subsidiary;
(ii) issuances of director's qualifying shares or issuances or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
to such issuance or sale would have been permitted to be made under Section
4.04 if made on the date of such issuance or sale; or
(iv) issuances or sales of Common Stock of a Restricted Subsidiary,
provided that the Company or such Restricted Subsidiary applies the Net
Cash Proceeds, if any, of any such sale in accordance with clause (A) or
(B) of Section 4.11 of this Indenture.
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES. The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company or any Subsidiary
Guarantor which is PARI PASSU with or expressly subordinate in right of payment
to the Notes or any Notes Guarantee ("Guaranteed Indebtedness"), unless (i) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee (a "Subsidiary Guarantee")
of payment of the Notes by such Restricted Subsidiary and (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee, until payment in full of the outstanding principal amount of such
Notes and any premium or accrued and unpaid interest thereon then due and owing;
PROVIDED that this paragraph shall not be applicable to any Guarantee of any
Restricted Subsidiary (a) that existed at the time such Person became a
Restricted Subsidiary and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or (b) of
Indebtedness Incurred pursuant to clause (i) of the second paragraph of Section
4.03. If the Guaranteed Indebtedness is (A) PARI PASSU with the Notes, then the
Guarantee of such Guaranteed Indebtedness shall be PARI PASSU with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
(including by way of merger or consolidation), to any Person not an Affiliate of
the Company, of all of the Company's and each Restricted Subsidiary's Capital
Stock in, or all or substantially all the assets of, such Restricted Subsidiary
(which sale,
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exchange, transfer or other transaction is not prohibited by this Indenture),
(ii) the legal or covenant defeasance of the Notes or satisfaction and discharge
of this Indenture, subject to customary contingent reinstatement provisions,
(iii) the release or discharge of the Guarantee which resulted in the creation
of such Subsidiary Guarantee, except a discharge or release by or as a result of
payment under such Guarantee or (iv) upon the merger or consolidation of such
Subsidiary Guarantor with and into the Company or another Subsidiary Guarantor
that is the surviving Person in such merger or consolidation.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into, renew or extend any transaction (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 with any Affiliate of
the Company or any Restricted Subsidiary, except upon fair and reasonable terms
that taken as a whole are no less favorable to the Company or such Restricted
Subsidiary than could be obtained, at the time of such transaction or, if such
transaction is pursuant to a written agreement, at the time of the execution of
the agreement providing therefor, in a comparable arm's-length transaction with
a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which the Company or a
Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized investment banking or appraisal firm stating that the
transaction is fair to the Company or such Restricted Subsidiary from a
financial point of view, or is upon terms that taken as a whole are no less
favorable to the Company or such Restricted Subsidiary than could be
obtained in a comparable arm's-length transaction;
(ii) any transaction solely between or among the Company and any of
its Wholly Owned Restricted Subsidiaries or solely between or among Wholly
Owned Restricted Subsidiaries;
(iii) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes;
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(v) any Restricted Payments (or a transaction excluded from the
definition of the term "Restricted Payments") not prohibited by Section
4.04;
(vi) transactions consisting of or pursuant to employment or benefit
agreements, plans, programs or arrangements for or with, or indemnification
or contribution obligations to, employees, officers or directors in the
ordinary course of business;
(vii) the entering into of the Securities Purchase and Cancellation
Agreement, the 1999 Share Option Plan, the Securities Purchase Agreement,
the Registration Rights Agreement and the Securityholders' Agreement, as
described in the Offering Memorandum dated February 12, 1999 as amended or
supplemented, and performance of the obligations and the transactions
contemplated thereby; or
(viii) issuances or sales of Capital Stock (other than Disqualified
Stock) of the Company or options, warrants or other rights to acquire such
Capital Stock.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this Section 4.08 and not covered by clauses
(ii) through (viii) of this paragraph, the aggregate amount of which exceeds $2
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
SECTION 4.09. LIMITATION ON LIENS. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character (including, without
limitation, licenses), or any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, without making effective provision for all of the Notes
and all other amounts due under this Indenture to be directly secured equally
and ratably with (or, if the obligation or liability to be secured by such Lien
is expressly subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such
other Restricted Subsidiary;
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(iv) Liens securing Indebtedness which is permitted to be Incurred
under clause (iii) of the second paragraph of Section 4.03 to refinance
secured Indebtedness; PROVIDED that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other
than the property or assets securing the Indebtedness being refinanced;
(v) Liens on the Capital Stock of, or any property or assets of, a
Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary
(or obligations in respect thereof) permitted under Section 4.03; or
(vi) Permitted Liens.
SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company will
not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties more than one year after acquiring
such assets or properties and then or thereafter leases such assets or
properties or any part thereof or any other assets or properties which the
Company or such Restricted Subsidiary, as the case may be, intends to use for
substantially the same purpose or purposes as the assets or properties sold or
transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the second paragraph of Section 4.11 of
this Indenture.
SECTION 4.11. LIMITATION ON ASSET SALES. The Company will not, and will not
permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary (including
any Released Indebtedness and including by way of relief from or by any other
Person assuming responsibilities for any liabilities other than Indebtedness
("Released Liabilities")) is at least equal to the fair market value of the
assets sold or disposed of; PROVIDED that this clause (i) shall not apply to any
sale, transfer or other disposition arising from foreclosure, condemnation or
similar action with respect to any assets and (ii) at least 75% of the
consideration received (including any Released Indebtedness and Released
Liabilities) consists of cash, Temporary Cash Investments or Released
Indebtedness and Released Liabilities; PROVIDED, HOWEVER, that this clause (ii)
shall not apply to long-term assignments in
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capacity in a telecommunications network or other transfers of indefeasible
rights of use, multiple investment units or dark fibers.
In the event and to the extent that the Net Cash Proceeds received by the
Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its Subsidiaries has been filed
with the Commission or provided to the Trustee pursuant to Section 4.18), then
the Company shall or shall cause the relevant Restricted Subsidiary to:
(i) within 12 months after the date Net Cash Proceeds so received
exceed 10% of Adjusted Consolidated Net Tangible Assets
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company, or any
Restricted Subsidiary providing a Notes Guarantee or Indebtedness of
any other Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A), (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement) in property
or assets (other than current assets) of a nature or type or that are
used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such
investment (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board
Resolution) and
(ii) apply (no later than the end of the 12-month period referred to
in clause (i)) such excess Net Cash Proceeds (to the extent not applied or
committed to be applied pursuant to clause (i)) as provided in the
following paragraph of this Section 4.11.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied or committed to be applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $5 million,
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65
the Company must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders of the Notes (and if
and to the extent required by the terms of any Indebtedness that is PARI PASSU
with the Notes or any Notes Guarantee ("Pari Passu Indebtedness"), purchase,
redeem or repay such Pari Passu Indebtedness) on a PRO RATA basis an aggregate
principal amount of Notes (and an amount of Pari Passu Indebtedness) equal to
the Excess Proceeds on such date, at a purchase price equal to 100% of the
principal amount of the Notes (and the required amount of Pari Passu
Indebtedness), plus accrued interest (if any) to the Payment Date. If the
aggregate principal amount of the Notes and aggregate principal amount of such
Pari Passu Indebtedness validly tendered and not withdrawn (or otherwise subject
to purchase, redemption or repayment) exceeds such Excess Proceeds, such Excess
Proceeds will be apportioned between the Notes and such Pari Passu Indebtedness,
with the portion of such Excess Proceeds payable in respect of the Notes to
equal the lesser of (x) the Excess Proceeds amount multiplied by a fraction, the
numerator of which is the aggregate principal amount of the Notes and the
denominator of which is the sum of the aggregate principal amount of the Notes
and the aggregate principal amount of such Pari Passu Indebtedness and (y) the
aggregate principal amount of Notes validly tendered and not withdrawn.
Any Excess Proceeds remaining after such Offer to Purchase is completed may
be applied to fund any general corporate purpose not prohibited by the
Indenture.
For purposes of the first paragraph of this Section 4.11, (1) securities
received by the Company or any Restricted Subsidiary in any Asset Sale that are
converted by the Company or such Restricted Subsidiary into cash within 12
months after such Asset Sale and (2) consideration consisting of Indebtedness of
the Company or any Restricted Subsidiary, shall be deemed to be cash.
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company
shall commence, within 30 days of the occurrence of a Change of Control, and
consummate an Offer to Purchase for all Notes then outstanding, at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the Payment Date.
SECTION 4.13. EXISTENCE. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each Restricted Subsidiary and the
rights (whether pursuant to charter, partnership certificate, agreement, statute
or otherwise), licenses and franchises of the Company and each Restricted
Subsidiary; PROVIDED that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is, in the judgment of the Company, no
longer desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole.
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SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge and shall cause each of its Restricted Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Restricted Subsidiary, (b) the
income or profits of any such Restricted Subsidiary which is a corporation or
(c) the property of the Company or any such Restricted Subsidiary and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a lien upon the property of the Company or any such Restricted
Subsidiary; PROVIDED that the Company shall not be required to pay or discharge,
or cause to be paid or discharged, any such tax, assessment, charge or claim (x)
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings and for which adequate reserves have been established
to the extent required by generally accepted accounting principles or (y) if
failure to do so would not (as determined by the Company in good faith)
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of the Company and its Restricted
Subsidiaries taken as a whole or (z) if any resulting Lien constitutes a
Permitted Lien or otherwise complies with Section 4.09.
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company will
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED that nothing in
this Section 4.15 shall prevent the Company or any Restricted Subsidiary from
omitting to take such action or discontinuing the use, operation or maintenance
of any of such properties or disposing of any of them, if such omission,
discontinuance or disposal is, in the judgment of the Company, desirable in the
conduct of the business of the Company or such Restricted Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers, in such amounts, with such deductibles and by such methods as shall be
customary for corporations similarly situated in the industry in which the
Company or any such Restricted Subsidiary, as the case may be, is then
conducting business; PROVIDED that in the judgment of the Company such insurance
is available to the Company on commercially reasonable terms and is desirable.
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SECTION 4.16. NOTICE OF DEFAULTS. In the event that any Officer becomes
aware of any Default or Event of Default, the Company shall promptly deliver to
the Trustee an Officers' Certificate specifying such Default or Event of
Default.
SECTION 4.17. COMPLIANCE CERTIFICATES. The Company shall deliver to the
Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that occurred during such fiscal quarter. Such certificate shall contain
a certification from the principal executive officer, principal financial
officer or principal accounting officer of the Company that a review has been
conducted of the activities of the Company and its Restricted Subsidiaries and
the Company's and its Restricted Subsidiaries' performance under this Indenture
and that the Company has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.17, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If any of the officers of the Company signing
such certificate has knowledge of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. At all times from
and after the earlier of (i) the date of the commencement of an Exchange Offer
or the effectiveness of a Shelf Registration Statement (the "Registration") and
(ii) the date that is six months after the Closing Date, in either case, whether
or not the Company is then required to file reports with the Commission, the
Company shall file with the Commission to the extent then permitted by the
Securities Exchange Act of 1934, as amended, and by the Commission, all such
information on an appropriate available form as it would be required to file
with the Commission by Sections 13(a) or 15(d) under the Securities Exchange Act
of 1934 as if it were a U.S. company and subject thereto, including information
required by annual, quarterly and current reports whether or not required to be
so filed. The Company shall supply the Trustee and each Holder or shall supply
to the Trustee for forwarding to all Holders, without cost to such Holders,
copies of such reports and other information. In addition, at all times prior to
the earlier of the date of the Registration and the date that is six months
after the Closing Date, the Company shall, at its cost, supply the Trustee and
each Holder or shall supply to the Trustee for forwarding to all Holders,
without cost to such Holders, quarterly and annual reports substantially
equivalent to those described above or which would otherwise be required by the
Exchange Act commencing with the report for the fiscal quarter ending
immediately after the Closing Date; provided that the Company may deliver copies
of the registration statement (including pre-effective amendments thereto) with
respect to the Exchange Offer to the extent it contains the information that
would have been required in such reports. In addition, at all times prior to the
Registration, upon the request of any Holder or any prospective purchaser of the
Notes designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
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SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.20. ADDITIONAL AMOUNTS. All payments made by the Company under or
with respect to the Notes shall be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment, or other governmental charge (including penalties,
interest and other liabilities related thereto) (collectively, "TAXES") imposed
or levied by or on behalf of Luxembourg or any other jurisdiction in which the
Company is organized or is a resident for tax purposes or by any government
authority or political subdivision or territory or possession or agency therein
or thereof having the power to tax (each, a "TAXING AUTHORITY"), unless the
Company is required to withhold or deduct Taxes by law or by the interpretation
or administration thereof.
If the Company is required to withhold or deduct any amount for or on
account of Taxes imposed by a Taxing Authority within Luxembourg or within any
other jurisdiction in which the Company is organized or is a resident for tax
purposes, from any payment made under or with respect to the Notes, the Company
shall pay such additional amounts ("ADDITIONAL AMOUNTS") as may be necessary so
that the net amount received by each Holder of Notes after such withholding or
deduction will not be less than the amount the Holder and beneficial owner would
have received if such Taxes had not been withheld or deducted; PROVIDED that no
Additional Amounts shall be payable with respect to a payment made to a Holder
of Notes or to a third party on behalf of a Holder, with respect to (a) any
Taxes that would not have been so imposed but for the existence of any present
or former connection between such Holder and the jurisdiction imposing such tax
(other than the mere receipt of such payment or the ownership or holding outside
of Luxembourg of such Note); (b) any estate, inheritance, gift, sales, excise,
transfer, personal property tax or similar tax, assessment or governmental
charge; (c) any Taxes payable otherwise than by deduction or withholding from
payments of principal of, premium, if any, or interest on such Note; or (d)
Taxes that would not have been imposed but for the failure of the Holder or
beneficial owner of a Note to comply, upon written request therefor furnished by
the Company to the Trustee, with any certification, identification, information,
or other documentation requirement under law, regulation, administrative
practice or an applicable treaty that is a precondition to exemption from, or
reduction in the rate of the imposition, deduction or withholding of Taxes; nor
shall Additional Amounts be paid: (i) if the payment under or with
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respect to the Notes could have been made by another paying agent without such
deduction or withholding, (ii) if the payment under or with respect to the Notes
could have been made without such deduction or withholding if the beneficiary of
the payment had presented the Note for payment within 30 days after (A) the date
on which such payment or such Note became due and payable or (B) the date on
which payment thereof is duly provided for, whichever is later (except to the
extent that the holder would have been entitled to Additional Amounts had the
Note been presented on the last day of such 30 day period), (iii) with respect
to any payment under or with respect to the Notes to any holder who is a
fiduciary or partnership or any person other than the sole beneficial owner of
such payment, to the extent that a beneficiary or settlor with respect to such
fiduciary, a member of such a partnership or the beneficial owner of such
payment would not have been entitled to the Additional Amounts had such
beneficiary, settlor, member or beneficial owner been the actual holder of such
Note.
The Company shall also (i) make such withholding or deduction and (ii)
remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. The Company shall use its reasonable efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes. The Company
will supply to the Trustee for forwarding to all Holders, without cost to such
Holders, within 60 days after the date the payment of any Taxes so deducted or
withheld is due pursuant to applicable law, certified copies of tax receipts
evidencing such payment by the Company or if, notwithstanding the Company's
efforts to obtain such receipts, the same are not obtainable, other evidence of
such payments by the Company.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company shall be obligated to
pay Additional Amounts with respect to such payment, the Company shall deliver
to the Trustee an Officers' Certificate stating the fact that such Additional
Amounts will be payable, the amounts so payable and shall set forth such other
information as is necessary to enable the Trustee to pay such Additional Amounts
to holders of Notes on the payment date.
The foregoing provisions shall survive any termination or the discharge of
this Indenture and shall apply MUTATIS MUTANDIS to any jurisdiction in which any
successor Person to the Company is organized or is engaged in business for tax
purposes or any political subdivision or taxing authority or agency thereof or
therein.
In addition, the Company shall pay any stamp, issue, registration,
documentary or other similar taxes and duties, including interest and penalties,
payable in Luxembourg or any political subdivision thereof or therein in respect
of the creation, issue and offering of the Notes.
Whenever in this Indenture or the Notes there is mentioned in any context,
the payment of amounts based upon principal of, premium, if any, or interest or
of any other amount payable
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under or with respect to any of the Notes, such mention shall be deemed to
include mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of
the Company shall be a corporation organized and validly existing under the
laws of the Kingdom of the Netherlands (including the Netherlands
Antilles), Bermuda, Canada, Switzerland, any member state of the European
Union or the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on the Notes and under
this Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of
the Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction; PROVIDED that this clause (iii) shall only apply to a sale of
less than all of the assets of the Company;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Company, or any Person becoming the successor obligor on
such Notes, as the case may be, could Incur at least $1.00 of Indebtedness
under the first paragraph of Section 4.03; PROVIDED that this clause (iv)
shall not apply to a consolidation, merger or sale of all (but not less
than all) of the assets of the Company if all Liens and Indebtedness of the
Company or any Person becoming the successor obligor of the Notes, as the
case may be, and its Restricted Subsidiaries outstanding immediately after
such transaction would, if Incurred at such time, have been permitted to be
Incurred (and all such Liens and Indebtedness, other than Liens and
Indebtedness of the Company and its Restricted
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Subsidiaries outstanding immediately prior to the transaction, shall be
deemed to have been Incurred) for all purposes of this Indenture; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv) above) and Opinion of Counsel, in each case to the
effect that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for in this paragraph relating to such transaction have been
complied with;
PROVIDED, HOWEVER, that (x) in giving any such opinion such counsel may rely on
an Officers' Certificate as to compliance with the foregoing clauses (ii), (iii)
and (iv) and as to any matters of fact and (y) clauses (iii) and (iv) above will
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 jurisdiction of
organization of the Company, and such transaction does not have as one of its
purposes the evasion of the foregoing limitations.
SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; PROVIDED that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. Any of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days; PROVIDED that a failure to
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make any of the first five scheduled interest payments on the Notes on the
applicable Interest Payment Date will constitute an Event of Default with
no grace or cure period;
(c) default in the performance or breach of the provisions of Article
Five of this Indenture or the failure to make or consummate an Offer to
Purchase when required in accordance with Section 4.11 or 4.12 of this
Indenture;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) or the
Pledge Agreement and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 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 $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and,
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in each case, such decree or order shall remain unstayed and in effect for
a period of 30 consecutive days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of
Default specified in clause (g) or (h) of Section 6.01 that occurs with respect
to the Company) occurs and is continuing under this Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the Holders), may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, and accrued interest on the
Notes to be immediately due and payable. Upon a declaration of acceleration,
such principal of, premium, if any, and accrued and unpaid interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) of
Section 6.01 occurs with respect to the Company, the principal of, premium, if
any, and accrued and unpaid interest on the Notes then outstanding shall IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
At any time after such declaration of acceleration, but before a judgment
or decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past Defaults
and rescind and annul a declaration of acceleration and its consequences if (a)
the Company has paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances (if any) of the Trustee, its
agents and counsel, (ii) all overdue interest on all Notes, (iii) the principal
of and premium, if any, on any Notes that have
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become due otherwise than by such declaration or occurrence of acceleration and
interest thereon at the rate prescribed therefor by such Notes, and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest,
if any, at the rate prescribed therefor by such Notes, (b) all existing Events
of Default, other than the non-payment of the principal of, premium, if any, and
accrued interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (c) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may, and, subject to Section 7.02(iv), at the direction
of the Holders of at least a majority in principal amount of the outstanding
Notes shall, pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of, premium, if any, or interest on the Notes
or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07 and
9.02, the Holders of at least a majority in principal amount of the outstanding
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, or interest on any Note as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority in
aggregate principal amount of the outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and provided
further that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. LIMITATION ON SUITS. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
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(i) the Holder has previously given the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal
amount of outstanding Notes shall have made a written request to the
Trustee to pursue such remedy;
(iii) such Holder or Holders offer the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liability or
expense;
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the
Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances (if any) of the Trustee, its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant
to this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Notes in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Notes for principal, premium, if any,
and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
faith of the claims
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or defenses made by the party litigant. This Section 6.11 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by
Holders of more than 10% in principal amount of the outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the 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
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee
shall be as provided by the TIA and as set forth herein. All rights (including
the right to indemnification) stated in this Article Seven shall also be
conferred on any Registrar or Paying Agent. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. Whether or not herein expressly so provided, every
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provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely, and shall be protected in acting
or refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person;
(ii) before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel, which
shall conform to Section 11.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care by it hereunder;
(iv) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or
within its rights or powers, provided that the Trustee's conduct does
not constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(vii) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document; and
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(viii) the Trustee shall not be charged with knowledge of any
documentation other than this Indenture or documentation to which it is
a party.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture, the Pledge
Agreement or the Notes, (ii) shall not be accountable for the Company's use or
application of the proceeds from the Notes and (iii) shall not be responsible
for any statement in the Notes other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured;
PROVIDED, HOWEVER, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
May 15, beginning with May 15, 1999, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed by the Company with the
Commission and each stock exchange on which the Securities are listed in
accordance with TIA Section 313(d). The Company shall promptly notify the
Trustee when the Securities are listed on any stock exchange or of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services
hereunder. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances (if
any) incurred or made by the Trustee without negligence or bad faith on its
part. Such expenses shall include the reasonable compensation and expenses of
the Trustee's agents and counsel.
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The Company shall indemnify the Trustee (which for purposes of this
Section 7.07 shall include its directors, officers, employees and agents) for,
and hold it harmless against, any loss or liability or expense incurred by it
without negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Notes. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder, unless the Company is materially prejudiced thereby. At the Trustee's
request, the Company shall defend the claim and the Trustee shall cooperate in
the defense. Unless otherwise set forth herein, the Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust, pursuant to the Pledge Agreement or otherwise, to pay principal
of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (g) or (h) of Section 6.01, the
expenses and the compensation for the services will be intended to constitute
expenses of administration under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.
The provisions of this Section 7.07 shall survive the termination of
this Indenture, the payment of the Notes and the resignation or removal of the
Trustee.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee if:
(i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is
adjudged
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a bankrupt or an insolvent; (iii) a receiver or other public officer takes
charge of the Trustee or its property; or (iv) the Trustee becomes incapable of
acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may, at the expense
of the Company, petition any court of competent jurisdiction for the appointment
of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder. No successor Trustee
shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article.
If the Trustee is no longer eligible under Section 7.10 or shall fail
to comply with TIA Section 310(b), any Holder who satisfies the requirements of
TIA Section 310(b) may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 7.08, the Trustee shall resign immediately in the manner and with
the effect provided in this Section.
The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligation under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee
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with the same effect as if the successor Trustee had been named as the Trustee
herein, provided such corporation shall be otherwise qualified and eligible
under this Article.
SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee
who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have
a combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition that is subject to the requirements
of applicable Federal or state supervising or examining authority. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in this Article.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Company, as provided in Section 8.05) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder; or
(ii) (A) the Notes mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, as trust funds solely for the benefit of the Holders
for that purpose, money or European Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if, any, and interest on the Notes
to maturity or redemption, as the case may be, (C) no Default or Event
of Default with respect to the Notes shall have occurred and be
continuing on the date of such deposit, (D) such deposit will not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company is a party
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or by which it is bound and (E) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating
to the satisfaction and discharge of this Indenture have been complied
with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 4.20, 7.07, 7.08 and 8.06, and the rights, powers,
trusts, duties and immunities of the Trustee hereunder, shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07 and 8.06, and the Trustee's obligations under Sections 8.04 and
8.05, shall survive. After any such irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same if:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance reasonably satisfactory to the Trustee
as trust funds in trust, specifically pledged to the Trustee for the
benefit of the Holders as security for payment of the principal of,
premium, if any, and interest, if any, on the Notes, and dedicated
solely to, the benefit of the Holders, in and to (1) money in an
amount, (2) European Government Obligations that, through the payment
of interest, premium, if any, and principal in respect thereof in
accordance with their terms, will provide money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest or on any earlier
Redemption Date; PROVIDED that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such European
Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Notes and, with respect
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84
to any Redemption Date, the Company shall have provided the Trustee
with irrevocable instructions to redeem all of the Notes on such
Redemption Date;
(B) the Company has delivered to the Trustee (1) either (x)
an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this Section 8.02 and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had
not been exercised, which Opinion of Counsel shall be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal
income tax law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (2) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment
Company Act of 1940 and that after the passage of 123 days following
the deposit (except, with respect to any trust funds for the account of
any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (II) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company, (a) assuming such trust
funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold,
for the benefit of the Holders, a valid and perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise
except for the effect of Section 552(b) of the United States Bankruptcy
Code on interest on the trust funds accruing after the commencement of
a case under such statute and (b) the Holders will be entitled to
receive adequate protection of their interests in such trust funds if
such trust funds are used in such case or proceeding;
(C) immediately after giving effect to such deposit, on a
pro forma basis, no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or during the period ending
on the 123rd day after such date of such deposit, and such deposit
shall not result in a breach or violation of, or constitute a default
under, any other material agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
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85
(D) if the Notes are then listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with (which
Opinion of Counsel may rely on any Officers certificate as to matters
of fact, including, to the extent applicable, compliance with the
foregoing clauses (A), (B), (C) and (D)).
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (B)(2) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 4.20, 8.06, and the rights, powers, trusts, duties and
immunities of the Trustee hereunder shall survive until the Notes are no longer
outstanding. Thereafter, only the Company's obligations in Sections 7.07 and
8.06, and the Trustee's obligations under Sections 8.04 and 8.05, shall survive.
If and when a ruling from the Internal Revenue Service or an Opinion of Counsel
referred to in clause (B)(1) of this Section 8.02 is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's obligations under Section 4.01, then the Company's obligations under
such Section 4.01 shall cease upon delivery to the Trustee of such ruling or
Opinion of Counsel and compliance with the other conditions precedent provided
for herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit
to comply with any term, provision or condition set forth in clauses (iii) and
(iv) of Section 5.01 and Sections 4.03 through 4.12 and clause (c) of Section
6.01 with respect to clauses (iii) and (iv) of Section 5.01 and with respect to
Sections 4.11 and 4.12, clause (d) of Section 6.01 with respect to Sections 4.02
through 4.10 and 4.13 through 4.19 and clauses (e) and (f) of Section 6.01 shall
be deemed not to be Events of Default, in each case with respect to the
outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and
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86
substance reasonably satisfactory to the Trustee as trust funds in
trust, specifically pledged to the Trustee for the benefit of the
Holders as security for payment of the principal of, premium, if any,
and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) European
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide money in an amount or (C) a combination thereof in
an amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and interest on the outstanding Notes (i) on the Stated Maturity
of such principal or interest or (ii) on any earlier Redemption Date;
PROVIDED that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such European Government
Obligations to the payment of such principal, premium, if any, and
interest with respect to the Notes and, with respect to any Redemption
Date, the Company shall have provided the Trustee with irrevocable
instructions to redeem all of the Notes on such Redemption Date;
(ii) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute, and either (1) the trust
funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (2) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the
Company, (x) assuming such trust funds remained in the possession of
the Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute) and
(y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in
such case or proceeding, (C) the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such
deposit and defeasance of certain covenants and Events of Default and
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not
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occurred and (D) the Trustee, for the benefit of the Holders, has a
valid first-priority security interest in the trust funds;
(iii) immediately after giving effect to such deposit on a
pro forma basis, no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or during the period ending
on the 123rd day after such date of such deposit, and such deposit
shall not result in a breach or violation of, or constitute a default
under any other material agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(iv) if the Notes are then listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with (which
Opinion of Counsel may rely on any Officers certificate as to matters
of fact, including, to the extent applicable, compliance with the
foregoing clauses (i), (ii), (iii) and (iv)).
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.06, the
Trustee shall hold in trust money or European Government Obligations deposited
with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall
apply the deposited money and the money from European Government Obligations in
accordance with the Notes and this Indenture to the payment of principal of,
premium, if any, and interest on the Notes; but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 8.01, 8.02 and
8.03, the Trustee shall promptly pay to the Company upon request set forth in an
Officers' Certificate any excess money held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee
shall pay to the Company upon request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for two years.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee with respect to such money
shall cease.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any money or European Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application,
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88
the Company's obligations under this Indenture and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02
or 8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or European Government Obligations in
accordance with Section 8.01, 8.02 or 8.03, as the case may be; PROVIDED that,
if the Company has made any payment of principal of, premium, if any, or
interest on any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or European Government Obligations held by
the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized
by a resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not, in
the good faith opinion of the Board of Directors as evidenced by a
Board Resolution, adversely affect the interests of the Holders in any
material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(6) to add one or more Subsidiary Guarantees on the terms
required by this Indenture; or
(7) to make any change that, in the good faith opinion of
the Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
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89
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Company, when authorized by
its Board of Directors (as evidenced by a Board Resolution delivered to the
Trustee), and the Trustee may amend this Indenture, the Pledge Agreement and the
Notes with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding, and the Holders of a
majority in aggregate principal amount of the Notes then outstanding by written
notice to the Trustee may waive future compliance by the Company with any
provision of this Indenture, the Pledge Agreement or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, premium, if any, or
interest on any Note;
(iii) change any place or currency of payment of principal
of, premium, if any, or interest on, any Note;
(iv) impair the right of such Holder to institute suit for
the enforcement of any payment of principal, premium or interest on or
after the Stated Maturity (or, in the case of redemption, on or after
the Redemption Date) of any Note;
(v) reduce the percentage or principal amount of
outstanding Notes the consent of whose Holders is necessary to modify
or amend this Indenture or to waive compliance with certain provisions
of or certain Defaults under this Indenture;
(vi) waive a default in the payment of principal of,
premium, if any, or interest on, any Note;
(vii) modify the Pledge Agreement to release any collateral
subject to the Pledge Agreement (other than as contemplated thereby);
or
(viii) modify any of the provisions of this Section 9.02,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby.
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90
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, subject to the last paragraph
of this Section 9.03, any such Holder or subsequent Holder may revoke the
consent as to its Note or portion of its Note. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver. An
amendment, supplement or waiver becomes effective on the later of the date of
receipt of such certificate and the date specified in such amendment, supplement
or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in the second paragraph of
Section 9.02. In case of an amendment or waiver of the type described in the
second paragraph of Section 9.02, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent Holder of a Note that evidences the
same indebtedness as the Note of the consenting Holder.
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver such Note to the Trustee. At the Company's expense, the
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder and the Trustee may place an appropriate
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91
notation on any Note thereafter authenticated. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the changed terms.
Failure to make the appropriate notation, or issue a new Note, shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company. Subject to the
preceding sentence, the Trustee shall sign such amendment, supplement or waiver
if the same does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. SECURITY. (a) On the Closing Date, the Company
shall (i) enter into the Pledge Agreement and comply with the terms and
provisions thereof and (ii) purchase the Pledged Securities to be pledged to the
Trustee 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
five scheduled interest payments due on the Notes. In the event the Pledged
Securities to be purchased on the Closing Date are for any reason not purchased
by the Company, the Company shall purchase and deliver to the Trustee additional
Pledged Securities in such amount as will be sufficient upon receipt of
scheduled interest and/or principal payments of all Pledged Securities
thereafter held in the Pledge Account, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide
payment for the first five scheduled interest payments due on the Notes. The
Pledged Securities shall be pledged by the Company to the Trustee for the
benefit of the Holders and shall be held by the Trustee in the Pledge Account
pending disposition pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure
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92
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 will do or cause to be done all such acts and
things as may be necessary, 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, upon request of the Trustee, any and all actions
reasonably required to cause the Pledge Agreement to create and maintain (to the
maximum extent permitted by law), 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 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 Company shall cause TIA Section 314(b), relating to
opinions of counsel regarding the Lien under the Pledge Agreement, to be
complied with. The Trustee may, to the extent permitted by Sections 7.01 and
7.02 hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
(e) The Trustee may, in its sole discretion and without the
consent of the Holders, 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
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93
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 ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939. Prior to the effectiveness
of the Registration Statement, this Indenture shall incorporate and be governed
by the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 11.02. NOTICES. Any notice or communication hereunder shall be
sufficiently given if in writing, in English and delivered in person, mailed by
first-class mail or sent by telecopier transmission addressed as follows:
IF TO THE COMPANY:
Carrier1 International S.A.
c/o Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
IF TO THE TRUSTEE:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Market Fiduciary Services
and
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94
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Manager Capital Markets Fiduciary Services
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to it at
its address as it appears on the Security Register by first-class mail and shall
be sufficiently given to him if so mailed within the time prescribed. Any notice
or communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee and each Agent at the
same time.
Failure to mail a notice or communication to a Holder as provided
herein or any defect in any such notice or communication shall not affect its
sufficiency with respect to other Holders. Except for a notice to the Trustee,
which is deemed given only when received, and except as otherwise provided in
this Indenture, if a notice or communication is mailed in the manner provided in
this Section 11.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
<PAGE>
95
(i) an Officers' Certificate to the effect that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(ii) an Opinion of Counsel to the effect that, in the
opinion of such Counsel, all such conditions precedent have been
complied with.
Notwithstanding the foregoing, in the case of any such request or
application as to which the furnishing of any Officers' Certificate or Opinion
of Counsel is specifically required by any provision of this Indenture relating
to such particular request or application, no additional certificate or opinion
need be furnished.
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Subject
to the last paragraph of Section 11.03, each certificate or opinion with respect
to compliance with a condition or covenant provided for in this Indenture
(except for certificates provided for in Section 4.16) shall include:
(i) a statement that each person signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
PROVIDED, HOWEVER, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding
<PAGE>
96
Business Day with the same force and effect as if made on the Interest Payment
Date, Payment Date or Redemption Date, or at the Stated Maturity or date of
maturity of such Note; PROVIDED that no interest shall accrue for the period
from and after such Interest Payment Date, Payment Date, Redemption Date, Stated
Maturity or date of maturity, as the case may be.
SECTION 11.07. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.08. NO RECOURSE AGAINST OTHERS. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company contained in this
Indenture or in any of the Notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or against any past,
present or future partner, shareholder, other equityholder, officer, director,
employee or controlling person, as such, of the Company or of any successor
Person, either directly or through the Company or any successor Person, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Notes.
SECTION 11.09. SUCCESSORS. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 11.10. DUPLICATE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 11.11. SEPARABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.12. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE>
97
SECTION 11.13. METHOD OF PAYMENT. (a) Euro is the sole currency of
account and payment for all sums payable by the Company under or in connection
with the Notes, including damages, except as otherwise set forth in this Section
11.13.
(b) Investors who hold beneficial interests in Global DTC Notes,
directly or indirectly, through DTC will be paid in U.S. dollars converted from
such payments in Euro by the Paying Agent unless the registered holder, on
behalf of any such owner of beneficial interests, elects to receive payments in
Euro.
Upon receipt of notice of such election and wire transfer instructions
on or prior to the fourth New York Business Day (as defined in clause (c)) after
the record date for any payment of interest and on or prior to the sixth New
York Business Day prior to the payment of principal, the Paying Agent will make
such payments in Euro to the Euro accounts of the relevant Holders.
The Paying Agent shall convert the remainder of the aggregate amount of
such payments into U.S. dollars, based on the Paying Agent's bid quotation, at
or prior to 11:00 a.m., New York Time, on the second New York Business Day
preceding the date of such payment, for the purchase of U.S. dollars with Euro,
for settlement on the date of such payment. If such bid quotation is not
available, all such payments will be made in Euro, outside DTC to Euro accounts
maintained by Holders of the Global DTC Notes.
(c) All costs of conversion, if any, will be borne by holders of
beneficial interests in the Global DTC Notes, by deduction from such payments.
All costs of payment by wire transfer referred to in paragraph (b) above will be
borne by registered holders receiving such payments by deduction from such
payments. For purposes of the foregoing, "NEW YORK BUSINESS DAY" means a day all
banking institutions are not authorized or obligated by law or executive order
to be closed in The City of New York.
SECTION 11.14. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR
SERVICE. (a) With respect to any suit, action, or proceeding that may be brought
in connection with this Indenture or the Notes or any Guarantee, if any, the
Company irrevocably consents to the jurisdiction of any United States federal or
New York State court sitting in the Borough of Manhattan, The City of New York,
the State of New York and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding and any claim of inconvenient forum, and
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding.
(b) The Company (i) irrevocably designates and appoints CT Corporation
System, 1633 Broadway, New York, NY 10019 (together with any successor, the
"AUTHORIZED AGENT"), as its authorized agent upon which process may be served in
any suit, action or proceeding described in the first sentence of this Section
11.13 and represents and warrants that the Authorized Agent
<PAGE>
98
has accepted such designation and (ii) agrees that service of process upon the
Authorized Agent and written notice of said service to the Company (mailed or
delivered to its General Counsel at its executive office at Militarstrasse 36,
CH-8004, Zurich, Switzerland), shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. The Company
further agrees to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of the Authorized Agent in full force and effect so
long as any of the Notes shall be outstanding.
(c) To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under the
above-referenced documents, to the extent permitted by law.
SECTION 11.15. JUDGMENT CURRENCY. The Company hereby agrees to
indemnify the Trustee, its directors, its officers and each person, if any, who
controls the Trustee within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act against any loss incurred by such person as a
result of any judgment or order being made or given against the Company for any
Euro amount due under this Agreement and such judgment or order being expressed
and paid in a currency (the "JUDGMENT CURRENCY") other than Euros and as a
result of any variation as between (i) the rate of exchange at which the Euro
amount is converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in The City of New York on which
such party on the date of payment of such judgment or order is able to purchase
Euros with the amount of the Judgment Currency actually received by such party.
The foregoing indemnity shall continue in full force and effect notwithstanding
any such judgment or order. The term "spot rate of exchange" shall include any
premiums or costs of exchange payable in connection with the purchase of, or
conversion into the Euros.
SECTION 11.16. 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 THE EXCHANGE NOTES OR THE EFFECTIVENESS OF THE SHELF
REGISTRATION STATEMENT, THIS INDENTURE SHALL BE SUBJECT TO THE PROVISIONS OF THE
TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED TO BE PART OF THIS
INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
CARRIER1 INTERNATIONAL S.A.
By: /s/ Mark A. Pelson
---------------------------------
Name: Mark A. Pelson
Title: Director
By: /s/ Glenn M. Creamer
---------------------------------
Name: Glenn M. Creamer
Title: Director
THE CHASE MANHATTAN BANK, Trustee
By: /s/ William Potes
---------------------------------
Name: William Potes
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
[FACE OF NOTE]
CARRIER1 INTERNATIONAL S.A.
13 1/4% Senior Euro Note due 2009
[CUSIP] [CINS] [ISIN] [ ]
----------
No. Euro
---- ----------
CARRIER1 INTERNATIONAL S.A., a societe anonyme organized under the laws of
the Grand Duchy of Luxembourg (the "Company", which term includes any successor
under the Indenture hereinafter referred to), for value received, promises to
pay to _____________, or its registered assigns, the principal sum of
____________ (Euro ____________________) on February 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing August 15,
1999.
Regular Record Dates: February 1 and August 1.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
CARRIER1 INTERNATIONAL S.A.
By:
---------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 13 1/4% Senior Euro Notes due 2009 described in the
within-mentioned Indenture.
Date: THE CHASE MANHATTAN BANK,
as Trustee
By:
---------------------------------
Authorized Signatory
<PAGE>
A-3
[REVERSE SIDE OF NOTE]
CARRIER1 INTERNATIONAL S.A.
13 1/4% Senior Euro Note due 2009
1. PRINCIPAL AND INTEREST.
The Company will pay the principal of this Note on February 15, 2009.
The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate per annum shown
above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the February 1 or August 1 immediately
preceding the Interest Payment Date) on each Interest Payment Date.
[If an exchange offer (the "Exchange Offer") registered under the
Securities Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Notes is not declared effective by the Commission, on or before August 19, 1999
in accordance with the terms of the Registration Rights Agreement dated February
12, 1999 between the Company, Morgan Stanley & Co. Incorporated, Salomon Smith
Barney Inc., Warburg Dillon Read LLC and Bear, Stearns & Co. Inc., the annual
interest rate borne by the Notes shall be increased by 0.5% from the rate shown
above accruing from August 19, 1999, payable in cash semiannually, in arrears,
on each Interest Payment Date, commencing February 15, 2000 until the Exchange
Offer is consummated or the Shelf Registration Statement is declared effective.
The Holder of this Note is entitled to the benefits of such Registration Rights
Agreement.]*
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from February 19, 1999;
PROVIDED that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
- ----------------------
* To be omitted from Exchange Notes. Substantially similar language to be
included or omitted, as the case may be, with respect to Additional Notes,
MUTATIS MUTANDI.
<PAGE>
A-4
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
Under certain circumstances described in the Indenture, the Company also
shall pay Additional Amounts to the Holders of Notes equal to an amount that the
Company may be required to withhold or deduct for or on account of Taxes imposed
by a Taxing Authority, from any payment made under or with respect to the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each February 15 and August 15,
commencing August 15, 1999 to the persons who are Holders (as reflected in the
Security Register at the close of business on the February 1 or August 1
immediately preceding the Interest Payment Date), in each case, even if the Note
is canceled on registration of transfer or registration of exchange after such
record date; PROVIDED that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after February 15, 2009.
The Company will pay principal, premium, if any, and as provided above,
interest in Euros. However, the Company may pay principal, premium, if any, and
interest by its check payable in such money. It may mail an interest check to a
Holder's registered address (as reflected in the Security Register). If a
payment date is a date other than a Business Day at a place of payment, payment
may be made at that place on the next succeeding day that is a Business Day and
no interest shall accrue for the intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar. In addition, the
Trustee will maintain a paying agent in London and in Frankfurt in the event
that the Notes are included in the Frankfurt over-the-counter market.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of February 19,
1999 (the "Indenture"), between the Company and The Chase Manhattan Bank,
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
<PAGE>
A-5
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company except to the
extent set forth in Article Ten of the Indenture and the Pledge Agreement.
The Company may, subject to Article Four of the Indenture and applicable
law, issue Additional Notes under the Indenture.
5. OPTIONAL REDEMPTION.
The Notes are redeemable, at the Company's option, in whole or in part, at
any time or from time to time, on or after February 15, 2004 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
February 15 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2004.................. 106.625%
2005.................. 104.417
2006.................. 102.208
2007 and thereafter... 100.000
</TABLE>
At any time prior to February 15, 2002, the Company at its option may
redeem Notes in an aggregate principal amount equal to up to 35% of the
principal amount of the Notes (including the principal amount of any Additional
Notes), with funds in an amount equal to the proceeds of one or more sales of
Capital Stock (other than Disqualified Stock) of, or capital contributions to,
the Company, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 113.25%, plus accrued and
unpaid interest, if any, to the Redemption Date (subject to the rights of
Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); PROVIDED
that (i) an aggregate principal amount equal to at least 65% of the principal
amount of the initially issued Notes (plus the principal amount of any
Additional Notes) remains outstanding after each such redemption and (ii) notice
of such redemption is mailed within 60 days of each such sale or capital
contribution.
<PAGE>
A-6
In the event that (i) as a result of any change in, or amendments to, any
laws or treaties (or any regulations or rulings promulgated thereunder) or any
change in official position regarding the application of such laws, treaties,
regulations or rulings (including a holding, judgement or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective after the Closing Date, the Company has become or would become
obligated to pay, on the next date on which any amount would be payable under or
with respect to the Notes, any Additional Amounts, and (ii) the Company cannot
reasonably arrange (without other material adverse consequences to the Company)
for another obligor to make such payment so as to avoid the requirement to pay
such Additional Amounts, then the Company may redeem all, but not less than all,
the Notes at any time at 100% of the principal amount thereof, together with
accrued interest thereon, if any, to the Redemption Date.
Notes in original denominations larger than Euro1,000 may be redeemed in
part. On and after the Redemption Date, interest ceases to accrue on Notes or
portions of Notes called for redemption, unless the Company defaults in the
payment of the Redemption Price.
6. REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Payment Date").
A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register. Notes in original denominations larger than Euro1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the purchase price.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of
Euro1,000 of principal amount and multiples of Euro1,000 in excess thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before
the day of mailing of a notice of redemption of Notes selected for redemption.
<PAGE>
A-7
8. PERSONS DEEMED OWNERS.
A Holder shall be treated as the owner of a Note for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee will pay the money back to the Company at
its request. After that, Holders entitled to the money must look to the Company
for payment, unless an abandoned property law designates another Person, and all
liability of the Trustee with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company deposits with the Trustee money or European Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain provisions thereof, and (b) to the Stated Maturity,
the Company will be discharged from certain covenants set forth in the
Indenture.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Pledge Agreement or the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
materially and adversely affect the rights of any Holder.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, suffer to exist restrictions on the
ability of Restricted Subsidiaries to make certain payments to the Company,
issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the
Company, engage in transactions with Affiliates, suffer to exist or incur Liens,
enter into sale-leaseback transactions, use the proceeds from Asset Sales, or
merge, consolidate or transfer substantially all of its assets. Within 90 days
after the end of each fiscal year, the Company shall deliver to the Trustee an
Officers' Certificate stating whether or not the signers thereof know of any
Default or Event of Default under such restrictive covenants.
<PAGE>
A-8
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.
14. DEFAULTS AND REMEDIES.
Any of the following events constitutes an "Event of Default" under the
Indenture:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days; PROVIDED that a failure to make any of the first five scheduled
interest payments on the relevant series of Notes on the applicable
Interest Payment Date will constitute an Event of Default with no grace or
cure period;
(c) default in the performance or breach of the provisions of Article
Five of the Indenture or the failure to make or consummate an Offer to
Purchase when required in accordance with Section 4.11 or 4.12 of the
Indenture;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) or the
Pledge Agreement and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default;
<PAGE>
A-9
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 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 $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 30 consecutive
days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable. If a bankruptcy or insolvency default with
respect to the Company occurs and is continuing, the Notes automatically become
due and payable. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes. Subject to certain limitations,
Holders of at least a majority in principal amount of the Notes then outstanding
may direct the Trustee in its exercise of any trust or power.
<PAGE>
A-10
15. SECURITY.
The Company has entered into the Pledge Agreement for the purchase and
pledge to the Trustee for the benefit of the Holders Pledged Securities in an
amount sufficient upon receipt of scheduled interest and principal payments on
such securities to provide for payment in full of the first five scheduled
interest payments due on the Notes. The Pledged Securities will be pledged by
the Company to the Trustee for the benefit of the Holders and will be held by
the Trustee in the Pledge Account pending disbursement pursuant to the Pledge
Agreement.
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No incorporator or any past, present or future partner, shareholder, other
equityholder, officer, director, employee or controlling person, as such, of the
Company or of any successor Person shall have any liability for any obligations
of the Company under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
18. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge. Requests may be made to Carrier1 International S.A,
c/o Carrier1 International GmbH, Militarstrasse 36, CH-8004 Zurich, Switzerland;
Attention: Kees van Ophem, Vice President Purchase and General Counsel.
<PAGE>
A-11
20. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE.
In connection with the Indenture or the Notes or any Guarantee, if any, the
Company irrevocably consents to the jurisdiction of any court of the State of
New York or any United States federal court sitting in the Borough of Manhattan,
The City of New York, the State of New York and irrevocably waives, to the
fullest extent permitted by law, any objection to any suit, action, or
proceeding that may be brought which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding and any claim of
inconvenient forum, and irrevocably submits to the non-exclusive jurisdiction of
any such court in any such suit, action or proceeding. In connection with any
Guarantee, the Company shall use reasonable efforts to cause the issuer of any
Guarantee to submit to jurisdiction to substantially the same extent.
The Company (i) irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, NY 10019 (together with any successor, the "Authorized
Agent"), as its authorized agent upon which process may be served in any such
suit, action or proceeding and (ii) agrees that service of process upon the
Authorized Agent and written notice of said service to the Company (mailed or
delivered to its General Counsel at its executive office at Militarstrasse 36,
CH-8004, Zurich, Switzerland), shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, it hereby
irrevocably waives such immunity in respect of its obligations under the
Indenture or the Notes, to the extent permitted by law.
THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
A-12
[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 said 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 AND UNLEGENDED NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) 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.
<PAGE>
A-13
If none 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 2.08 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.
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
<PAGE>
A-14
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.11 or 4.12 of the Indenture, check the Box: / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or 4.12 of the Indenture, state the amount (in
principal amount): Euro ________________.
Date:
-------------------------
Your Signature:
-----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
------------------------------------------
<PAGE>
EXHIBIT B
Form of Certificate
_____________ , ____
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR EURO NOTES DUE 2009 (THE "NOTES")
------------------------------------------------
Dear Sirs:
This letter relates to Euro ________________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02(a)
of the Indenture dated as of February 19, 1999 (the "Indenture") relating to
the Notes, we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are hereby
requested to exchange the legended certificate for an unlegended certificate
representing an identical principal amount of Notes, all in the manner
provided for in 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 Signatory
20731870.1
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
____________, ____
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR EURO NOTES DUE 2009 (THE "NOTES")
------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of Euro _______ aggregate
principal amount of the Notes, in accordance with Section 2.08(a) of the
Indenture referred to below, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Indenture dated as of
February 19, 1999 (the "Indenture") relating to the Notes and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes within the time period
referred to in Rule 144(k) of the Securities Act, we will do so only (A) to the
<PAGE>
C-2
Company or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of an aggregate principal amount of Notes at
the time of transfer of less than Euro 250,000, an opinion of counsel acceptable
to the Company that such transfer is in compliance with the Securities Act, (D)
to a person outside the United States in an offshore transaction in compliance
with Regulation S under the Securities Act that, for any transfer prior to
February 19, 2000, furnishes to the Trustee and the Company, prior to such
transfer, a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes (the form of which letter
can be obtained from the Trustee), (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available) or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
<PAGE>
C-3
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.
Very truly yours,
[Name of Transferee]
By:
---------------------
Authorized Signatory
<PAGE>
EXHIBIT D-1
FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFERORS IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
_______________,____
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY")
13 1/4% SENIOR EURO NOTES DUE 2009 (THE "NOTES")
------------------------------------------------
Dear Sirs:
In connection with our proposed sale of Euro _________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes (and any Units of which they may form a part)
was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transfer is not part of a plan or scheme to evade the registration
requirements of the U.S. Securities Act of 1933.
<PAGE>
D-1-2
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 Transferor]
By:
------------------------
Authorized Signatory
<PAGE>
EXHIBIT D-2
FORM OF CERTIFICATE TO BE
DELIVERED BY TRANSFEREES IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
[Date]
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Capital Markets Fiduciary Services
The Chase Manhattan Bank London Branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
RE: CARRIER1 INTERNATIONAL S.A. (THE "COMPANY)
13 1/4% SENIOR EURO NOTES DUE 2009 (THE "NOTES")
------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of Euro ___________ aggregate
principal amount of the Notes, we certify that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture dated as of February 19, 1999 relating to the Notes (the "Indenture")
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such restrictions and
conditions and the U.S. Securities Act of 1933, as amended (the "SECURITIES
ACT").
2. We understand that the Notes have not been registered under the
Securities Act, and accordingly may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons (as defined in
Regulation S) except as set forth in the following sentence. We agree that if,
prior to February 19, 2000, we decide (for ourself
<PAGE>
D-2-2
or for any account for which we are acting) to resell or otherwise transfer the
Notes, we will do so only (a) to the Company or any subsidiary thereof, (b) to a
qualified institutional buyer in compliance with Rule 144A under the Securities
Act, (c) to an institutional accredited investor that, prior to such transfer,
furnishes to the Trustee and the Company a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Notes (the form of which letter can be obtained from the Trustee) and, if such
transfer is in respect of an aggregate principal amount of Notes of less than
Euro 250,000, an opinion of counsel acceptable to the Company that such transfer
is in compliance with the Securities Act, (d) to a person outside the United
States in an offshore transaction in compliance with Regulation S under the
Securities Act that, for any transfer prior to February 19, 2000, furnishes to
the Trustee and the Company, prior to such transfer, a signed letter containing
certain representations and agreements relating to the restrictions on transfer
of the Notes (the form of which letter can be obtained from the Trustee), (e)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available) or (f) pursuant to an effective registration
statement under the Securities Act. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect during such period,
which legend may be removed after such period upon receipt of a certificate by
the Trustee (the form of which can be obtained from the Trustee).
3. We are purchasing the Notes for our own account or an account with
respect to which we exercise sole investment discretion and that we and any such
account are each a foreign purchaser that is outside the United States (or a
foreign purchaser that is a dealer or other fiduciary), and that we and any such
account are not a U.S. person (as defined in Regulation S) and we are not
acquiring the Notes for the account or benefit of any U.S. person.
4. We represent and agree that hedging transactions involving the Notes may
not be conducted unless in compliance with the Securities Act and that, during
the distribution compliance period (defined as one year after the date of the
closing), the Notes will bear a legend to this effect, and that we will not
engage in any such hedging transactions.
5. We understand that the Company and the Trustee will refuse to register
any transfer of Notes not made in accordance with Regulation S, pursuant to
registration under the Securities Act or pursuant to an available exemption from
registration.
6. We agree that we will deliver to each person to whom we transfer any of
the Notes notice of any restrictions on transfer of such securities.
7. If we are acquiring any Notes as a fiduciary or agent for one or more
investor accounts, we represent that we have sole investment discretion with
respect to each such account
<PAGE>
D-2-3
and we have full power to make the foregoing acknowledgments, representations
and agreements on behalf of each such account.
8. The transfer restrictions applicable to this Note and the provisions of
this certificate are also applicable to any Unit of which this Note may form a
part.
The Trustee 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. We agree to notify the Trustee promptly
if any of our representations herein ceases to be accurate and complete.
Very truly yours,
[Name of Transferee]
By:
----------------------------
Authorized Signature
<PAGE>
Exhibit 4.5
- --------------------------------------------------------------------------------
NOTES REGISTRATION RIGHTS AGREEMENT
Dated February 12, 1999
between
CARRIER1 INTERNATIONAL S.A.
(a Luxembourg societe anonyme)
and
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
WARBURG DILLON READ LLC
BEAR, STEARNS & CO. INC.
- --------------------------------------------------------------------------------
<PAGE>
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into February 12, 1999, between CARRIER1 INTERNATIONAL S.A., a
societe anonyme organized under the laws of the Grand Duchy of Luxembourg (the
"Company"), and MORGAN STANLEY & CO. INCORPORATED, SALOMON SMITH BARNEY INC.,
WARBURG DILLON READ LLC, BEAR, STEARNS & CO. INC. (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated the date hereof among the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of an aggregate of 160,000 Dollar Units (the "Dollar Units"), each consisting of
one 13 1/4% Senior Dollar Note due 2009 of the Company with a principal amount
of $1,000 (each, a "Dollar Security" and collectively, the "Dollar Securities")
and one warrant (a "Dollar Warrant"), each Dollar Warrant initially entitling
the holder thereof to purchase 6.71013 shares of common stock, par value $2.00
per share, of the Company ("Common Shares"), at a per share exercise price equal
to the greater of $2.00 and the minimum par value required by Luxembourg law,
subject to adjustment, and an aggregate of 85,000 Euro Units (the "Euro Units"
and, together with the Dollar Units, the "Units"), each consisting of one
13 1/4% Senior Euro Note due 2009 of the Company with a principal amount of Euro
1,000 (each, a "Euro Security" and collectively, the "Euro Securities") and one
warrant (a "Euro Warrant"), each Euro Warrant initially entitling the holder
thereof to purchase 7.53614 Common Shares at a per share exercise price equal to
the greater of $2.00 and the minimum par value required by Luxembourg law,
subject to adjustment. The Dollar Securities and the Euro Securities are
collectively referred to as the "Securities." In order to induce the Placement
Agents to enter into the Placement Agreement, the Company has agreed to provide
to the Placement Agents and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
<PAGE>
2
"CLOSING DATE" shall mean the Closing Date as defined in the
Placement Agreement.
"COMPANY" shall have the meaning set forth in the preamble
hereto and shall also include the Company's successors.
"DOLLAR NOTES INDENTURE" shall mean the Indenture relating to
the Dollar Securities dated the Closing Date between the Company and
The Chase Manhattan Bank, as Trustee, as the same may be amended from
time to time in accordance with its terms.
"EURO NOTES INDENTURE" means the Indenture relating to the
Euro Securities dated the Closing Date between the Company and The
Chase Manhattan Bank, as Trustee, as the same may be amended from time
to time in accordance with its terms.
"EXCHANGE OFFER" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"EXCHANGE SECURITIES" shall mean securities issued by the
Company under the Dollar Notes Indenture containing terms identical to
the Dollar Securities and under the Euro Notes Indenture containing
terms identical to the Euro Securities (in each case, except that the
Exchange Securities will not contain restrictions on transfer or
include provisions relating to additional interest and will contain
terms of an administrative nature that differ from those of the
Securities) and to be offered to Holders of Securities in exchange for
Securities pursuant to the Exchange Offer.
"HOLDER" shall mean the Placement Agents, for so long as they
own any Registrable Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indentures; PROVIDED that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
<PAGE>
3
"INDENTURES" shall mean the Dollar Notes Indenture and the
Euro Notes Indenture.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
PROVIDED that (i) the principal amount of the Euro Notes Securities
shall be calculated in dollars based upon an exchange rate of
Euro .89 per U.S.$1.00 and (ii) whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or any of its
affiliates (as such term is defined in Rule 405 under the 1933 Act)
(other than the Placement Agents or subsequent Holders of Registrable
Securities if such subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Securities) shall
not be counted in determining whether such consent or approval was
given by the Holders of such required percentage or amount.
"PERSON" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
"PLACEMENT AGENTS" shall have the meaning set forth in the
preamble.
"PLACEMENT AGREEMENT" shall have the meaning set forth in the
preamble.
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Dollar Securities or
the Euro Securities, as the case may be; PROVIDED, HOWEVER, that a
Security shall cease to be Registrable Security (i) when a Registration
Statement with respect to such Security shall have been declared
effective under the 1933 Act and such Security shall have been disposed
of pursuant to such Registration Statement, (ii) when such Security has
been sold to the public pursuant to Rule 144 (or any successor
provision then in force, but not Rule 144A under the 1933 Act) or is
saleable pursuant to Rule 144(k) under the 1933 Act (or is otherwise
available for resale pursuant to Rule 144 or any successor provision
under the 1933 Act) without volume restriction, if any, or (iii) when
such Security shall have ceased to be outstanding.
<PAGE>
4
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky
qualification of any of the Exchange Securities or Registrable
Securities), (iii) all reasonable expenses of any Persons in preparing
or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees (it being
understood that no rating agency shall be engaged by any Placement
Agent or Holder without the Company's prior consent), (v) all fees and
disbursements relating to the qualification of the Indentures under
applicable securities laws, (vi) the fees and disbursements of each
Trustee and its counsel, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration Statement, the
reasonable fees and disbursements of one counsel for the Holders (which
counsel shall be selected by the Majority Holders and which counsel may
also be counsel for the Placement Agents) and (viii) the fees and
disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, but
excluding fees and expenses of counsel to the underwriters (other than
reasonable fees and disbursements of such counsel set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder. The Placement Agents shall bear any
fees and expenses of their counsel incurred in connection with the
Exchange Offer.
"REGISTRATION STATEMENT" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES" shall have the meaning set forth in the preamble
hereto.
"SHELF REGISTRATION" shall mean a registration effected
pursuant to Section 2(b) hereof.
<PAGE>
5
"SHELF REGISTRATION STATEMENT" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"TRUSTEE" shall mean the applicable trustee with respect to
the Dollar Securities or the Euro Securities.
"UNDERWRITER" shall have the meaning set forth in Section 3
hereof.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall
mean a registration in which Registrable Securities are sold to an
Underwriter for reoffering to the public.
2. REGISTRATION UNDER THE 1933 ACT.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The Company
shall commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC and use its reasonable best
efforts to have the Exchange Offer consummated not later than 60 days after such
effective date. The Company shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the date or dates of acceptance for exchange (which
shall be a period of at least 20 business days from the date such
notice is mailed) (the "Exchange Dates");
<PAGE>
6
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election,
not later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing his election
to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer; and
(ii) deliver, or cause to be delivered, to the relevant
Trustee for cancellation all Registrable Securities or portions thereof
so accepted for exchange by the Company and issue, and cause the
relevant Trustee to promptly authenticate and mail to each Holder, an
Exchange Security of the same series equal in principal amount to the
principal amount of the Registrable Securities surrendered by such
Holder.
The Company shall use its best efforts to complete the Exchange Offer as and to
the extent provided above and shall comply in all material respects with the
applicable requirements of the 1933 Act, the 1934 Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the Staff of the SEC.
The Company shall inform the Placement Agents of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Placement Agents shall have
the right, subject to applicable law, to contact such Holders and otherwise
facilitate the tender of Registrable Securities in the Exchange Offer.
Each Holder participating in the Exchange Offer shall be
required to represent to the Company at or prior to the consummation of the
Exchange Offer that (i) any Exchange
<PAGE>
7
Securities received by such Holder will be acquired in the ordinary course of
business, (ii) such Holder will have no arrangements or understanding with any
person to participate in the distribution of the Securities or the Exchange
Securities within the meaning of the 1933 Act, and (iii) such Holder is not an
"affiliate," as defined in Rule 405 of the 1933 Act, of the Company. If such
Holder is a broker-dealer, it will be required to represent that the Securities
were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such Exchange Securities. Each such Holder, whether or not it is a
broker-dealer, shall also represent that it is not acting on behalf of any
person that could not truthfully make any of the foregoing representations
contained in this paragraph.
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply (to
the extent applicable) solely with respect to Registrable Securities held by the
Placement Agents or any Participating Broker-Dealers (as defined in Section
4(a)) as provided in (and subject to) Section 2(b)(iii), and the Company shall
have no further obligation to register Securities (other than such Registrable
Securities of the Placement Agents and Participating Broker-Dealers) pursuant to
Section 2(b) of this Agreement.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated by August 19, 1999 or (iii) the Exchange Offer has been completed
and in the opinion of counsel for the Placement Agents (notice of which shall be
given to the Company within 30 days of such completion) a Registration Statement
must be filed and a Prospectus must be delivered by the Placement Agents in
connection with any offering or sale of Registrable Securities, the Company
shall use its best efforts to cause to be filed as soon as practicable after
such determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the applicable Holders of all of their Registrable Securities and to
have such Shelf Registration Statement declared effective by the SEC. In the
event the Company is required to file a Shelf Registration Statement solely as a
result of the matters referred to in clause (iii) of the preceding sentence, the
Company shall use its best efforts to file and have declared effective by the
SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Securities and a Shelf Registration Statement (which
may be a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Securities held by
the Placement Agents after completion of the Exchange Offer. The Company agrees
to use its best efforts to keep the Shelf Registration Statement continuously
effective until the expiration of the period referred to in Rule 144(k) under
the 1933 Act with respect to the Registrable Securities or such shorter period
that will
<PAGE>
8
terminate when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or are no longer restricted securities (as defined in Rule 144 under
the 1993 Act, or any successor rule thereof). The Company further agrees to
supplement or amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the 1933 Act or by any other
rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder with respect to information relating to such Holder, and
to use its best efforts to cause any such amendment to become effective and such
Shelf Registration Statement to become usable as soon as thereafter practicable.
The Company agrees to furnish to the Holders of Registrable Securities covered
by the Shelf Registration Statement copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to be effective during the period of
such interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. As provided for in the Indentures, in
the event the Exchange Offer is not consummated and the Shelf Registration
Statement is not declared effective on or prior to August 19, 1999, the annual
interest rate borne by the Securities shall be increased by 0.5% per annum on
the Securities from August 19, 1999 and be payable in cash semi-annually,
commencing February 15, 2000, until the Exchange Offer is consummated or the
Shelf Registration Statement is declared effective by the SEC.
(e) Without limiting the remedies available to the Placement
Agents and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agents or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
<PAGE>
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders (selected by the Majority Holders) and to
each Underwriter of an Underwritten Offering of Registrable Securities,
if any, without charge, as many copies of each Prospectus, including
each preliminary Prospectus, and any amendment or supplement thereto
and such other documents as such Holder or Underwriter may reasonably
request, in order to facilitate the public sale or other disposition of
the Registrable Securities; and the Company consents to the use of such
Prospectus and any amendment or supplement thereto in accordance with
applicable law by each of the selling Holders of Registrable Securities
and any such Underwriters in connection with the offering and sale of
the Registrable Securities covered by and in the manner described in
such Prospectus or any amendment or supplement thereto in accordance
with applicable law;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities under all applicable U.S. state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall reasonably request
in writing by the time the applicable Registration
<PAGE>
10
Statement is declared effective by the SEC, to cooperate with such
Holders in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
PROVIDED, HOWEVER, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) file any general consent to service of
process or (iii) subject itself to taxation in any such jurisdiction if
it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder
of Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or
counsel, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for material
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and
correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation
of any proceeding for such purpose, (v) of the happening of any event
during the period a Shelf Registration Statement is effective which
makes any statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to
make the statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading and (vi)
of any determination by the Company that a post-effective amendment to
a Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement
<PAGE>
11
and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the applicable Indenture) and
registered in such names as the selling Holders may reasonably request
at least two business days prior to the closing of any sale of such
Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its reasonable
best efforts to prepare and file with the SEC a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees to notify the Holders to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and the
Holders hereby agree to suspend use of the Prospectus until the Company
has amended or supplemented the Prospectus to correct such misstatement
or omission;
(j) a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus or any document
which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement,
provide a reasonable number of copies of such document to the Placement
Agents and their counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) and make such of the
representatives of the Company as shall be reasonably requested by the
Placement Agents or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any
amendment of or supplement to a Registration Statement or a Prospectus
or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus, of which the Placement Agents
and their counsel (and, in the case of a Shelf Registration Statement,
the Holders and their counsel) shall not have previously been advised
and furnished a copy or to which the Placement Agents or their counsel
(and, in the case of a Shelf Registration Statement, the Holders or
their counsel) shall reasonably object;
<PAGE>
12
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) use its best efforts to cause the Indentures to be
qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), in connection with the registration of the Exchange Securities
or Registrable Securities, as the case may be, cooperate with the
Trustees and the Holders to effect such changes to the Indentures as
may be required for the Indentures to be so qualified in accordance
with the terms of the TIA and execute, and use its reasonable best
efforts to cause the Trustees to execute, all documents as may be
required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indentures to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, upon execution of
customary confidentiality agreements reasonably satisfactory to the
Company and its counsel, make available for inspection by a
representative of the Holders of the Registrable Securities, any
Underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and attorneys and accountants designated by the
Holders, at reasonable times and in a reasonable manner, all financial
and other records, pertinent documents and properties of the Company,
and cause the respective officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with
a Shelf Registration Statement as shall be necessary to enable such
persons to conduct a reasonable investigation within the meaning of
Section 11 of the 1933 Act.
(n) use its reasonable best efforts to cause the Exchange
Securities or Registrable Securities, as the case may be, to be rated
by two nationally recognized statistical rating organizations (as such
term is defined in Rule 436(g)(2) under the 1933 Act) if, at the time
of filing of either Registration Statement, the Registrable Securities
are rated;
(o) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received notification of the matters to be incorporated
in such filing; and
(p) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by
<PAGE>
13
the Holders of a majority in principal amount of the Registrable
Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited
to, an Underwritten Offering and in such connection, (i) to the extent
possible, make such representations and warranties to the Holders and
any Underwriters of such Registrable Securities with respect to the
business of the Company and its subsidiaries, the Registration
Statement, Prospectus and documents incorporated by reference therein
or deemed incorporated by reference therein, if any, in each case, in
form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) use its reasonable best efforts to obtain opinions of
counsel to the Company (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Holders of a
majority in principal amount of the Registrable Securities being sold
and such Underwriters and their respective counsel) addressed to each
selling Holder and Underwriter of Registrable Securities, covering the
matters customarily covered in opinions requested in underwritten
offerings (it being understood that the matters to be covered by such
opinion may be subject to customary or other reasonable qualifications
and exceptions), (iii) use its reasonable best efforts to obtain "cold
comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business acquired by the
Company for which separate financial statements and financial data are
or are required to be included in the Registration Statement) addressed
to each selling Holder and Underwriter of Registrable Securities, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing. The Company may exclude from such registration the
Registrable Securities of any Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder
agrees hereby that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of
<PAGE>
14
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. Each Holder agrees to indemnify the Company, the Placement Agents and
the other selling Holders and each of their respective directors and officers
who sign the Registration Statement and each Person, if any, who such person
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
for any losses, claims, damages and liabilities caused by the failure of such
Holder to discontinue disposition of Registrable Securities after receipt of the
notice referred to in the preceding sentence or the failure of such Holder to
comply with applicable prospectus delivery requirements with respect to any
Prospectus (including, but not limited to, any amended or supplemental
Prospectus) provided by the Company for such use. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Registration Statement, the Company shall extend the period during which the
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions. The Company may give any such notice (i) twice during any 365
day period and any such suspensions may not exceed 30 days for each suspension
and there may not be more than two suspensions in effect during any 365 day
period and (ii) five additional times, for non-consecutive three-day periods
each, if the Company's Board of Directors determines in good faith that the
Company cannot provide adequate disclosure during such period due to
circumstances beyond its control.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering; PROVIDED that the Company's approval (which
approval shall not be unreasonably withheld) of the managing underwriters
therefor is required. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities. No
Participating
<PAGE>
15
Broker-Dealers other than the Placement Agents and persons who have obtained the
Company's prior written consent to act as a market maker shall have any rights
as Participating Broker-Dealers under this Agreement.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company agrees that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clauses (i) and (ii)
below, in order to expedite or facilitate the disposition of any Exchange
Securities by Participating Broker-Dealers consistent with the positions of the
Staff recited in Section 4(a) above; PROVIDED that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement,
as would otherwise be contemplated by Section 3(i), for a period
exceeding 90 days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3 of this
Agreement) and Participating Broker-Dealers shall not be authorized by
the Company to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section 4;
and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration,
to the extent not required by the positions of the Staff of the SEC or
the 1933 Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Placement
Agents or with the reasonable request in writing to the Company by one
or more broker-dealers who certify to the Placement Agents and the
Company in writing that they anticipate that they will be Participating
Broker-Dealers; and PROVIDED FURTHER that, in connection with such
application of the Shelf Registration procedures set forth in Section 3
to an Exchange Offer Registration, the Company shall be obligated (x)
to deal only with one entity representing the Participating
Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless
it elects not to act as such representative,
<PAGE>
16
(y) to pay the fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the Placement
Agents unless such counsel elects not to so act and (z) to cause to be
delivered only one, if any, "cold comfort" letter with respect to the
Prospectus in the form existing on the last Exchange Date and with
respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (i) above.
(c) The Placement Agents shall have no liability to any
Holder with respect to any request that it may make pursuant to Section 4(b)
above.
5. INDEMNIFICATION AND CONTRIBUTION.
<PAGE>
17
(a) The Company agrees to indemnify and hold harmless each
Placement Agent, each selling Holder of Securities covered thereby and each
Person, if any, who controls any Placement Agent or any such Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or
is under common control with, or is controlled by, any Placement Agent or any
such Holder, from and against all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
by any Placement Agent, any such Holder or any such controlling or affiliated
Person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Exchange Securities or Registrable Securities were registered under the
1933 Act, including all documents incorporated therein by reference, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agents or any Holder
furnished to the Company in writing through Morgan Stanley & Co. Incorporated or
any selling Holder expressly for use therein; PROVIDED, HOWEVER, that the
foregoing indemnity agreement with respect to any preliminary Prospectus shall
not inure to the benefit of any Holder to the extent that any such losses,
claims, damages or liabilities result from the fact that such Holder sold
securities to a person to whom there was not sent or given by or on behalf of
such Holder (if required by law so to have been delivered) a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) at or prior to the written confirmation
of the sale of the Registrable Securities to such person, and if the losses,
claims, damages or liabilities result from an untrue statement or alleged untrue
statement or an omission or alleged omission contained in such preliminary
Prospectus that was corrected in the Prospectus (as so amended or supplemented),
unless such failure is the result of noncompliance by the Company with its
obligations to deliver copies of the Prospectus to the Holders, nor shall this
indemnity agreement inure to the benefit of any Holder from whom the person
asserting any such losses, claims, damages or liabilities purchased the
Registrable Securities concerned to the extent that at the time of such purchase
such Holder had received written notice from the Company that the use of such
Prospectus, amendment, supplement or preliminary Prospectus was suspended as
provided in the penultimate paragraph of Section 3. In connection with any
Underwritten Offering permitted by Section 3, the Company will also indemnify
the Underwriters, if any, selling brokers, dealers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of the
<PAGE>
18
1933 Act and the 1934 Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection with any
Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, each Placement Agent and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, any
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agents and the
Holders, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
law firm (in addition to any local counsel) for the Placement Agents and all
Persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate law firm (in addition to any local counsel)
for the Company, its directors, its officers who sign the Registration Statement
and each Person, if any, who controls the Company within the meaning of either
such Section and (c) the fees and expenses of more than one separate law firm
(in addition to any local counsel) for all Holders and all Persons, if any, who
control any Holders within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In such case
involving any Placement Agent and Persons who control such Placement Agent, such
firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In
such case involving the Holders and such Persons who control Holders, such firm
shall be designated in writing by
<PAGE>
19
the Majority Holders. In all other cases, such firm shall be designated by the
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. Notwithstanding the immediately
preceding sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for any settlement effected
without its consent if such indemnifying party (i) reimburses such indemnified
party in accordance with such request to the extent such request is reasonable
and made in good faith and (ii) provides written notice to the indemnified party
substantiating the unpaid balance as unreasonable, in each case prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which such indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement (i) includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties'
<PAGE>
20
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Holders' respective obligations to
contribute pursuant to this Section 5(d) are several in proportion to the
respective principal amount of Registrable Securities of such Holder that were
registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, with respect to any untrue or alleged untrue
statement or omission or alleged omission referred to in Section 5(a) hereof
(other than in the first exception thereto), to the fullest extent permitted by
law, no Holder shall be required to indemnify or contribute any amount in excess
of the amount by which the total price at which Registrable Securities were sold
by such Holder exceeds the amount of any damages that such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Placement Agent, any Holder or any Person controlling any Placement Agent
or any Holder, or by or on behalf of the Company, its officers or directors or
any Person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered
into, and on or after the date of this Agreement will not enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
<PAGE>
21
(b) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent (assuming an exchange rate equal to Euro .89 per
U.S.$1.00 in the case of the Euro Securities); PROVIDED, HOWEVER, that no
amendment, modification, supplement, waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder.
(c) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indentures.
<PAGE>
22
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) PURCHASES AND SALES OF SECURITIES. The Company shall
not, and shall use its best efforts to cause its affiliates (as defined in Rule
405 under the 1933 Act) not to, purchase and then resell or otherwise transfer
any Securities prior to consummation of the Exchange Offer or a Shelf
Registration Statement being declared effective.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Placement Agents, on the other hand, and shall have the right
to enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
23
(k) SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR
SERVICE. The Company irrevocably agrees that any legal suit, action or
proceeding brought by any Placement Agent or by any person who controls any
Placement Agent arising out of or relating to this Agreement and the
transactions contemplated hereby may be instituted in any federal or state court
in the Borough of Manhattan, The City of New York, the State of New York and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding and any claim of inconvenient forum, and irrevocably submits to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding.
The Company (i) irrevocably designates and appoints CT
Corporation System, 1633 Broadway, New York, NY 10019 (together with any
successor, the "Authorized Agent") as its authorized agent upon which process
may be served in any suit, action or proceeding described in Section 11 of the
Placement Agreement and represents and warrants that the Authorized Agent has
accepted such designation and (ii) agrees that service of process upon the
Authorized Agent and written notice of said service to the Company (mailed or
delivered to Carrier1 International S.A. c/o Carrier1 International GmbH,
Militarstrasse 36, CH-8004 Zurich, Switzerland, Attention: General Counsel),
shall be deemed in every respect effective service of process upon the Company
in any such suit or proceeding. The Company further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the Authorized Agent in full force and effect so long as any of the Units, Notes
or Warrants shall be outstanding.
<PAGE>
24
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
CARRIER1 INTERNATIONAL S.A.
By: /s/ Stig Johansson
-----------------------------
Name: Stig Johansson
Title: Director
By: /s/ Eugene A. Rizzo
-----------------------------
Name: Eugene A. Rizzo
Title: Authorized Officer
Confirmed and accepted as of the date
first above written:
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
WARBURG DILLON READ LLC
BEAR, STEARNS & CO. INC.
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ Jonathan G. Morphett
--------------------------------
Name: Jonathan G. Morphett
Title: Principal
<PAGE>
Exhibit 4.6
EXECUTION COPY
U.S. DOLLAR COLLATERAL PLEDGE AND SECURITY AGREEMENT
This U.S. DOLLAR COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "PLEDGE
AGREEMENT") is made and entered into as of February 19, 1999 by CARRIER1
INTERNATIONAL S.A., a societe anonyme organized under the laws of the Grand
Duchy of Luxembourg (the "PLEDGOR"), having its registered office at L-8009
Strassen 3, Route d'Arlon, Luxembourg, in favor of THE CHASE MANHATTAN BANK
("CHASE"), a New York banking corporation, having an office at 450 West 33rd
Street, New York, New York, 10001-2097, as (i) trustee (the "TRUSTEE") for the
holders (the "HOLDERS") of the Notes (as defined herein) issued by the Pledgor
under the Indenture referred to below and (ii) in its individual capacity, as
securities intermediary (in such capacity, the "COLLATERAL SECURITIES
INTERMEDIARY"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Indenture.
W I T N E S S E T H
WHEREAS, the Pledgor and The Chase Manhattan Bank, as Trustee, have entered
into that certain indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant
to which the Pledgor is issuing on the date hereof $160,000,000 in aggregate
principal amount of 131/4% Senior Notes due 2009 (the "NOTES"); and
WHEREAS, the Trustee has opened a collateral account (the "COLLATERAL
ACCOUNT") with The Chase Manhattan Bank, at its office at 450 West 33rd Street,
New York, New York 10001-2097, ABA No. 021-000-021, Reference: "The Chase
Manhattan Bank, as Trustee, Carrier1 Dollar Securities Collateral A/C", Account
No. C28682, in the name, and under the sole control and dominion, of the Trustee
and subject to the terms of this Agreement;
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to either
(i)(A) purchase or cause the purchase of the Pledged Securities (as defined
herein) in the name of the Trustee for the benefit of Holders of the Notes in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments in respect thereof to provide for the payment of the first five
scheduled interest payments due on the Notes and (B) to deliver or cause the
delivery of the Pledged Securities into the Collateral Account for the benefit
of Holders of the Notes or (ii) deposit (or cause to be deposited) sufficient
cash into the Collateral Account to allow for the purchase of such Pledged
Securities and deposit thereof in the Collateral Account; and
<PAGE>
2
WHEREAS, to secure the obligations of the Pledgor under the Indenture and
the Notes to pay in full each of the first five scheduled interest payments on
the Notes and to secure repayment of the principal, premium (if any) and
interest on the Notes in the event that the Notes become due and payable prior
to such time as the first five scheduled interest payments thereon shall have
been paid in full (collectively, the "Obligations"), the Pledgor has agreed (i)
to pledge to the Trustee for its benefit and the ratable benefit of the Holders
of the Notes, a security interest in all cash, if any, held in the Collateral
Account, the Pledged Securities and related collateral and (ii) to execute and
deliver this Pledge Agreement in order to secure the payment and performance by
the Pledgor of all the Obligations; and
WHEREAS, it is a condition precedent to the initial purchase of the Notes
by the initial Holders thereof that the Pledgor shall have granted the
assignment and security interest and made the pledge and assignment contemplated
by this Pledge Agreement; and
WHEREAS, unless otherwise defined herein or in the Indenture, terms used in
Articles 8 or 9 of the Uniform Commercial Code ("UCC") as in effect in the State
of New York are used herein as therein defined.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and in order to induce the Holders of the Notes to purchase the Notes, the
Pledgor hereby agrees with the Trustee, for the benefit of the Trustee and for
the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. PLEDGE AND GRANT OF SECURITY INTEREST. The Pledgor hereby
assigns and pledges to the Trustee for its benefit and for the ratable benefit
of the Holders of the Notes, and hereby grants to the Trustee for its benefit
and for the ratable benefit of the Holders of the Notes, a continuing first
priority security interest in and to all of the Pledgor's right, title and
interest in, to and under the following (whether consisting of investment
securities, book-entry securities or other securities, security entitlements,
financial assets or other investment property, accounts, general intangibles,
instruments or documents, securities accounts, deposit accounts or other bank,
trust or cash collateral accounts, or other property, assets or rights), whether
now owned or hereafter acquired, wherever located and whether now or hereafter
existing (hereinafter collectively referred to as the "COLLATERAL"):
(a) the Collateral Account, all financial assets from time to time
credited to the Collateral Account (including, without limitation, any
Pledged Securities from time to time credited to the Collateral Account),
and all dividends, interest, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such financial assets;
<PAGE>
3
(b) any and all applicable security entitlements to any of the
financial assets credited from time to time to the Collateral Account
(including, without limitation, to any Pledged Securities from time to time
credited to the Collateral Account);
(c) any and all related securities accounts in which security
entitlements to any of the financial assets credited from time to time to
the Collateral Account (including, without limitation, to any Pledged
Securities from time to time credited to the Collateral Account);
(d) all notes, certificates of deposit, deposit accounts, checks and
other instruments 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;
(e) all interest, dividends, cash, instruments and other property 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
(f) all proceeds (including, without limitation, cash proceeds) of any
and all of the foregoing Collateral (including, without limitation,
proceeds that constitute property of types described in clauses (a) through
(e) of this Section 1).
SECTION 2. SECURITY FOR OBLIGATION. This Pledge Agreement and the grant of
a security interest in the Collateral secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Obligations, whether for principal, interest, fees or otherwise, now
or hereafter existing, under this Pledge Agreement, the Notes or the Indenture
(all such Obligations being the "SECURED OBLIGATIONS"). Without limiting the
generality of the foregoing, this Pledge Agreement and the grant of a security
interest in the Collateral hereunder secure the payment of all amounts that
constitute part of the Secured Obligations and would be owed by the Pledgor to
the Trustee or the Holders under the Notes or the Indenture but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Pledgor.
SECTION 3. MAINTAINING THE COLLATERAL ACCOUNT. Prior to or concurrently
with the execution and delivery hereof and for so long as any Secured Obligation
shall remain outstanding,
(a) the Trustee shall establish and maintain (and the Collateral
Securities Intermediary shall maintain and administer in accordance with
this Pledge Agreement) the Collateral Account with the Collateral
Securities Intermediary at its office at 450 West 33rd Street, New York,
New York 10001-2097 in accordance with the terms of
<PAGE>
4
this Pledge Agreement. The Collateral Account shall at all times be
segregated from any other custodial or collateral account maintained by the
Trustee.
(b) the Collateral Securities Intermediary and the Trustee shall cause
the Collateral Account to be, and the Collateral Account shall be, separate
from all other accounts held by or under the control and dominion of the
Trustee, the Collateral Securities Intermediary or Chase. It shall be a
term and condition of the Collateral Account, notwithstanding any term or
condition to the contrary in any other agreement relating to the Collateral
Account, and except as otherwise provided by the provisions of Section 5
and Section 17.9 of this Pledge Agreement, that no amount shall be paid or
released to or for the account of, or withdrawn by or for the account of,
the Pledgor or any other Person from the Collateral Account.
(c) the Collateral Account shall be subject to such applicable laws,
and such applicable regulations of any appropriate banking or governmental
authority, as may now or hereafter be in effect, including, without
limitation, any applicable regulations of the Board of Governors of the
Federal Reserve System.
(d) subject to the provisions of this Agreement, the Collateral
Account shall be under the sole dominion and control of the Trustee. The
Trustee shall have the sole right to make withdrawals from the Collateral
Account and to exercise all rights (including the delivery of entitlement
orders) with respect to the Collateral from time to time therein. All
Collateral delivered to or held by or on behalf of, and not released by,
the Trustee pursuant hereto shall be held in the Collateral Account in
accordance with the provisions hereof.
(e) if any earnings of the Collateral held in the Collateral Account
are subject to non-U.S. withholding taxes, the Trustee shall cooperate in
good faith with the Pledgor to reduce or eliminate such withholding taxes,
including, without limitation, through changing the location of the
Collateral Account or through establishing an additional Collateral Account
at a different location to hold the affected Collateral, PROVIDED that
after giving effect to any such change of location or establishment of an
additional Collateral Account, the Trustee's security interest in the
affected Collateral shall continue to constitute a valid and perfected
first priority security interest in such Collateral.
SECTION 4. DELIVERY AND CONTROL OF COLLATERAL; COLLATERAL ACCOUNTS;
INTEREST. (a) All cash, certificates or instruments representing or evidencing
any of the Collateral shall be delivered to and held by or on behalf of the
Trustee pursuant to this Pledge Agreement and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Trustee.
<PAGE>
5
(b) With respect to any of the Collateral that constitutes an
uncertificated security, the Pledgor shall cause the issuer thereof either (i)
to register the Trustee as the registered owner of such security or (ii) to
agree in writing with the Pledgor and the Trustee that such issuer will comply
with instructions with respect to such security originated by the Trustee
without further consent of the Pledgor, such agreement to be in form and
substance reasonably satisfactory to the Trustee.
(c) With respect to any of the Collateral that constitutes a security
entitlement, the Pledgor shall cause the securities intermediary with respect to
such security entitlement to identify in its records the Trustee as the
entitlement holder of such security entitlement against such securities
intermediary.
(d) With respect to any Collateral that constitutes a securities account,
the Pledgor will comply with subsection (c) of this Section 4 with respect to
all security entitlements carried in such securities account.
(e) Upon transfer of the Pledged Securities to the Trustee (or the
Trustee's acquisition of a security entitlement thereto), as confirmed to the
Trustee by FRBNY, Chase or another securities intermediary, the Trustee shall
make appropriate book entries indicating that the Pledged Securities and/or such
security entitlements have been credited to and are held in the Collateral
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 Collateral Account subject (except as expressly provided in
Sections 5(a), (b), (c), (d), (e) and (f) hereof) to the exclusive dominion and
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.
(f) All Collateral shall be retained in the Collateral Account pending
disbursement pursuant to the terms of this Pledge Agreement.
SECTION 5. DISBURSEMENTS. (a) Three business days prior to the due date of
any of the first five scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions given by the Pledgor to the Trustee (an "ISSUER
ORDER"), direct the Trustee to release from the Collateral Account and pay to
the Holders of the Notes proceeds sufficient to provide for payment in full of
such interest then due on the Notes. Upon receipt of an Issuer Order, the
Trustee will release funds in an amount sufficient to provide for the payment in
full of such interest then due on the Notes in accordance with such Issuer Order
and the payment provisions of the Indenture to the Holders of the Notes from
(and to the extent of) proceeds of the Pledged Securities in the Collateral
Account. Nothing in this Section 5 shall affect the Trustee's
<PAGE>
6
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 Account ("PLEDGOR FUNDS"), the Pledgor may, after payment in full
of such interest payment, direct the Trustee pursuant to an 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 Account in an amount less
than or equal to the amount of Pledgor Funds applied to such interest payment.
Upon receipt by the Trustee of (i) such Issuer Order and (ii) payment in full of
such interest payment, the Trustee shall pay over to the Pledgor or the
Pledgor's Designee, as the case may be, proceeds from the Collateral Account in
accordance with such Issuer Order as soon as practicable.
(c) If at any time the principal of and interest on the Pledged Securities
exceeds 100% of the amount sufficient, in the written opinion of an
internationally recognized firm of independent accountants selected by the
Pledgor and delivered to the Trustee, to provide for payment in full of the
remaining first five scheduled interest payments due on the Notes, the Pledgor
may direct the Trustee to release any such excess amount to the Pledgor or to
the Pledgor's Designee. Upon receipt of an Issuer Order (which shall include a
certificate from such internationally recognized firm of independent accountants
stating the amount by which the Pledged Securities exceeds the amount required
to be held in the Collateral Account) the Trustee shall pay over to the Pledgor
or the Pledgor's Designee, as the case may be, any such excess amount.
(d) Upon payment in full of the first five scheduled interest payments on
the Notes, 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 shall promptly be paid over and transferred to the Pledgor or the
Pledgor's Designee, as the case may be. Furthermore, upon the release of any
Collateral from the Collateral Account in accordance with the terms of this
Pledge Agreement, whether upon release of Collateral to Holders as payment of
interest or otherwise, the security interest evidenced by this Pledge Agreement
in such released Collateral will automatically terminate and be of no further
force and effect.
(e) At least three Business Days prior to the due date of each of the first
five scheduled interest payments on the Notes, the Pledgor shall give the
Trustee notice (by Issuer Order) as to whether such interest payment will be
made pursuant to Section 5(a) or 5(b) above and the respective amounts of
interest that will be paid from the Collateral Account and from Pledgor Funds.
Any Pledgor Funds to be used to make any interest payment shall be delivered to
the Trustee, in immediately available funds, prior to 10:00 a.m. (New York City
time) on such interest payment date. If no such notice is given or such Pledgor
Funds have not been so
<PAGE>
7
delivered, the Trustee will act pursuant to Section 5(a) above as if it had
received an Issuer Order pursuant thereto for the payment in full of the
interest then due from the Collateral Account.
(f) If on any interest payment date there are insufficient funds in the
Collateral Account to make any scheduled payment of interest (after taking into
account any Pledgor Funds delivered to the Trustee as provided in Section 5(b)
above), the Trustee shall liquidate Collateral in the Collateral Account to the
extent necessary to pay, in full, such scheduled payment of interest.
(g) Nothing contained in this Pledge Agreement shall (i) afford the Pledgor
any right to issue entitlement orders with respect to any security entitlement
to the Pledged Securities 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 Pledged Securities, 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 (except
as expressly provided in Sections 5(a), (b), (c), (d), (e) and (f) hereof) of
the Trustee in its capacity as such (and not as a securities intermediary). The
Pledgor acknowledges, confirms and agrees that the Trustee holds a security
interest to the Pledged Securities solely as Trustee for the Holders of the
Notes and not as a securities intermediary.
SECTION 6. CASH DEPOSIT; INVESTMENTS. (a) On the date hereof, the Pledgor
shall either (i) deliver or cause the delivery of the United States Treasury
securities identified by CUSIP No. in Exhibit A to this Pledge Agreement (the
"PLEDGED SECURITIES") into the Collateral Account or (ii) deposit (or cause to
be deposited) cash proceeds sufficient to purchase such Pledged Securities on
the third business day occurring immediately hereafter into the Collateral
Account.
(b) In the event that the Pledgor shall have deposited (or cause to be
deposited) cash proceeds pursuant to clause (a)(ii) above, the Trustee shall,
within three business days of the date hereof, use such cash proceeds to invest
in the Pledged Securities, at which time such Pledged Securities shall be
promptly credited to the Collateral Account. Until such time as any cash
proceeds are invested in the Pledged Securities as provided above, such cash
proceeds shall be deposited and held in a deposit account with Chase in the name
of the Trustee and under the sole control and dominion of the Trustee, such
deposit account to be deemed to constitute part of the Collateral Account.
SECTION 7 SECURITIES INTERMEDIARY. (a) Chase, as Collateral Securities
Intermediary, hereby represents and warrants to, and agrees with the Pledgor and
the Trustee as follows:
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8
(a) It is a securities intermediary as of the date hereof and for so
long as this Pledge Agreement remains in effect shall remain in effect and
Chase is acting as the Collateral Securities Intermediary hereunder, it
shall remain a securities intermediary and shall act as such with respect
to the Pledgor, the Trustee, the Collateral Account and all other
Collateral.
(b) The Collateral Account is and will be maintained as a securities
account.
(c) It is the securities intermediary with respect to any assets,
property or other items credited to the Collateral Account from time to
time.
(d) All financial assets in registered form or payable to or to the
order of and credited to the Pledge Account shall be registered in the name
of, payable to or to the order of, or endorsed to, the Collateral
Securities Intermediary and in no case during the term of this Pledge
Agreement will any financial asset credited to the Collateral Account be
registered in the name of, payable to or to the order of, or endorsed to,
the Pledgor, except to the extent the foregoing have been subsequently
endorsed by the Pledgor to the Collateral Securities Intermediary or in
blank.
(e) It shall, upon written direction from the Trustee and without
further consent from the Pledgor, (i) comply with all instructions,
entitlement orders and directions of any kind originated by the Trustee
concerning the Collateral, to liquidate or otherwise dispose of the
Collateral as and to the extent directed by the Trustee and pay over to the
Trustee all proceeds and other value therefrom or otherwise distributed
with respect thereto without any set-off or deduction, and (ii) except as
otherwise directed by the Trustee, not to comply with the instructions,
entitlement orders or directions of the Pledgor or any other person.
(f) Each item of property (whether cash, a security, investment
property, instrument or obligation, share, participation, interest or other
property whatsoever) credited to the Collateral Account shall be treated as
a financial asset.
(g) Except for the claims and interests of the Trustee and the Pledgor
in the Collateral, it does not know of any claim to or security interest or
other interest in the Collateral.
(h) It hereby waives its rights to set off any obligations of the
Pledgor to it against any or all assets held by the Trustee as Collateral,
and hereby agrees that any and all liens, encumbrances, claims or security
interests which it may have against the Collateral, either now or in the
future are and shall be subordinate and junior to the prior payment in full
of all obligations of the Pledgor now or hereafter existing under the
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9
Indenture, Notes and all other documents related thereto whether for
principal, interest (including, without limitation, interest as provided
in the Notes, whether or not such interest accrues after the filing of such
petition for purposes of the Bankruptcy Code or is an allowed claim in such
proceeding), indemnities, fees, premiums, expenses or otherwise.
(i) It shall not agree with any third party to comply with any
instructions, entitlement orders or directions of any kind concerning the
Collateral originated by such third party without the prior written consent
of the Trustee.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents
and warrants 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 Articles of Incorporation
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.
(b) No consent of any other person and no approval, authorization,
order of, action by or qualification with, any governmental authority,
regulatory body, agency or other third party is required (i) for the
execution, delivery or performance by the Pledgor of its obligations under
this Pledge Agreement or (ii) for the grant by the Pledgor of the security
interests created by this Pledge Agreement or for the pledge by the Pledgor
of the Collateral pursuant to this Pledge Agreement, except, in each case,
for such consents, approvals, authorizations, orders, actions and
qualifications which the failure to obtain, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the properties, assets, financial condition or results of
operations of the Pledgor. No consent of any other person and no approval,
authorization, order of, action by or qualification with, any governmental
authority, regulatory body, agency or other third party is required 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, 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.
(c) 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 created by this Pledge Agreement). The Pledgor has not
at time transferred any of the Collateral to third
<PAGE>
10
parties nor encumbered such Collateral with any third party rights. No
financing statement or instrument similar in effect covering all or any
part of the Pledgor's interest in the Pledged Securities is on file in any
public or recording office, other than the financing statements filed
pursuant to this Pledge Agreement. The Pledgor has no trade names.
(d) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and 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 creditors' rights or remedies generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability, (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 14(a) and (b), Section 17.11 and
Section 17.15 of this Pledge Agreement may be limited by applicable law.
(e) Upon the transfer to the Trustee of any cash proceeds or the
Pledged Securities (and the acquisition by the Trustee of a security
entitlement thereto), in accordance with Sections 3, 4 and 6 above, the
pledge and grant of a security interest in the Collateral pursuant to this
Pledge Agreement for the benefit of the Trustee and the Holders of the
Notes will constitute a valid and perfected first priority security
interest in such Collateral, securing the payment of the Secured
Obligations enforceable as such against all creditors of the Pledgor (and
any persons purporting to purchase any of the Collateral from the Pledgor).
(f) 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 such subsidiary 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.
(g) 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.
(h) No Event of Default exists.
<PAGE>
11
SECTION 9. FURTHER ASSURANCES. (a) The Pledgor agrees that from time to
time, at the expense of the Pledgor, the Pledgor will, promptly including upon
reasonable request by the Trustee, execute and deliver or cause to be executed
and delivered, or use its reasonable commercial 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 may be necessary or, in the reasonable opinion
of the Trustee, 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.
(b) The Pledgor 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); PROVIDED, HOWEVER, that the Pledgor shall not be relieved of any of its
obligations under Section 9(a) hereof. A photocopy or other reproduction of this
Pledge Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(c) The Pledgor will furnish to the Trustee from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Trustee may reasonably request,
all in reasonable detail.
(d) The Pledgor will promptly pay all costs reasonably incurred in
connection with any of the foregoing within 30 days of receipt of an invoice
therefor. The Pledgor also agrees, whether or not requested by the Trustee, to
take all actions that are necessary to perfect or continue the perfection of, or
to protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, 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 10. 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 earlier of payment in full in cash of (x) each of the first
five scheduled interest payments due on the Notes under the terms of the
Indenture and (y) all obligations due and owing under the Indenture and the
Notes in the event such obligations become due and payable prior to the payment
in full of the first five scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Collateral or its beneficial interest therein, and (ii) it will not create
or permit to exist any Lien or other adverse interest in or
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12
with respect to its beneficial interest in any of the Collateral (except
for the security interests granted under this Pledge Agreement); 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 its
beneficial interest in 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 such beneficial interest.
SECTION 11. POWER OF ATTORNEY. In addition to all of the powers granted to
the Trustee pursuant to the Indenture, the Pledgor hereby appoints and
constitutes the Trustee as the Pledgor's attorney-in-fact (with full power of
substitution), with full authority in the place and stead of the Pledgor and in
the name of the Pledgor or otherwise, from time to time in the Trustee's
reasonable discretion to take any action and to execute any instrument that the
Trustee may deem necessary or advisable to accomplish the purposes of this
Pledge Agreement, including, without limitation:
(a) to ask for, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral,
(b) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above,
(c) to file any claims or take any action or institute any proceedings
that the Trustee may reasonably deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Trustee with respect to any of the Collateral, and
(d) to pay or discharge 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;
PROVIDED, HOWEVER, that the Trustee shall have no obligation to perform any of
the foregoing actions. The Trustee's authority under this Section 11 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
<PAGE>
13
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 reasonably deemed necessary or
appropriate by the Trustee 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 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers
conferred on the Trustee hereunder are solely 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 its own
account, 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 or any loss on any investment.
SECTION 13. INDEMNITY. The Pledgor shall indemnify, hold harmless and
defend the Trustee, the Collateral Securities Intermediary and each of their
respective directors, officers, agents and employees, 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 their execution of or performance 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. This indemnification shall
survive the termination of this Pledge Agreement.
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall
have occurred and be continuing:
(a) The Trustee and the Holders of the Notes may exercise, 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 at that
time and also may (i) require the Pledgor to, and the Pledgor hereby agrees
that it will at its expense and upon request of the Trustee
<PAGE>
14
forthwith, assemble all or part of the Collateral as directed by the
Trustee and make it available to the Trustee at a place to be designated by
the Trustee that is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part thereof
in one or more parcels at any broker's board or at public or private sale,
in one or more sales or lots, at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as
the Trustee may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days'
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Trustee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. 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. 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. 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) All cash proceeds received by the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, following the payment of the fees and expenses of the
Trustee, be held by the Trustee as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the
Trustee pursuant to Section 15) in whole or in part by the Trustee for the
ratable benefit of the Holders of the Notes against, all or any part of the
Secured Obligations in such order a majority of the Holders shall elect.
Any surplus of such cash or cash proceeds held by the Trustee and remaining
after payment in full of all the Secured Obligations shall be paid over to
the Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
(c) The Trustee may, without notice to the Pledgor except as required
by law and at any time or from time to time, charge, set-off and otherwise
apply all or any part of the Secured Obligations against the Collateral
Account or any part thereof.
<PAGE>
15
(d) The Pledgor further agrees to use its 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 14
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 14 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 14
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 and is continuing.
SECTION 15. EXPENSES. The Pledgor will upon demand pay to the Trustee and
the Collateral Securities Intermediary 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 or the
Collateral Securities Intermediary, as the case may be, that the Trustee or the
Collateral Securities Intermediary, as the case may be, may incur in connection
with (a) the review, negotiation and administration of this Pledge Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Trustee and the Holders of the Notes hereunder or (d) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 16. 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 Notes
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any taking, exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Secured Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Secured Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Secured Obligations or
any other assets of the Pledgor;
<PAGE>
16
(e) any change, restructuring or termination of the corporate
structure or existence of the Pledgor; or
(f) 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 Secured Obligations or of this Pledge
Agreement.
SECTION 17. MISCELLANEOUS PROVISIONS.
Section 17.1. NOTICES. Any notice or communication given hereunder shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:
IF TO THE PLEDGOR:
Carrier1 International S.A.
c/o Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Fax: 011-41-1-297-2601
IF TO THE TRUSTEE OR THE COLLATERAL SECURITIES INTERMEDIARY:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Fax: (212) 946-8177 or 8178
Attention: William Potes, Corporate Trust Department
All such notices and other communications shall, when mailed, delivered or
telecopied, respectively, be effective when deposited in the mails, delivered or
telecopied, respectively, addressed as aforesaid.
Section 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.
Section 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
<PAGE>
17
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.
Section 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.
Section 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.
Section 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.
The rights of the Pledgor in the Collateral and the rights and obligations of
the Pledgor hereunder may be assigned (an "ASSIGNMENT") to any direct or
indirect Wholly Owned Subsidiary of the Pledgor (an "ASSIGNEE"), provided that
such Assignee furnishes the Trustee with an Opinion of Counsel to the effect
that such Assignment is valid, binding and enforceable against such Assignee and
that after such Assignment the Trustee shall have a perfected security interest
in the Collateral, securing the payment of the Secured Obligations, and
addressing such other related matters as the Trustee may reasonably request. The
Trustee shall cooperate in good faith with the Pledgor to effect any proposed
Assignment. Upon the effectiveness of any such Assignment, the Assignee shall
become the Pledgor hereunder for all purposes of this Agreement, and the prior
Pledgor shall be released from its obligations hereunder (other than its
obligations under Sections 13 and 15).
Section 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 then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. 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 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
<PAGE>
18
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
Section 17.8. INTERPRETATION OF AGREEMENT. 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.
Section 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 this Pledge Agreement, remain in full
force and effect until the payment in full in cash of the Secured 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, the Collateral Securities Intermediary and their respective successors,
transferees and assigns.
(b) This Pledge Agreement (other than Pledgor's obligations under Sections
13 and 15) shall terminate upon the earlier of (i) the payment in full in cash
of the Secured Obligations and (ii) the payment in full in cash of the first
five scheduled interest payments on all of the Notes. At such time, 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 and take all actions that are necessary to release the security
interest created by this Pledge Agreement in and to the Collateral, including
the execution and delivery of all termination statements necessary to terminate
any financing or continuation statements filed with respect to the Collateral.
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.
Section 17.10. SURVIVAL OF REPRESENTATIONS AND COVENANTS. 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.
Section 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.
<PAGE>
19
Section 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 terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
(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. All rights of the Trustee under
the Indenture, including its right to reimbursement and indemnification are
incorporated herein by reference in their entirety.
Section 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.
Section 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 6.07 of the Indenture;
PROVIDED that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
Section 17.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
20
(b) THE PLEDGOR HEREBY APPOINTS CT CORPORATION SYSTEM WITH AN OFFICE ON THE
DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS
AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO
THIS PLEDGE AGREEMENT AND FOR ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE
SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW
YORK AND AGREES TO SUBMIT TO THE JURISDICTION OF ANY SUCH COURT.
(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 (AND TO THE EXTENT THE TRUSTEE HAS RECEIVED
INDEMNITY DEEMED SATISFACTORY TO IT AND HAS AGREED TO DO SO), 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. THE
PLEDGOR WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
IN THE BOROUGH OF MANHATTAN ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NONE OF ANY HOLDER OF NOTES, (EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE TRUSTEE IN ITS
CAPACITY AS TRUSTEE OR CHASE IN ITS CAPACITY AS COLLATERAL SECURITIES
INTERMEDIARY 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
<PAGE>
21
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A
COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY
BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT
OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR
PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT
BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE
NOTES ON THE OTHER HAND.
[The remainder of this page left intentionally blank.]
<PAGE>
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:
CARRIER1 INTERNATIONAL S.A.
By: /s/ Carlos Colina
----------------------------------------
Name: Carlos Colina
Title: Authorized Officer
Trustee:
THE CHASE MANHATTAN BANK
By: /s/ William Potes
----------------------------------------
Name: William Potes
Title: Assistant Treasurer
Collateral Securities Intermediary:
THE CHASE MANHATTAN BANK
By: /s/ William Potes
----------------------------------------
Name: William Potes
Title: Assistant Treasurer
<PAGE>
EXHIBIT A
U.S. SECURITIES
<TABLE>
<CAPTION>
SECURITY CUSIP NO. COUPON (%) MATURITY AMOUNT
-------- -------- ---------- --------- -------
<S> <C> <C> <C> <C>
United States Treasury 912820AT4 0.0 08/15/99 10,025,000
United States Treasury 912820AV9 0.0 02/15/00 10,261,000
United States Treasury 912820AX5 0.0 08/15/00 10,261,000
United States Treasury 912820AZ0 0.0 02/15/01 10,261,000
United States Treasury 912827Y71 6.625 07/31/01 10,261,000
TOTAL 51,069,000
</TABLE>
<PAGE>
Exhibit 4.7
EXECUTION COPY
EURO COLLATERAL PLEDGE AND SECURITY AGREEMENT
This EURO COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "PLEDGE
AGREEMENT") is made and entered into as of February 19, 1999 by CARRIER1
INTERNATIONAL S.A., a societe anonyme organized under the laws of the Grand
Duchy of Luxembourg (the "PLEDGOR"), having its registered office at L-8009
Strassen 3, Route d'Arlon, Luxembourg, in favor of THE CHASE MANHATTAN BANK
("CHASE"), a New York banking corporation, having an office at 450 West 33rd
Street, New York, New York, 10001-2097, 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 and CHASE MANHATTAN BANK AG, having an
office at Gruneburgweg 2, 60322 Frankfurt am Main, Germany, in its individual
capacity, as securities intermediary (the "COLLATERAL SECURITIES INTERMEDIARY").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in the Indenture.
W I T N E S S E T H
WHEREAS, the Pledgor and The Chase Manhattan Bank, as Trustee, have entered
into that certain indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time the "INDENTURE"), pursuant
to which the Pledgor is issuing on the date hereof Euro 85,000,000 in aggregate
principal amount of 13 1/4% Senior Notes due 2009 (the "NOTES"); and
WHEREAS, the Trustee has opened a collateral account (the "COLLATERAL
ACCOUNT") with Chase Manhattan Bank AG at its office at Gruneburgweg 2, 60322
Frankfurt am Main, Germany, Reference: "The Chase Manhattan Bank, as Trustee,
Carrier1 Euro Securities Collateral A/C", Account No. 616-057-006-01, in the
name, and under the sole control and dominion, of the Trustee and subject to the
terms of this Agreement;
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to either
(i)(A) purchase or cause the purchase of the Pledged Securities (as defined
herein) in the name of the Trustee for the benefit of Holders of the Notes in an
amount that will be sufficient upon receipt of scheduled interest and principal
payments in respect thereof to provide for the payment of the first five
scheduled interest payments due on the Notes and (B) to deliver or cause the
delivery of the Pledged Securities into the Collateral Account for the benefit
of Holders of the Notes or (ii) deposit (or cause to be deposited) sufficient
cash into the Collateral Account to allow for the purchase of such Pledged
Securities and deposit thereof in the Collateral Account; and
<PAGE>
2
WHEREAS, to secure the obligations of the Pledgor under the Indenture and
the Notes to pay in full each of the first five scheduled interest payments on
the Notes and to secure repayment of the principal, premium (if any) and
interest on the Notes in the event that the Notes become due and payable prior
to such time as the first five scheduled interest payments thereon shall have
been paid in full (collectively, the "OBLIGATIONS"), the Pledgor has agreed (i)
to pledge to the Trustee for its benefit and the ratable benefit of the Holders
of the Notes, a security interest in all cash, if any, held in the Collateral
Account, the Pledged Securities and related collateral and (ii) to execute and
deliver this Pledge Agreement in order to secure the payment and performance by
the Pledgor of all the Obligations; and
WHEREAS, it is a condition precedent to the initial purchase of the Notes
by the initial Holders thereof that the Pledgor shall have granted the
assignment and security interest and made the pledge and assignment contemplated
by this Pledge Agreement; and
WHEREAS, unless otherwise defined herein or in the Indenture, terms used in
Articles 8 or 9 of the Uniform Commercial Code ("UCC") as in effect in the State
of New York are used herein as therein defined.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and in order to induce the Holders of the Notes to purchase the Notes, the
Pledgor hereby agrees with the Trustee, for the benefit of the Trustee and for
the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. PLEDGE AND GRANT OF SECURITY INTEREST. The Pledgor hereby
assigns and pledges to the Trustee for its benefit and for the ratable benefit
of the Holders of the Notes, and hereby grants to the Trustee for its benefit
and for the ratable benefit of the Holders of the Notes, a continuing first
priority security interest in and to all of the Pledgor's right, title and
interest in, to and under the following (whether consisting of investment
securities, book-entry securities or other securities, security entitlements,
financial assets or other investment property, accounts, general intangibles,
instruments or documents, securities accounts, deposit accounts or other bank,
trust or cash collateral accounts, or other property, assets or rights), whether
now owned or hereafter acquired, wherever located and whether now or hereafter
existing (hereinafter collectively referred to as the "COLLATERAL"):
(a) the Collateral Account, all financial assets from time to time
credited to the Collateral Account (including, without limitation, any
Pledged Securities from time to time credited to the Collateral Account),
and all dividends, interest, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such financial assets;
<PAGE>
3
(b) any and all applicable security entitlements to any of the
financial assets credited from time to time to the Collateral Account
(including, without limitation, to any Pledged Securities from time to time
credited to the Collateral Account);
(c) any and all related securities accounts in which security
entitlements to any of the financial assets credited from time to time to
the Collateral Account (including, without limitation, to any Pledged
Securities from time to time credited to the Collateral Account);
(d) all notes, certificates of deposit, deposit accounts, checks and
other instruments 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;
(e) all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the then existing Collateral;
(f) any and all claims against the Collateral Securities Intermediary
(ABTRETUNG DER HERAUSGABEANSPRUCHE) for the delivery of the Pledged
Securities in accordance with Sections 870, 1293 and 1205 Abs.2 of the
German Civil Code (BURGERLICHES GESETZBUCH - "BGB" -) or any and all claims
(based on contract or otherwise) against Cedel S.A. or any other clearing
house in respect of the Pledged Securities (collectively, the "ASSIGNED
EURO RIGHTS"); and
(g) all proceeds (including, without limitation, cash proceeds) of any
and all of the foregoing Collateral (including, without limitation,
proceeds that constitute property of types described in clauses (a) through
(f) of this Section 1).
SECTION 2. SECURITY FOR OBLIGATION. This Pledge Agreement and the grant of
a security interest in the Collateral secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all the Obligations, whether for principal, interest, fees or otherwise, now
or hereafter existing, under this Pledge Agreement, the Notes or the Indenture
(all such Obligations being the "SECURED OBLIGATIONS"). Without limiting the
generality of the foregoing, this Pledge Agreement and the grant of a security
interest in the Collateral hereunder secure the payment of all amounts that
constitute part of the Secured Obligations and would be owed by the Pledgor to
the Trustee or the Holders under the Notes or the Indenture but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Pledgor.
<PAGE>
4
SECTION 3. MAINTAINING THE COLLATERAL ACCOUNT. Prior to or concurrently
with the execution and delivery hereof and for so long as any Secured Obligation
shall remain outstanding,
(a) the Trustee shall establish and maintain (and the Collateral
Securities Intermediary shall maintain and administer in accordance with
this Pledge Agreement) the Collateral Account with the Collateral
Securities Intermediary at its office at Gruneburgweg 2, 60322 Frankfurt am
Main, Germany, in accordance with the terms of this Pledge Agreement. The
Collateral Account shall at all times be segregated from any other
custodial or collateral account maintained by the Trustee.
(b) the Collateral Securities Intermediary and the Trustee shall cause
the Collateral Account to be, and the Collateral Account shall be, separate
from all other accounts held by or under the control and dominion of the
Trustee, the Collateral Securities Intermediary or Chase. It shall be a
term and condition of the Collateral Account, notwithstanding any term or
condition to the contrary in any other agreement relating to the Collateral
Account, and except as otherwise provided by the provisions of Section 5
and Section 17.9 of this Pledge Agreement, that no amount shall be paid or
released to or for the account of, or withdrawn by or for the account of,
the Pledgor or any other Person from the Collateral Account.
(c) the Collateral Account shall be subject to such applicable laws,
and such applicable regulations of any appropriate banking or governmental
authority, as may now or hereafter be in effect, including, without
limitation, any applicable regulations of the Board of Governors of the
Federal Reserve System.
(d) subject to the provisions of this Agreement, the Collateral
Account shall be under the sole dominion and control of the Trustee. The
Trustee shall have the sole right to make withdrawals from the Collateral
Account and to exercise all rights (including the delivery of entitlement
orders) with respect to the Collateral from time to time therein. All
Collateral delivered to or held by or on behalf of, and not released by,
the Trustee pursuant hereto shall be held in the Collateral Account in
accordance with the provisions hereof.
(e) if any earnings of the Collateral held in the Collateral Account
are subject to non-U.S. withholding taxes, the Trustee shall cooperate in
good faith with the Pledgor to reduce or eliminate such withholding taxes,
including, without limitation, through changing the location of the
Collateral Account or through establishing an additional Collateral Account
at a different location to hold the affected Collateral, PROVIDED that
after giving effect to any such change of location or establishment of an
additional
<PAGE>
5
Collateral Account, the Trustee's security interest in the affected
Collateral shall continue to constitute a valid and perfected first
priority security interest in such Collateral.
SECTION 4. DELIVERY AND CONTROL OF COLLATERAL; COLLATERAL ACCOUNTS;
INTEREST. (a) All cash, certificates or instruments representing or evidencing
any of the Collateral shall be delivered to and held by or on behalf of the
Trustee pursuant to this Pledge Agreement and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Trustee.
(b) With respect to any of the Collateral that constitutes an
uncertificated security, the Pledgor shall cause the issuer thereof either (i)
to register the Trustee as the registered owner of such security or (ii) to
agree in writing with the Pledgor and the Trustee that such issuer will comply
with instructions with respect to such security originated by the Trustee
without further consent of the Pledgor, such agreement to be in form and
substance reasonably satisfactory to the Trustee.
(c) With respect to any of the Collateral that constitutes a security
entitlement, the Pledgor shall cause the securities intermediary with respect to
such security entitlement to identify in its records the Trustee as the
entitlement holder of such security entitlement against such securities
intermediary.
(d) With respect to any Collateral that constitutes a securities account,
the Pledgor will comply with subsection (c) of this Section 4 with respect to
all security entitlements carried in such securities account.
(e) Upon transfer of the Pledged Securities to the Trustee (or the
Trustee's acquisition of a security entitlement thereto), as confirmed to the
Trustee by FRBNY, Chase or another securities intermediary, the Trustee shall
make appropriate book entries indicating that the Pledged Securities and/or such
security entitlements have been credited to and are held in the Collateral
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 Collateral Account subject (except as expressly provided in
Sections 5(a), (b), (c), (d), (e) and (f) hereof) to the exclusive dominion and
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.
(f) All Collateral shall be retained in the Collateral Account pending
disbursement pursuant to the terms of this Pledge Agreement.
<PAGE>
6
SECTION 5. DISBURSEMENTS. (a) Three business days prior to the due date of
any of the first five scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions given by the Pledgor to the Trustee (an "ISSUER
ORDER"), direct the Trustee to release from the Collateral Account and pay to
the Holders of the Notes proceeds sufficient to provide for payment in full of
such interest then due on the Notes. Upon receipt of an Issuer Order, the
Trustee will release funds in an amount sufficient to provide for the payment in
full of such interest then due on the Notes in accordance with such Issuer Order
and the payment provisions of the Indenture to the Holders of the Notes from
(and to the extent of) proceeds of the Pledged Securities in the Collateral
Account. Nothing in this Section 5 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 Account ("PLEDGOR FUNDS"), the Pledgor may, after payment in full
of such interest payment, direct the Trustee pursuant to an 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 Account in an amount less
than or equal to the amount of Pledgor Funds applied to such interest payment.
Upon receipt by the Trustee of (i) such Issuer Order and (ii) payment in full of
such interest payment, the Trustee shall pay over to the Pledgor or the
Pledgor's Designee, as the case may be, proceeds from the Collateral Account in
accordance with such Issuer Order as soon as practicable.
(c) If at any time the principal of and interest on the Pledged Securities
exceeds 100% of the amount sufficient, in the written opinion of an
internationally recognized firm of independent accountants selected by the
Pledgor and delivered to the Trustee, to provide for payment in full of the
remaining first five scheduled interest payments due on the Notes, the Pledgor
may direct the Trustee to release any such excess amount to the Pledgor or to
the Pledgor's Designee. Upon receipt of an Issuer Order (which shall include a
certificate from such internationally recognized firm of independent accountants
stating the amount by which the Pledged Securities exceeds the amount required
to be held in the Collateral Account) the Trustee shall pay over to the Pledgor
or the Pledgor's Designee, as the case may be, any such excess amount.
(d) Upon payment in full of the first five scheduled interest payments on
the Notes, 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 shall promptly be paid over and transferred to the Pledgor or the
Pledgor's Designee, as the case may be. Furthermore, upon the release of any
Collateral from the Collateral Account in accordance with the terms of this
Pledge Agreement, whether upon release of Collateral to Holders as payment of
<PAGE>
7
interest or otherwise, the security interest evidenced by this Pledge Agreement
in such released Collateral will automatically terminate and be of no further
force and effect.
(e) At least three Business Days prior to the due date of each of the first
five scheduled interest payments on the Notes, the Pledgor shall give the
Trustee notice (by Issuer Order) as to whether such interest payment will be
made pursuant to Section 5(a) or 5(b) above and the respective amounts of
interest that will be paid from the Collateral Account and from Pledgor Funds.
Any Pledgor Funds to be used to make any interest payment shall be delivered to
the Trustee, in immediately available funds, prior to 10:00 a.m. (New York City
time) on such interest payment date. If no such notice is given or such Pledgor
Funds have not been so delivered, the Trustee will act pursuant to Section 5(a)
above as if it had received an Issuer Order pursuant thereto for the payment in
full of the interest then due from the Collateral Account.
(f) If on any interest payment date there are insufficient funds in the
Collateral Account to make any scheduled payment of interest (after taking into
account any Pledgor Funds delivered to the Trustee as provided in Section 5(b)
above), the Trustee shall liquidate Collateral in the Collateral Account to the
extent necessary to pay, in full, such scheduled payment of interest. The
Trustee will not charge any fee in connection with any necessary conversion of
the legacy currency of any participating member state in the European Monetary
Union into Euro, whether such legacy currency is on deposit in the Collateral
Account, received by the Trustee as a payment from the Pledgor or under any item
of Collateral, or received by the Trustee upon the liquidation of any item of
Collateral.
(g) Nothing contained in this Pledge Agreement shall (i) afford the Pledgor
any right to issue entitlement orders with respect to any security entitlement
to the Pledged Securities 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 Pledged Securities, 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 (except
as expressly provided in Sections 5(a), (b), (c), (d), (e) and (f) hereof) of
the Trustee in its capacity as such (and not as a securities intermediary). The
Pledgor acknowledges, confirms and agrees that the Trustee holds a security
interest to the Pledged Securities solely as Trustee for the Holders of the
Notes and not as a securities intermediary.
SECTION 6. CASH DEPOSIT; INVESTMENTS. (a) On the date hereof, the Pledgor
shall either (i) deliver or cause the delivery of the European Government
Securities identified in Exhibit A to this Pledge Agreement (the "PLEDGED
SECURITIES") into the Collateral Account or (ii) deposit (or cause to be
deposited) cash proceeds sufficient to purchase such Pledged Securities on the
third business day occurring immediately hereafter into the Collateral Account.
<PAGE>
8
(b) In the event that the Pledgor shall have deposited (or cause to be
deposited) cash proceeds pursuant to clause (a)(ii) above, the Trustee shall,
within three business days of the date hereof, use such cash proceeds to invest
in the Pledged Securities, at which time such Pledged Securities shall be
promptly credited to the Collateral Account. Until such time as any cash
proceeds are invested in the Pledged Securities as provided above, such cash
proceeds shall be deposited and held in a deposit account with Chase in the name
of the Trustee and under the sole control and dominion of the Trustee, such
deposit account to be deemed to constitute part of the Collateral Account.
SECTION 7 SECURITIES INTERMEDIARY. (a) Chase Manhattan Bank AG, as
Collateral Securities Intermediary, hereby represents and warrants to, and
agrees with the Pledgor and the Trustee as follows:
(a) It is a securities intermediary as of the date hereof and for so
long as this Pledge Agreement remains in effect shall remain in effect and
it is acting as the Collateral Securities Intermediary hereunder, it shall
remain a securities intermediary and shall act as such with respect to the
Pledgor, the Trustee, the Collateral Account and all other Collateral.
(b) The Collateral Account is and will be maintained as a securities
account.
(c) It is the securities intermediary with respect to any assets,
property or other items credited to the Collateral Account from time to
time.
(d) All financial assets in registered form or payable to or to the
order of and credited to the Pledge Account shall be registered in the name
of, payable to or to the order of, or endorsed to, the Collateral
Securities Intermediary and in no case during the term of this Pledge
Agreement will any financial asset credited to the Collateral Account be
registered in the name of, payable to or to the order of, or endorsed to,
the Pledgor, except to the extent the foregoing have been subsequently
endorsed by the Pledgor to the Collateral Securities Intermediary or in
blank.
(e) It shall, upon written direction from the Trustee and without
further consent from the Pledgor, (i) comply with all instructions,
entitlement orders and directions of any kind originated by the Trustee
concerning the Collateral, to liquidate or otherwise dispose of the
Collateral as and to the extent directed by the Trustee and pay over to the
Trustee all proceeds and other value therefrom or otherwise distributed
with respect thereto without any set-off or deduction, and (ii) except as
otherwise directed by the Trustee, not to comply with the instructions,
entitlement orders or directions of the Pledgor or any other person.
<PAGE>
9
(f) Each item of property (whether cash, a security, investment
property, instrument or obligation, share, participation, interest or other
property whatsoever) credited to the Collateral Account shall be treated as
a financial asset.
(g) Except for the claims and interests of the Trustee and the Pledgor
in the Collateral, it does not know of any claim to or security interest or
other interest in the Collateral.
(h) It hereby waives its rights to set off any obligations of the
Pledgor to it against any or all assets held by the Trustee as Collateral,
and hereby agrees that any and all liens, encumbrances, claims or security
interests which it may have against the Collateral, either now or in the
future are and shall be subordinate and junior to the prior payment in full
of all obligations of the Pledgor now or hereafter existing under the
Indenture, Notes and all other documents related thereto whether for
principal, interest (including, without limitation, interest as provided
in the Notes, whether or not such interest accrues after the filing of such
petition for purposes of the Bankruptcy Code or is an allowed claim in such
proceeding), indemnities, fees, premiums, expenses or otherwise.
(i) It shall not agree with any third party to comply with any
instructions, entitlement orders or directions of any kind concerning the
Collateral originated by such third party without the prior written consent
of the Trustee.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby represents
and warrants 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 Articles of Incorporation
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.
(b) No consent of any other person and no approval, authorization,
order of, action by or qualification with, any governmental authority,
regulatory body, agency or other third party is required (i) for the
execution, delivery or performance by the Pledgor of its obligations under
this Pledge Agreement or (ii) for the grant by the Pledgor of the security
interests created by this Pledge Agreement or for the pledge by the Pledgor
of the
<PAGE>
10
Collateral pursuant to this Pledge Agreement, except, in each case, for
such consents, approvals, authorizations, orders, actions and
qualifications which the failure to obtain, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the properties, assets, financial condition or results of
operations of the Pledgor. No consent of any other person and no approval,
authorization, order of, action by or qualification with, any governmental
authority, regulatory body, agency or other third party is required 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, 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.
(c) 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 created by this Pledge Agreement). The Pledgor has not
at time transferred any of the Collateral to third parties nor encumbered
such Collateral with any third party rights. No financing statement or
instrument similar in effect covering all or any part of the Pledgor's
interest in the Pledged Securities is on file in any public or recording
office, other than the financing statements filed pursuant to this Pledge
Agreement. The Pledgor has no trade names.
(d) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and 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 creditors' rights or remedies generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability, (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 14(a) and (b), Section 17.11 and
Section 17.15 of this Pledge Agreement may be limited by applicable law.
(e) Upon the transfer to the Trustee of any cash proceeds or the
Pledged Securities and the acquisition by the Trustee of a security
entitlement thereto, in accordance with Sections 3, 4 and 6 above, the
pledge and grant of a security interest in the Collateral pursuant to this
Pledge Agreement for the benefit of the Trustee and the Holders of the
Notes will constitute a valid and perfected first priority security
interest in such Collateral, securing the payment of the Secured
Obligations enforceable as such against all creditors of the Pledgor (and
any persons purporting to purchase any of the Collateral from the Pledgor).
<PAGE>
11
(f) 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 such subsidiary 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.
(g) 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.
(h) No Event of Default exists.
SECTION 9. FURTHER ASSURANCES. (a) The Pledgor agrees that from time to
time, at the expense of the Pledgor, the Pledgor will, promptly including upon
reasonable request by the Trustee, execute and deliver or cause to be executed
and delivered, or use its reasonable commercial 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 may be necessary or, in the reasonable opinion
of the Trustee, 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.
(b) The Pledgor 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); PROVIDED, HOWEVER, that the Pledgor shall not be relieved of any of its
obligations under Section 9(a) hereof. A photocopy or other reproduction of this
Pledge Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(c) The Pledgor will furnish to the Trustee from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Trustee may reasonably request,
all in reasonable detail.
(d) The Pledgor will promptly pay all costs reasonably incurred in
connection with any of the foregoing within 30 days of receipt of an invoice
therefor. The Pledgor also agrees, whether or not requested by the Trustee, to
take all actions that are necessary to perfect or continue the perfection of, or
to protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, and
<PAGE>
12
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 10. 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 earlier of payment in full in cash of (x) each of the first
five scheduled interest payments due on the Notes under the terms of the
Indenture and (y) all obligations due and owing under the Indenture and the
Notes in the event such obligations become due and payable prior to the payment
in full of the first five scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Collateral or its beneficial interest therein, and (ii) it will not create
or permit to exist any Lien or other adverse interest in or with respect to
its beneficial interest in any of the Collateral (except for the security
interests granted under this Pledge Agreement); 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 its
beneficial interest in 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 such beneficial interest.
SECTION 11. POWER OF ATTORNEY. In addition to all of the powers granted to
the Trustee pursuant to the Indenture, the Pledgor hereby appoints and
constitutes the Trustee as the Pledgor's attorney-in-fact (with full power of
substitution), with full authority in the place and stead of the Pledgor and in
the name of the Pledgor or otherwise, from time to time in the Trustee's
reasonable discretion to take any action and to execute any instrument that the
Trustee may deem necessary or advisable to accomplish the purposes of this
Pledge Agreement, including, without limitation:
(a) to ask for, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral,
(b) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above,
(c) to file any claims or take any action or institute any proceedings
that the Trustee may reasonably deem necessary or desirable for the
collection of any of the
<PAGE>
13
Collateral or otherwise to enforce the rights of the Trustee with respect
to any of the Collateral, and
(d) to pay or discharge 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;
PROVIDED, HOWEVER, that the Trustee shall have no obligation to perform any of
the foregoing actions. The Trustee's authority under this Section 11 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 reasonably deemed necessary or
appropriate by the Trustee 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 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers
conferred on the Trustee hereunder are solely 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 its own
account, 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 or any loss on any investment.
SECTION 13. INDEMNITY. The Pledgor shall indemnify, hold harmless and
defend the Trustee, the Collateral Securities Intermediary and each of their
respective directors, officers, agents and employees, 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 their execution of or performance under this
Pledge Agreement, except to the extent that such claim, action, obligation,
liability or
<PAGE>
14
expense is directly attributable to the bad faith, gross negligence or wilful
misconduct of such indemnified person. This indemnification shall survive the
termination of this Pledge Agreement.
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall
have occurred and be continuing:
(a) The Trustee and the Holders of the Notes may exercise, 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 at that
time and also may (i) require the Pledgor to, and the Pledgor hereby agrees
that it will at its expense and upon request of the Trustee forthwith,
assemble all or part of the Collateral as directed by the Trustee and make
it available to the Trustee at a place to be designated by the Trustee that
is reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at any broker's board or at public or private sale, in one or more
sales or lots, at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Trustee may
deem commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Trustee shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. 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. 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.
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) All cash proceeds received by the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, following the payment of the fees and expenses of the
Trustee, be held by the Trustee
<PAGE>
15
as collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Trustee pursuant to Section 15) in
whole or in part by the Trustee for the ratable benefit of the Holders of
the Notes against, all or any part of the Secured Obligations in such order
as a majority of the Holders shall elect. Any surplus of such cash or cash
proceeds held by the Trustee and remaining after payment in full of all the
Secured Obligations shall be paid over to the Pledgor or to whomsoever may
be lawfully entitled to receive such surplus.
(c) The Trustee may, without notice to the Pledgor except as required
by law and at any time or from time to time, charge, set-off and otherwise
apply all or any part of the Secured Obligations against the Collateral
Account or any part thereof.
(d) The Pledgor further agrees to use its 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 14
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 14 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 14
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 and is continuing.
SECTION 15. EXPENSES. The Pledgor will upon demand pay to the Trustee and
the Collateral Securities Intermediary 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 or the
Collateral Securities Intermediary, as the case may be, that the Trustee or the
Collateral Securities Intermediary, as the case may be, may incur in connection
with (a) the review, negotiation and administration of this Pledge Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of the Trustee and the Holders of the Notes hereunder or (d) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 16. 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 Notes
or any other agreement or instrument relating thereto;
<PAGE>
16
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture;
(c) any taking, exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Secured Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Secured Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Secured Obligations or
any other assets of the Pledgor;
(e) any change, restructuring or termination of the corporate
structure or existence of the Pledgor; or
(f) 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 Secured Obligations or of this Pledge
Agreement.
SECTION 17. MISCELLANEOUS PROVISIONS.
Section 17.1. NOTICES. Any notice or communication given hereunder shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:
IF TO THE PLEDGOR:
Carrier1 International S.A.
c/o Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Fax: 011-41-1-297-2601
IF TO THE TRUSTEE:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Fax: (212) 946-8177 or 8178
Attention: William Potes, Corporate Trust Department
IF TO THE COLLATERAL SECURITIES INTERMEDIARY:
<PAGE>
17
Chase Manhattan Bank AG
Gruneburgweg 2
60322 Frankfurt am Main
Germany
Fax: 011-4969-7158-2553
Attention: Wolfgang Boehm
All such notices and other communications shall, when mailed, delivered or
telecopied, respectively, be effective when deposited in the mails, delivered or
telecopied, respectively, addressed as aforesaid.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
The rights of the Pledgor in the Collateral and the rights and obligations of
the Pledgor hereunder may be assigned (an "ASSIGNMENT") to any direct or
indirect Wholly Owned Subsidiary of the Pledgor (an "ASSIGNEE"), provided that
such Assignee furnishes the Trustee with an Opinion of Counsel to the effect
that such Assignment is valid, binding and enforceable against such Assignee and
that after such Assignment the Trustee shall have a perfected security interest
in the Collateral, securing the payment of the Secured Obligations, and
<PAGE>
18
addressing such other related matters as the Trustee may reasonably request. The
Trustee shall cooperate in good faith with the Pledgor to effect any proposed
Assignment. Upon the effectiveness of any such Assignment, the Assignee shall
become the Pledgor hereunder for all purposes of this Agreement, and the prior
Pledgor shall be released from its obligations hereunder (other than its
obligations under Sections 13 and 15).
Section 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 then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. 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 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.
Section 17.8. INTERPRETATION OF AGREEMENT. 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.
Section 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 this Pledge Agreement, remain in full
force and effect until the payment in full in cash of the Secured 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, the Collateral Securities Intermediary and their respective successors,
transferees and assigns.
(b) This Pledge Agreement (other than Pledgor's obligations under Sections
13 and 15) shall terminate upon the earlier of (i) the payment in full in cash
of the Secured Obligations and (ii) the payment in full in cash of the first
five scheduled interest payments on all of the Notes. At such time, the Trustee
shall, pursuant to an Issuer Order, reassign and redeliver
<PAGE>
19
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 and take all actions that are necessary to
release the security interest created by this Pledge Agreement in and to the
Collateral, including the execution and delivery of all termination statements
necessary to terminate any financing or continuation statements filed with
respect to the Collateral. 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.
Section 17.10. SURVIVAL OF REPRESENTATIONS AND COVENANTS. 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.
Section 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.
Section 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 terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
(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
<PAGE>
20
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. All rights of the Trustee under the Indenture,
including its right to reimbursement and indemnification are incorporated herein
by reference in their entirety.
Section 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.
Section 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 6.07 of the Indenture;
PROVIDED that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
Section 17.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HEREBY APPOINTS CT CORPORATION SYSTEM WITH AN OFFICE ON THE
DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS
AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO
THIS PLEDGE AGREEMENT AND FOR ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE
SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW
YORK AND AGREES TO SUBMIT TO THE JURISDICTION OF ANY SUCH COURT.
(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 (AND TO THE EXTENT THE TRUSTEE HAS RECEIVED
INDEMNITY DEEMED SATISFACTORY TO IT AND HAS AGREED TO DO SO), 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
<PAGE>
21
FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR
ASSERTED. THE PLEDGOR WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN THE CITY OF NEW YORK IN THE BOROUGH OF MANHATTAN ONCE THE TRUSTEE HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NONE OF ANY HOLDER OF NOTES, (EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE TRUSTEE IN ITS
CAPACITY AS TRUSTEE OR CHASE MANHATTAN BANK AG IN ITS CAPACITY AS COLLATERAL
SECURITIES INTERMEDIARY SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER ARISING
IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL
AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE OR SUCH
HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR
OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY
BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT
OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR
PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT
BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE
NOTES ON THE OTHER HAND.
<PAGE>
22
[The remainder of this page left intentionally blank.]
<PAGE>
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:
CARRIER1 INTERNATIONAL S.A.
By: /s/ Carlos Colina
-----------------------------------------
Name: Carlos Colina
Title: Authorized Officer
Trustee:
THE CHASE MANHATTAN BANK
By: /s/ William Potes
-----------------------------------------
Name: William Potes
Title: Assistant Treasurer
Collateral Securities Intermediary:
CHASE MANHATTAN BANK AG
By: /s/ Wolfgang Bohm
-----------------------------------------
Name: Wolfgang Bohm
Title: Vice President
<PAGE>
EXHIBIT A
EURO SECURITIES
<TABLE>
<CAPTION>
Security ID No. Coupon (%) Maturity Amount
-------- ------ ---------- -------- ------
<S> <C> <C> <C> <C>
DBUNDESSCHATZ (BKO) DKV113678 3.5 06/18/99 4,771,000
BUNDESOBL 113 (OBL) KV1141134 7.0 01/13/00 5,110,000
BUNDESSCHATZ (BKO) KV1136829 4.0 06/16/00 5,157,000
BUNDESSCHATZ (BKO) KV1136845 3.0 12/15/00 5,467,000
BUNDESOBL 119 (OBL) KV1141191 5.0 05/21/01 5,363,000
TOTAL 25,868,000
</TABLE>
<PAGE>
Exhibit 10.1
EXECUTION COPY
- --------------------------------------------------------------------------------
DOLLAR WARRANT AGREEMENT
between
CARRIER1 INTERNATIONAL S.A.
and
THE CHASE MANHATTAN BANK
Dated as of February 19, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ISSUE OF WARRANTS
Section 2.1. FORM OF WARRANT CERTIFICATES...............................................................7
Section 2.2. RESTRICTIVE LEGENDS.......................................................................10
Section 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES............................................13
Section 2.4. CERTIFICATED WARRANTS.....................................................................13
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
<S> <C>
Section 3.1. EXERCISE PRICE............................................................................13
Section 3.2. EXERCISE; RESTRICTIONS ON EXERCISE........................................................14
Section 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE.............................................14
Section 3.4. REPURCHASE OFFERS.........................................................................16
Section 3.5. REDEMPTION PRIOR TO THE EXPIRATION DATE...................................................19
ARTICLE IV
ADJUSTMENTS
Section 4.1. ADJUSTMENTS...............................................................................20
Section 4.2. NOTICE OF ADJUSTMENT......................................................................29
Section 4.3. STATEMENT ON WARRANTS.....................................................................29
Section 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC......................................................29
Section 4.5. FRACTIONAL INTERESTS......................................................................30
Section 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED..................................................30
Section 4.7. PAR VALUE; VALID ISSUANCE..................................................................30
Section 4.8. INITIAL PUBLIC OFFERING...................................................................30
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE.....................................................................32
Section 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS.............................................33
Section 8.3. SPECIAL TRANSFER PROVISIONS...............................................................35
Section 8.4. SURRENDER OF WARRANT CERTIFICATES.........................................................38
ARTICLE IX
WARRANT HOLDERS
Section 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER...................................................38
Section 9.2. RIGHT OF ACTION...........................................................................39
ARTICLE X
REMEDIES
Section 10.1. DEFAULTS.................................................................................39
Section 10.2. Omitted..................................................................................39
Section 10.3. REMEDIES; NO WAIVER......................................................................39
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI
THE WARRANT AGENT
Section 11.1. DUTIES AND LIABILITIES...................................................................40
Section 11.2. RIGHT TO CONSULT COUNSEL.................................................................41
Section 11.3. COMPENSATION; INDEMNIFICATION............................................................41
Section 11.4. NO RESTRICTIONS ON ACTIONS...............................................................41
Section 11.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT..........................................42
Section 11.6. SUCCESSOR WARRANT AGENT..................................................................43
ARTICLE XII
MISCELLANEOUS
Section 12.1. MONIES DEPOSITED WITH THE WARRANT AGENT..................................................43
Section 12.2. PAYMENT OF TAXES.........................................................................43
Section 12.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY................................44
Section 12.4. REPORTS TO HOLDERS.......................................................................44
Section 12.5. NOTICES; PAYMENT.........................................................................45
Section 12.6. BINDING EFFECT...........................................................................46
Section 12.7. COUNTERPARTS.............................................................................46
Section 12.8. AMENDMENTS...............................................................................46
Section 12.9. HEADINGS.................................................................................46
Section 12.10. COMMON SHARES LEGEND....................................................................46
Section 12.11. THIRD PARTY BENEFICIARIES...............................................................48
Section 12.12. TERMINATION.............................................................................49
SECTION 12.13. METHOD OF PAYMENT.......................................................................49
Section 12.13. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITIES;
GOVERNING LAW...................................................................................49
</TABLE>
<PAGE>
iv
EXHIBIT A FORM OF EURO WARRANT CERTIFICATE
EXHIBIT B-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFERORS
IN CONNECTION WITH TRANSFERS PURSUANT TO
REGULATION S
EXHIBIT B-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES
IN CONNECTION WITH TRANSFERS PURSUANT TO
REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFERORS
IN CONNECTION WITH TRANSFERS TO INSTITUTIONAL
ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES
IN CONNECTION WITH TRANSFERS TO INSTITUTIONAL
ACCREDITED INVESTORS
APPENDIX A LIST OF FINANCIAL EXPERTS
<PAGE>
DOLLAR WARRANT AGREEMENT
DOLLAR WARRANT AGREEMENT, dated as of February 19, 1999 (this
"AGREEMENT"), between CARRIER1 INTERNATIONAL S.A., a societe anonyme organized
under the laws of the Grand Duchy of Luxembourg (the "COMPANY"), and The Chase
Manhattan Bank (the "WARRANT AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated February
12, 1999 (the "PLACEMENT AGREEMENT"), among the Company, Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear,
Stearns & Co. Inc., as placement agents (collectively, the "PLACEMENT AGENTS"),
the Company has agreed to issue and sell to the Placement Agents (i) an
aggregate of 160,000 Dollar warrants (each, a "WARRANT" and collectively, the
"WARRANTS"), each Warrant initially entitling the holder thereof to purchase
6.71013 shares of Common Stock (as defined below) at a per share exercise price
equal to the greater of $2.00 and the minimum par value required by Luxembourg
law (excluding any Luxembourg capital duty which is payable by the Company) as
part of 160,000 Dollar Units (the "DOLLAR UNITS"), each Dollar Unit consisting
of one 13 1/4% Senior Dollar Note due 2009 of the Company (each, a "DOLLAR Note"
and collectively, the "DOLLAR NOTES") to be issued pursuant to the provisions of
an Indenture, dated as of the date hereof, between the Company and The Chase
Manhattan Bank (the "DOLLAR NOTES INDENTURE"), and one Warrant and (ii) an
aggregate of 85,000 Euro warrants (each a "EURO WARRANT") issued pursuant to the
Euro Warrant Agreement (as defined below), each Euro Warrant initially entitling
the holder thereof to purchase 7.53614 shares of Common Stock at a per share
exercise price equal to the greater of $2.00 and the minimum par value required
by Luxembourg law (excluding any Luxembourg capital duty which is payable by the
Company), as part of 85,000 Units (the "EURO UNITS"), each consisting of one 13
1/4% Senior Euro Note due 2009 (a "EURO NOTE") to be issued pursuant to the
terms of an Indenture, dated as of the date hereof, between the Company and The
Chase Manhattan Bank (the "EURO NOTES INDENTURE"), and one Euro Warrant;
WHEREAS, the Dollar Notes and the Warrants included in each Dollar
Unit will become separately transferable at the close of business upon the
earliest to occur of (i) the date that is six months after the Closing Date (as
defined below), (ii) the commencement of an exchange offer with respect to the
Dollar Notes undertaken pursuant to the Notes Registration Rights Agreement (as
defined below), (iii) the effectiveness of a shelf registration statement with
respect to resales of the Dollar Notes and (iv) such date as determined by
Morgan Stanley & Co. Incorporated in its sole discretion (the "SEPARATION
DATE"); and
WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in
<PAGE>
connection with the issuance of the Warrant Certificates (as defined below) and
the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders thereof
(together with the holders of shares of Common Stock (or other securities)
received upon exercise thereof, the "HOLDERS").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Placement Agreement, the Company and the
Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Beneficial Investor" means industry experts or other individuals
whose affiliation with the Company should, in the good faith judgment of the
Board, provide the Company with a strategic advantage.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the corporate
trust office of the Warrant Agent, are authorized by law to close.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
2
<PAGE>
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the voting Common Stock, par value $2.00 per
share of the Company, and any other capital stock of the Company into which such
Common Stock may be converted or reclassified or that may be issued in respect
of, in exchange for or in substitution of such Common Stock by reason of any
stock splits, stock dividends, distributions, mergers, consolidations or other
like events.
"Company" means Carrier1 International S.A. and its successors under
this Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Dollar Units" has the meaning provided in the recitals to this
Agreement.
"Dollar Notes" has the meaning provided in the recitals to this
Agreement.
"Dollar Notes Indenture" has the meaning provided in the recitals to
this Agreement.
"Euro Note" has the meaning provided in the recitals to this
Agreement.
"Euro Notes Indenture" has the meaning provided in the recitals to
this Agreement.
"Euro Units" has the meaning provided in the recitals to this
Agreement.
"Euro Warrant" has the meaning provided in the recitals to this
Agreement.
"Euro Warrant Agreement" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Euro Warrants, as such agreement may be amended or modified from
time to time.
3
<PAGE>
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exchange Offer" has the meaning specified in Section 12.4 hereof.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Existing Equity Agreements" means the arrangements described in the
Offering Memorandum, dated February 12, 1999 relating to the Dollar Units and
the Euro Units, under the caption "Certain Relationships and Related
Transactions -- Equity Investor Agreements --Securities Purchase and
Cancellation Agreement," "--1999 Share Option Plan" and "--Securities Purchase
Agreement" and in footnote (4) to the second table set forth under the caption
"Principal Security Holders."
"Expiration Date" means February 19, 2009.
"Final Surrender Time" has the meaning specified in Section 3.4
hereof.
"Financial Expert" means one of the Persons listed in Appendix A
hereto.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this Agreement.
"IAI Certificated Warrants" has the meaning provided in Section 2.1.
"Independent Financial Expert" means a Financial Expert that does not
(and whose directors, executive officers and 5% stockholders do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries
or affiliates, which has not been for at least five years and, at the time that
it is called upon to give independent financial advice to the Company, is not
(and none of its directors, executive officers or 5% stockholders is) a
promoter, director or officer of the Company or any of its subsidiaries or
affiliates. The Independent Financial Expert may be compensated and indemnified
by the Company for opinions and services it provides as an Independent Financial
Expert. No Financial Expert shall be deemed not to be an Independent Financial
Expert solely by reason of its having made one or more valuations hereunder, or
under the Euro Warrant Agreement.
"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"LLC" means Carrier1 L.L.C. and its successors.
4
<PAGE>
"Management Investor" means any officer, director, employee or
other member of the management of the Company or any of its Subsidiaries, or
family members or relatives thereof, or trusts or partnerships for the
benefit of any of the foregoing, or any of their heirs, executors, successors
and legal representatives.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Rule 902 of Regulation S.
"Notes Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Dollar Notes and the Euro Notes dated February 12,
1999 between the Company and the Placement Agents.
"Notice Date" has the meaning specified in Section 3.4 hereof.
"Officer" means, with respect to the Company, (i) any member of the
Board of the Company, or the Chairman, the President, the Chief Executive
Officer, any Vice President, the Chief Operating Officer or the Chief Financial
Officer of the Company, any officer of a Restricted Subsidiary designated by the
Board to act as such officer of the Company or any other person duly authorized
and empowered by the Board to execute for and on behalf and in the name of the
Company (any officer or other person described in this clause (i), a "Senior
Officer") and (ii) the Treasurer, Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company or any officer of a Restricted Subsidiary
designated by the Board to act as such officer of the Company.
"Officers' Certificate" means a certificate signed by one Senior
Officer and one other Officer or by two Senior Officers.
"Offshore Certificated Warrants " has the meaning provided in Section
2.1.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company or Carrier1 International
GmbH.
"Parent Entity" means any Person of which the Company is a direct or
indirect subsidiary.
"Person" means an individual, general partnership, limited
partnership, corporation, trust, joint stock company, association, joint venture
or any other entity or organization, whether or not legal entities, including,
without limitation, a government or political subdivision or an agency or
instrumentality thereof.
"Placement Agreement" has the meaning specified in the recitals to
this Agreement.
5
<PAGE>
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a), and, in the case of
Warrants transferred pursuant to Regulation S prior to February 19, 2000,
Section 2.2(b).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Reference Security" has the meaning specified in Section 4.1(l)(iv)
hereof.
"Registration" means the date of the commencement of an exchange offer
for, or the effectiveness of a shelf registration statement with respect to, the
Dollar Notes.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section 2.1
hereof.
"Relevant Value" means the value of the Warrants as set forth in the
Value Report in accordance with Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any date
when the Company (i) consolidates with or merges into or with another person
(but only where the holders of Common Stock receive consideration in exchange
for all or part of such Common Stock), if the Common Stock (or other securities)
thereafter purchasable upon exercise of the Warrants is not registered under the
Exchange Act or (ii) sells all or substantially all of its assets to another
person, if the Common Stock (or other securities) thereafter purchasable upon
exercise of the Warrants is not registered under the Exchange Act; PROVIDED that
in each case a "Repurchase Event" shall not be deemed to have occurred if the
consideration for such transaction consists solely of cash.
"Repurchase Notice" has the meaning specified in Section 3.4(a)
hereof.
"Repurchase Offer" means the Company's offer to repurchase the
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" means the amount of cash payable in respect of the
Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
6
<PAGE>
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) purchasable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"Valuation Date" means the date five Business Days prior to the Notice
Date.
"Value Certificate" has the meaning specified in Section 3.4 hereof.
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement relating to the Warrants and the Euro Warrants, dated February
12, 1999, between the Company and the Warrant Agent.
"Warrant Registration Statement" has the meaning specified in Section
3 of the Warrant Registration Rights Agreement.
ARTICLE II
ISSUE OF WARRANTS
SECTION 2.1. FORM OF WARRANT CERTIFICATES. Certificates representing
the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which such Warrant
Certificates are countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such
7
<PAGE>
legends and endorsements stamped, printed, lithographed or engraved thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any law or with any rule
or regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed or any depositary, or to conform to
custom or usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more global Warrant Certificates in definitive,
fully registered form, substantially in the form set forth in Exhibit A
(collectively, the "RESTRICTED GLOBAL WARRANTS") deposited with the Warrant
Agent, as custodian for, and registered in the name of the nominee for, the
Depositary, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrants may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance on
Regulation S (a) prior to February 19, 2000 shall be in the form of permanent
certificated Warrants in registered form substantially in the form set forth in
Exhibit A (the "OFFSHORE CERTIFICATED WARRANTS") and (b) following February 19,
2000, may be in the form of one or more permanent global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "REGULATION S GLOBAL WARRANT" and, together with the Restricted
Global Warrants, the "GLOBAL WARRANTS"), deposited with the Warrant Agent, as
custodian for, and registered in the name of, the Depositary or its nominee,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. The aggregate number of Warrants represented by the
Regulation S Global Warrants may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, in accordance with instructions given by the Holder
thereof.
Warrants transferred to Institutional Accredited Investors who are not
QIBs shall be issued in registered form substantially in the form set forth in
Exhibit A ("IAI CERTIFICATED WARRANTS").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Regulation S Global Warrant shall be issued in the form of
Offshore Certificated Warrants.
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Restricted Global Warrants shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form set
forth in Exhibit A (the "RESTRICTED CERTIFICATED WARRANTS" and, together with
the Offshore Certificated Warrants and the IAI Certificated Warrants, the
"CERTIFICATED WARRANTS").
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The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the Officer
or Officers executing such Warrant Certificates, as evidenced by the execution
of such Warrant Certificates.
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SECTION 2.2. RESTRICTIVE LEGENDS. (a) The Warrant Certificates shall
bear the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THESE WARRANTS IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF SUCH TRANSFER,
RESELL OR OTHERWISE TRANSFER THESE WARRANTS EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE WARRANT AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THESE WARRANTS (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE WARRANT AGENT) AND AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) TO A PERSON OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT THAT, FOR ANY TRANSFER PRIOR TO FEBRUARY 19, 2000,
FURNISHES TO THE WARRANT AGENT, PRIOR TO SUCH TRANSFER, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THESE WARRANTS (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE WARRANT AGENT), (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES
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ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THESE
WARRANTS ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE WARRANTS WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT AND
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 IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 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. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF
THESE WARRANTS IN VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Warrant transferred pursuant to Regulation S prior to
February 19, 2000 shall also bear the following legend on the face thereof:
HEDGING TRANSACTIONS INVOLVING THESE WARRANTS MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
THE COMMON SHARES PURCHASABLE UPON EXERCISE OF THESE WARRANTS HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT AND THESE WARRANTS MAY NOT BE
EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(c) Each Global Warrant shall also bear the following legend on the
face thereof:
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UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR THE
WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE
WARRANT AGREEMENT.
(d) Each Warrant Certificate issued prior to the Separation
Date shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS
PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13 1/4%
SENIOR DOLLAR NOTE DUE 2009 OF THE COMPANY (THE "NOTES") AND ONE
WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 6.71013
COMMON SHARES, PAR VALUE $2.00, OF THE COMPANY. PRIOR TO THE CLOSE OF
BUSINESS UPON THE EARLIEST TO OCCUR OF (i) AUGUST 19, 1999, (ii) THE
COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE DOLLAR NOTES,
(iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT
TO THE DOLLAR NOTES AND (vi) SUCH DATE AS DETERMINED BY MORGAN STANLEY
& CO. INCORPORATED IN ITS SOLE DISCRETION. THE WARRANTS EVIDENCED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM,
BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE DOLLAR
NOTES.
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THE TRANSFER RESTRICTIONS APPLICABLE TO THIS WARRANT ARE ALSO
APPLICABLE TO THE UNIT OF WHICH THIS WARRANT IS A PART.
SECTION 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing 160,000 Warrants, each Warrant to purchase initially
6.71013 Common Shares, may be executed, on or after the date of this Agreement,
by the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the written direction of the Company signed by one or more
Senior Officers to the purchasers thereof on the date of issuance. The Warrant
Agent is hereby authorized to countersign and deliver Warrant Certificates as
required by this Section 2.3 or by Section 3.3, Article VI or Article VIII
hereof.
The Warrant Certificates shall be executed on behalf of the Company by
one or more Senior Officers of the Company either manually or by facsimile
signature printed thereon. The Warrant Certificates shall be countersigned by
manual signature of the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any Senior Officer of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be such Senior Officer of the Company before countersignature by the
Warrant Agent and the issuance and delivery thereof, such Warrant Certificates
may nevertheless be countersigned by the Warrant Agent and issued and delivered
with the same force and effect as though such person had not ceased to be such
Senior Officer of the Company.
SECTION 2.4. CERTIFICATED WARRANTS. Beneficial owners of interests in
Global Warrants shall receive Certificated Warrants (which, except as set forth
in Section 8.3(d), shall bear the Private Placement Legend) in accordance with
the procedures of the Warrant Agent and the Depositary, as and when permitted by
Article VIII hereof. In connection with the execution and delivery of such
Certificated Warrants, the Warrant Agent shall reflect on its books and records
the date and a decrease in the number of Warrants represented by the Global
Warrant equal to the number of such Certificated Warrants and the Company shall
execute and the Warrant Agent shall countersign and deliver to said beneficial
owners one or more Certificated Warrants in an equal aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
SECTION 3.1. EXERCISE PRICE. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at
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a per share purchase price (the "EXERCISE PRICE") equal to the greater of $2.00
and the minimum par value required by Luxembourg law (excluding any Luxembourg
capital duty which is payable by the Company), subject to adjustment as provided
in Section 4.1 and Article V hereof.
SECTION 3.2. EXERCISE; RESTRICTIONS ON EXERCISE. At any time after one
year after the Closing Date and on or before the Expiration Date (unless
redeemed pursuant to Section 3.5), any outstanding Warrants may be exercised on
any Business Day; PROVIDED that the Warrants will become exercisable in
connection with the initial public offering of equity securities of the Company,
effective upon the consummation of such offering (or, in the case of any
Warrants as to which the Holders thereof have exercised piggyback registration
rights for such offering pursuant to Section 2 of the Warrants Registration
Rights Agreement, effective at such earlier time as may be necessary to permit
such exercise of such rights), and PROVIDED FURTHER that the Warrant
Registration Statement is, at the time of exercise, effective and available for
the exercise of the Warrants or the exercise of such Warrants is exempt from the
registration requirements of the Securities Act, as reasonably determined by the
Company, and such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states or other jurisdictions in
which the various Holders reside. Any Warrants not exercised by 5:00 p.m., New
York City time, on the Expiration Date shall expire and all rights of the
Holders of such Warrants shall terminate. Additionally, pursuant to Section
4.1(j)(ii) hereof, the Warrants shall expire and all rights of the Holders of
such Warrants shall terminate in the event the Company merges or consolidates
with or sells all or substantially all of its property and assets to a Person
(other than an Affiliate of the Company) if the consideration payable to holders
of Common Stock in exchange for their Common Stock in connection with such
merger, consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
SECTION 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. In order
to exercise all or any of the Warrants represented by a Warrant Certificate, the
Holder thereof must surrender for exercise the Warrant Certificate to the
Warrant Agent at its corporate trust office address set forth in Section 12.5
hereof, with the Subscription Form set forth on the reverse of the Warrant
Certificate duly executed, together with payment in full of the Exercise Price
then in effect for each Common Share (or other securities) purchasable upon
exercise of the Warrants as to which a Warrant is exercised; such payment may be
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company and shall be made to the Warrant Agent at its corporate
trust office address set forth in Section 12.5 hereof prior to the close of
business on the date the Warrant Certificate is surrendered to the Warrant Agent
for exercise. All payments received upon exercise of Warrants shall be delivered
to the Company by the Warrant Agent as instructed in writing by the Company. The
Warrant Agent shall transmit the entire amount that it has received, without any
deduction of any deduction of any wire, cable, service or other charges.
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In connection with any exercise of Warrants represented by the
Regulation S Global Warrants or Offshore Certificated Warrants, the Holder
thereof shall be required to provide written certification to the Warrant Agent
that (i)(x) it is not a U.S. person and the Warrant is not being exercised on
behalf of a U.S. person or (y) a written opinion of counsel to the effect that
the Warrant and the Common Stock issuable upon exercise thereof have been
registered under the Securities Act or are exempt from registration thereunder
and (ii) if an opinion of counsel is not being furnished, that the Holder
exercising the Warrant is located outside the United States at the time of
exercise thereof.
If less than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant Certificate shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
exercised shall be executed by the Company and delivered to the Warrant Agent
and the Warrant Agent shall countersign the new Warrant Certificate, registered
in such name or names as may be directed in writing by the Holder, and shall
deliver the new Warrant Certificate to the Person or Persons entitled to receive
the same; PROVIDED that such Holder (x) shall be responsible for the payment of
any transfer taxes required as a result of any change in ownership of such
Warrants and (y) must comply with Article VIII, and any other provision of this
Agreement relating to transfer, with respect to any such requested registration
or delivery involving such a change in ownership. Upon the exercise of any
Warrants following the surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Warrant Agent shall instruct the Company to transfer
promptly to the Holder or, upon the written order of the Holder of such Warrant
Certificate, appropriate evidence of ownership of any Common Shares or other
security or property to which it is entitled, registered or otherwise placed in
such name or names as may be directed in writing by the Holder, and to deliver
such evidence of ownership to the Person or Persons entitled to receive the same
and fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, as provided in Section 4.5 hereof; PROVIDED that the Holder of such
Warrant (x) shall be responsible for the payment of any transfer taxes required
as the result of any change in ownership of such Warrants or the issuance of
such Common Shares other than to the Holder of such Warrants and (y) must comply
with Article VIII, and any other provision of this Agreement relating to
transfer, with respect to any such requested registration or delivery involving
such a change in ownership.
Upon the exercise of a Warrant or Warrants, the Company shall as
promptly as practicable but not later than 14 Business Days after such exercise
enter, or cause any transfer agent of the Common Shares to enter, the name of
the person entitled to receive the Common Shares upon exercise of such Warrants
into the Company's register of shareholders. Thereupon, the Company or the
applicable transfer agent shall issue certificates (bearing the legend set forth
in Section 12.10 hereof, if applicable, unless a registration statement with the
Commission relating to such Common Shares shall then be in effect or the Company
and the Holder exercising such Warrants otherwise agree) for the necessary
number of Common Shares to which said Holder is entitled and deliver such
certificate to the Warrant Agent who in turn will deliver it to the Person
entitled to receive the Common Shares.
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A Warrant shall be deemed by the Company to be exercised immediately
prior to the close of business on the date of surrender for exercise, as
provided above, of the Warrant Certificate representing such Warrant and, for
all purposes under this Agreement, the Person entitled to receive any Common
Shares upon such exercise shall receive the Common Shares such person would have
been entitled to had it been the registered holder on such date, except for
purposes of transferring the Common Shares or voting in a general shareholders'
meeting, such Person shall, in its relation with the Company, be deemed to be
the holder thereof only when such Common Shares are entered in the register of
shareholders in the name of such person; PROVIDED, HOWEVER, that, with respect
to Warrants which have been exercised but for which the corresponding Warrant
Shares have not been recorded in the register of shareholders, the provisions of
Article IV shall continue to apply as if the number of Warrants held prior to
exercise remained outstanding on the date of any action or event of the type
giving rise to an adjustment under Article IV.
SECTION 3.4. REPURCHASE OFFERS. (a) NOTICE OF REPURCHASE EVENT. Within
five Business Days following the occurrence of a Repurchase Event, the Company
shall give notice (a "REPURCHASE NOTICE") to the Holders of the Warrants and the
Warrant Agent that such event has occurred.
(b) REPURCHASE OFFERS GENERALLY. Following the occurrence of a
Repurchase Event, the Company shall make (or shall cause an Affiliate to make)
an offer to repurchase for cash all outstanding Warrants pursuant to the
provisions of this Section 3.4 (a "REPURCHASE OFFER"). The Company shall give
notice of a Repurchase Offer in accordance with Section 3.4(f) hereof. Each date
on which the Company gives any such notice is referred to as the "NOTICE DATE."
The Repurchase Offer shall commence on the Notice Date for such Repurchase Offer
and shall expire at 5:00 p.m., New York City time, on a date determined by the
Company (the "FINAL SURRENDER TIME") that is at least 30 but not more than 60
days after the Notice Date. Once a Repurchase Event has occurred, there is no
limit on the number of Repurchase Offers that the Company may make.
(c) REPURCHASE OFFERS. (i) In any Repurchase Offer, the Company (or
such affiliate) shall offer to purchase for cash at the Repurchase Price all
Warrants outstanding on the Notice Date for such Repurchase Offer that are
properly tendered to the Warrant Agent on or prior to the Final Surrender Time
for such Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the Final
Surrender Time for such Repurchase Offer, the Warrant Certificates evidencing
the Warrants such Holder desires to have repurchased in such offer, together
with a completed Certificate for Surrender in substantially the form attached to
the Warrant Certificate. A Holder may withdraw all or a portion of the Warrants
tendered to the Warrant Agent at any time prior to the Final Surrender Time for
such Repurchase Offer. If less than all the Warrants represented by a Warrant
Certificate shall be tendered, such Warrant Certificate shall be surrendered and
a new Warrant
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Certificate of the same tenor and for the number of Warrants which shall not be
tendered shall be executed by the Company and delivered to the Warrant Agent and
the Warrant Agent shall countersign the new Warrant Certificate, registered in
such name or names as may be directed in writing by the Holder, and shall
deliver the new Warrant Certificate to the Person or Persons entitled to receive
the same; PROVIDED that (x) the Holder of such Warrants shall be responsible for
the payment of any transfer taxes required as the result of any change in
ownership of such Warrants and (y) must comply with Article VIII, and any other
provision of this Agreement relating to transfer, with respect to any such
requested registration or delivery involving such a change in ownership.
(d) REPURCHASE PRICE. (i) The purchase price (the "REPURCHASE PRICE")
for each Warrant properly tendered to the Warrant Agent pursuant to a Repurchase
Offer shall be equal to the value (the "RELEVANT VALUE") on the Valuation Date
of the Common Shares issuable, and other securities or property which would have
been delivered, upon exercise of Warrants had the Warrants then been exercised
(regardless of whether the Warrants are then exercisable), less the Exercise
Price in effect on the Notice Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other securities or
property purchasable upon exercise of all the Warrants, on any Valuation Date
shall be:
(1) (A) If the Common Shares (or other securities) are
registered under the Exchange Act, deemed to be the average of the
closing sales prices (on the stock exchange that is the primary
trading market for the Common Shares (or other securities)) of the
Common Shares (or other securities) for the 20 consecutive trading
days immediately preceding such Valuation Date or, (B) if the Common
Shares (or other securities) have been registered under the Exchange
Act for less than 20 consecutive trading days before such date, then
the average of the closing sales prices for all of the trading days
before such date for which closing sales prices are available, in the
case of each of (A) and (B), as certified to the Warrant Agent by an
Officer with general responsibility for financial matters (the "VALUE
CERTIFICATE"). The closing sales price for each such trading day shall
be: (A) in the case of a security listed or admitted to trading on any
national securities exchange, the closing sales price on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day, (B) in the case of a security not then
listed or admitted to trading on any national securities exchange, the
last reported sale price on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day,
as reported by a reputable quotation source designated by the Company,
(C) in the case of a security not then listed or admitted to trading
on any national securities exchange and as to which no such reported
sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in
the Borough of Manhattan, City and State of New York customarily
published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day,
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the average of the high bid and low asked prices, as so reported, on
the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are
no bid and asked prices reported during the 30 days prior to the date
in question, the Relevant Value shall be determined as if the Common
Shares (or other securities) were not registered under the Exchange
Act; or
(2) If the Common Shares (or other securities) are not
registered under the Exchange Act or if the value cannot be computed
under clause (1) above, deemed to be equal to the value set forth in
the Value Report (as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board in accordance
with Section 3.4(e) hereof, and retained on customary terms and
conditions, using one or more valuation methods that the Independent
Financial Expert, in its best professional judgment, determines to be
most appropriate but without giving effect to any discount for lack of
liquidity, the fact that the Company has no class of equity securities
registered under the Exchange Act or the fact that the Common Shares
and other securities or property purchasable upon exercise of the
Warrants represent a minority interest in the Company. The Company
shall use its best efforts (including by selecting another Independent
Financial Expert) to cause the Independent Financial Expert to deliver
to the Company, with a copy to the Warrant Agent, within 90 days of the
appointment of the Independent Financial Expert in accordance with
Section 3.4(e) hereof, a value report (the "VALUE REPORT") stating the
Relevant Value of the Common Shares and other securities or property,
if any, being valued as of the Valuation Date and containing a brief
statement as to the nature and scope of the methodologies upon which
the determination of Relevant Value was made. The Warrant Agent shall
have no duty with respect to the Value Report of any Independent
Financial Expert, except to keep it on file and available for
inspection by the Holders. The determination as to Relevant Value in
accordance with the provisions of this Section 3.4(d) shall be
conclusive on all Persons. The Independent Financial Expert shall
consult with management of the Company in order to allow management to
comment on the proposed Relevant Value prior to delivery to the Company
of any Value Report of the Independent Financial Expert.
(e) SELECTION OF INDEPENDENT FINANCIAL EXPERT. If clause
(d)(ii)(2) is applicable, the Board of the Company shall select an Independent
Financial Expert not more than five Business Days following a Repurchase Event.
Within two days after the selection of any Independent Financial Expert, the
Company shall deliver to the Warrant Agent a notice setting forth the name of
such Independent Financial Expert.
(f) NOTICE OF REPURCHASE OFFER. Each notice of a Repurchase Offer (an
"OFFER NOTICE") given by the Company pursuant to Section 3.4(b)(i) shall be
given by the Company directly to all Holders of the Warrants, with a copy to the
Warrant Agent, shall be given simultaneously with the Repurchase Notice (or, in
the event that the Relevant Value of the Common Shares or other securities or
property purchasable upon exercise of all the
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Warrants cannot be determined pursuant to Section 3.4(d)(ii)(1), then such Offer
Notice shall be given within five Business Days after the Company receives the
Value Report with respect to such offer), but in no event later than 60 days
following the Repurchase Event, and shall specify (A) the Final Surrender Time
for such Repurchase Offer, (B) the manner in which Warrants may be surrendered
to the Warrant Agent for repurchase by the Company, (C) the Repurchase Price at
which the Warrants will be repurchased by the Company, (D) if applicable, the
name of the Independent Financial Expert whose valuation of the Common Shares
and other securities or property was utilized in connection with determining
such Repurchase Price and (E) that payment of the Repurchase Price will be made
by the Warrant Agent. Each such notice shall be accompanied by a Certificate for
Surrender for Repurchase Offer in substantially the form attached to the Warrant
Certificate and a copy of the Value Report, if any.
(g) PAYMENT FOR WARRANTS. Upon surrender for repurchase of any
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company and any purchasing affiliate
of such surrender. On or before the Final Surrender Time for any Repurchase
Offer, the Company (or such affiliate) shall deposit with the Warrant Agent
funds sufficient to make payment for the Warrants tendered to the Warrant Agent
and not withdrawn. After receipt of such deposit from the Company (or such
affiliate), the Warrant Agent shall make payment, by delivering a check in such
amount as is appropriate, to such Person or Persons as it may be directed in
writing by the Holder surrendering such Warrants, net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than the Holder.
(h) COMPLIANCE WITH LAWS. Notwithstanding anything contained in this
Section 3.4, if the Company is required to comply with laws or regulations in
connection with making any Repurchase Offer, such laws or regulations shall
govern the making of such Repurchase Offer.
SECTION 3.5. REDEMPTION PRIOR TO THE EXPIRATION DATE. At any time
within ten days of the Expiration Date, the Company may redeem (or cause an
Affiliate of the Company to repurchase) all unexercised Warrants at a redemption
or repurchase price of $0.01 per share. Upon payment of such amount, such
unexercised Warrants shall be deemed to become the property of the Company or
such Affiliate, as the case may be, and may thereafter be exercised by the
Company or such Affiliate as the case may be. At its option, the Company or such
Affiliate may extend the expiration date of any Warrants so purchased.
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ARTICLE IV
ADJUSTMENTS
SECTION 4.1. ADJUSTMENTS. The Exercise Price and the number of
Common Shares purchasable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows (subject in each case to Section 4.1(l)
hereof):
(a) DIVISIONS; CONSOLIDATIONS; RECLASSIFICATIONS. In case
the Company shall, on or before the Expiration Date, (i) issue any Common Shares
in payment of a dividend or other distribution with respect to its Common
Shares, (ii) subdivide its issued and outstanding Common Shares, (iii)
consolidate its issued and outstanding Common Shares into a smaller number of
shares, or (iv) reclassify or convert the Common Shares (other than a
reclassification in connection with a merger, consolidation or other business
combination which will be governed by Section 4.1(j)), then the number of Common
Shares purchasable upon exercise of each Warrant immediately prior to the record
date for such issue or distribution or the effective date of such subdivision,
consolidation, reclassification or conversion shall be adjusted so that the
Holder of each Warrant shall thereafter be entitled to receive the kind and
number of Common Shares which such Holder would have been entitled to receive
after the happening of any of the events described above had such Warrant been
exercised immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this Section 4.1(a) shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall
issue rights, options, warrants or convertible or exchangeable securities (other
than an issuance of convertible or exchangeable securities subject to Section
4.1(a)) to all holders of its Common Shares, entitling them to subscribe for or
purchase Common Shares at a price per share which is lower (at the record date
for such issuance) than the then Current Market Value per Common Share, then the
Company shall ensure that at the time of such issuance, the same or a like offer
or invitation is made to the Holders of the Warrants as if their Warrants had
been exercised on the day immediately preceding the record date of such offer or
invitation on the terms (subject to any adjustment pursuant to Section 4.1(a)
for a prior event) on which such Warrants could have been exercised on such
date; PROVIDED that if the Board so resolves, the Company shall not be required
to ensure that the same offer or invitation is made to the Holders of the
Warrants, but the number of Common Shares thereafter purchasable upon the
exercise of each Warrant shall instead be adjusted and shall be determined by
multiplying the number of Common Shares theretofore purchasable upon exercise of
each Warrant by a fraction, the numerator of which shall be the sum of (i) the
number of Common Shares outstanding immediately prior to the issuance of such
rights, options, warrants or convertible or exchangeable securities plus (ii)
the number of additional Common Shares which may be purchased or subscribed for
upon exercise, exchange or conversion of such rights, options,
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warrants or convertible or exchangeable securities and the denominator of which
shall be the sum of (x) the number of Common Shares outstanding immediately
prior to the issuance of such rights, options, warrants or convertible or
exchangeable securities plus (y) the number of shares which the total
consideration received by the Company for such rights, options, warrants or
convertible or exchangeable securities so offered would purchase at the then
Current Market Value per Common Share.
Except as otherwise provided above, such adjustment shall be
made whenever such rights, options, warrants or convertible or exchangeable
securities are issued and shall become effective retroactively immediately after
the record date for the determination of shareholders entitled to receive such
rights, options, warrants or convertible or exchangeable securities.
(c) ISSUANCE OF COMMON SHARES AT LOWER VALUES. In case the
Company shall sell and issue any Common Share or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in Section
4.1(a) or (b) above, (ii) Common Shares issued pursuant to (x) the Warrants or
any Rights outstanding on the date of this Agreement or any Right issued in any
transaction described in Section 4.1(a) or (b) above and (y) a Right, if on the
date such Right was issued, the exercise, conversion or exchange price per
Common Share with respect thereto was at least equal to the then Current Market
Value per Common Share and (iii) any Common Shares or Right issued as
consideration (A) when any corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the Company or (B) in good faith
in connection with any other business collaboration, in each case under this
clause (iii) in an arm's-length transaction between the Company and a Person
other than an Affiliate of the Company) at a price per Common Share (determined
in the case of any such Right, by dividing (x) the total consideration
receivable by the Company in consideration of the sale and issuance of such
Right, plus the total consideration payable to the Company upon exercise,
conversion or exchange thereof, by (y) the total number of Common Shares covered
by such Right) that is lower than the Current Market Value per Common Share in
effect immediately prior to such sale or issuance, then the number of Common
Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Common Shares theretofore purchasable
upon exercise of such Warrant by a fraction, the numerator of which shall be the
number of Common Shares outstanding immediately after such sale or issuance and
the denominator of which shall be the number of Common Shares outstanding
immediately prior to such sale or issuance plus the number of Common Shares
which the aggregate consideration received (determined as provided below) for
such sale or issuance would purchase at such Current Market Value per Common
Share. For purposes of the calculation provided for in this Section 4.1(c), the
Common Shares which the holder of any such Right shall be entitled to subscribe
for or purchase shall be deemed to be issued and outstanding as of the date of
such sale and issuance of such Right and the consideration received by the
Company therefor shall be deemed to be the consideration received by the Company
for such Right, plus the consideration or premiums stated in such Right to be
paid for the Common Shares covered thereby. In case the Company shall sell and
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issue any Right together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per Common Share" and the
"consideration received by the Company" for purposes of this Section 4.1(c), the
Board shall determine, in good faith, the fair value of the Right then being
sold as part of such unit. For purposes of this paragraph, a "RIGHT" shall mean
any right, option, warrant or convertible or exchangeable security containing
the Right to subscribe for or acquire one or more Common Shares, excluding the
Warrants.
(d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR
CONVERTIBLE SECURITIES. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Common Shares referred to in
Section 4.1(a) above and excluding distributions in connection with the
dissolution, liquidation or winding-up of the Company which shall be governed by
Section 4.1(j) and distributions of securities referred to in Section 4.1(a),
Section 4.1(b) or Section 4.1(c)), then, in each case, the number of Common
Shares purchasable after the record date for such distribution upon the exercise
of each Warrant shall be determined by multiplying the number of Common Shares
purchasable upon the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Value per
Common Share immediately prior to the record date for such distribution and the
denominator of which shall be the Current Market Value per Common Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the evidences of its
indebtedness, or assets or other distributions so distributed attributable to
one Common Share; PROVIDED, HOWEVER, that in lieu of making the foregoing
adjustment the Company may make the same or a like distribution to the Holders
of the Warrants as if their Warrants had been exercised on the day immediately
preceding the record date of such distribution on the terms (subject to any
adjustment pursuant to Section 4.1(a) for a prior event) on which such Warrants
could have been exercised on such date.
Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES.
Upon the expiration of any rights, options, warrants or conversion or exchange
privileges (including, without limitation, any Rights) that have previously
resulted in an adjustment hereunder, if any thereof shall not have been
exercised, exchanged or converted, the Exercise Price and the number of Common
Shares purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
Common Shares so issued were the Common Shares, if any, actually issued or sold
upon the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including, without limitation, any Rights) and
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(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
(including, without limitation, any Rights) whether or not exercised.
(f) CURRENT MARKET VALUE. For the purposes of any
computation under this Article IV, the "CURRENT MARKET VALUE" per Common Share
or of any other security (herein collectively referred to as a "security") at
any date herein specified shall be:
(i) if the security is not registered under the Exchange
Act, the value of the security (1) most recently determined as of a
date within the six months preceding such date by an Independent
Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or (2) if no
such determination shall have been made within such six-month period or
if the Company so chooses, determined as of such date by an Independent
Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k); (PROVIDED that
no Financial Expert shall be deemed not to be an Independent Financial
Expert solely by reason of having made one or more such valuations), or
(ii) if the security is registered under the Exchange Act,
the average of the closing sales prices of the security for the 20
consecutive trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the
closing sales prices for all of the trading days before such date for
which closing sales prices are available. The closing sales price for
each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any national securities exchange, the closing
sales price, regular way, on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day
on the principal national securities exchange on which such security is
listed or admitted, as determined by the Board in good faith, (B) in
the case of a security not then listed or admitted to trading on any
national securities exchange, the last reported sale price on such day,
or if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not
then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or a newspaper
of general circulation in the Borough of Manhattan, City and State of
New York customarily published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the
most recent day (not more than 30 days prior to the date in question)
for which prices have been so reported and (D) if there are no bid and
asked prices reported during the
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30 days prior to the date in question, the Current Market Value of the
security shall be determined as if the security were not registered
under the Exchange Act.
(g) CONSIDERATION RECEIVED. For purposes of any computation
respecting consideration received pursuant to this Section 4.1, the following
shall apply:
(i) in the case of the issuance of Common Shares for cash,
the consideration shall be the amount of such cash;
(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board (irrespective of the accounting
treatment thereof), whose determination shall be conclusive and
described in reasonable detail in a board resolution which shall be
provided as soon as practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options, warrants
or securities convertible into or exchangeable for Common Shares
(including, without limitation, any Rights), the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Company for the issuance of such rights, options,
warrants or securities convertible into or exchangeable for Common
Shares, plus the additional minimum consideration, if any, to be
received by the Company upon the exercise, conversion or exchange
thereof (the consideration in each case to be determined in the same
manner as provided in clauses (i) and (ii) of this Section 4.1(g));
PROVIDED that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith.
(h) DE MINIMIS ADJUSTMENTS. No adjustment in the number of
Common Shares purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the number
of Common Shares purchasable upon the exercise of each Warrant; PROVIDED,
HOWEVER, that any adjustments which by reason of this Section 4.1(h) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(i) ADJUSTMENT OF EXERCISE PRICE. (i) Whenever the number of
Common Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per Common Share payable upon exercise of
such Warrant shall be adjusted (calculated to the nearest $.01) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which
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shall be the number of Common Shares purchasable upon the exercise of each
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Common Shares so purchasable immediately thereafter.
(ii) Following any adjustment to the Exercise Price pursuant
to this Article IV, the Adjusted Exercise Price shall never be less
than an amount (such amount per Common Share, the "Minimum Price")
equal to the greater of the par value per Common Share and the minimum
par value required by Luxembourg law at the time of such adjustment,
except to the extent permitted by applicable law. "Adjusted Exercise
Price" means the Exercise Price payable per Common Share, when adjusted
pursuant to this Article IV.
(iii) If, following any adjustment to the Exercise Price
pursuant to this Article IV, the Minimum Price is payable at the time
of exercise by Holders, and but for the provisions of the preceding
clause (ii), the Adjusted Exercise Price would (except to the extent
permitted by applicable law) equal an amount that is less than the
Minimum Price at the time of such adjustment (such lesser amount, the
"Sub-Par Price"), the Company will take such action that the Board of
Directors may in good faith determine is fair and appropriate to
protect the rights of the Holders against dilution or other impairment
as contemplated by this Article IV; PROVIDED, HOWEVER, that no such
action shall cause the aggregate amount payable per Warrant, after
giving effect to this clause (iii) (and taking into account any
payments to be received hereunder) to be greater than the aggregate
amount payable per Warrant which would have been payable but for the
preceding clause (ii). Such action may include, without limitation:
(A) payment to the Holder of each Warrant of
liquidated damages per Common Share purchasable upon Exercise
equal to the Minimum Price less the Sub-Par Price; or
(B) reduction, if permitted by applicable law, of
the par value per Common Share.
Any such payment shall be made or any other such action shall
be consummated not later than the earlier of (a) 180 days following the
consummation of the transaction giving rise to such adjustment and (b)
with respect to each Warrant, on the date such Warrant is exercised. If
such transaction is annulled, rescinded, revoked, or reversed or
otherwise canceled, or any subsequent adjustment is made pursuant to
this Article IV such that the adjusted Exercise Price is greater than
or equal to the Minimum Price (without applying the preceding clause
(ii) to that or any preceding adjustment pursuant to this Article IV),
then (x) in the case of such a payment, if such payment has not yet
been made to a Holder by the Company (or by any agent of the Company,
including for this purpose the Warrant Agent), such payment may be
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annulled, rescinded, revoked or otherwise canceled and any deposit made
in respect thereof returned to the Company and (y) in the case of any
such other action, such other action may be annulled, rescinded,
revoked, reversed or otherwise canceled.
(iv) If after an adjustment, a Holder of a Warrant upon
exercise of it may receive shares of two or more classes in the capital
of the Company, the Company shall determine the allocation of the
adjusted Exercise Price between such classes of shares in a manner that
the Board deems fair and equitable to the Holders. After such
allocation, the exercise privilege and the Exercise Price of each class
of shares shall thereafter be subject to adjustment on terms comparable
to those applicable to Common Shares in this Article IV.
(v) Such adjustment shall be made successively whenever any
event listed above shall occur.
(j) CONSOLIDATION, MERGER, ETC. (i) Subject to the
provisions of Subsection (ii) below of this Section 4.1(j), in case of the
consolidation of the Company with, or merger of the Company with or into, or of
the sale of all or substantially all of the properties and assets of the Company
to, any Person, and in connection therewith consideration is payable to holders
of Common Shares (or other securities or property purchasable upon exercise of
Warrants) in exchange therefor, the Warrants shall remain subject to the terms
and conditions set forth in this Agreement and each Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares in the capital or other securities or property (including cash)
of or from the Person resulting from such consolidation or surviving such merger
or to which such sale shall be made or of the parent of such Person, as the case
may be, that would have been distributable or payable on account of the Common
Shares if such Holder's Warrants had been exercised immediately prior to such
merger, consolidation or sale (or, if applicable, the record date therefor); and
in any such case the provisions of this Agreement with respect to the rights and
interests thereafter of the Holders of Warrants shall be appropriately adjusted
by the Board in good faith so as to be applicable, as nearly as may reasonably
be, to any shares, other securities or any property thereafter deliverable on
the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges
or consolidates with, or sells all or substantially all of its property
and assets to, another Person (other than an Affiliate of the Company)
and consideration is payable to holders of Common Shares in exchange
for their Common Shares in connection with such merger, consolidation
or sale which consists solely of cash, or (y) in the event of the
dissolution, liquidation or winding up of the Company, then the Holders
of Warrants shall be entitled to receive payments or distributions as
of the date of such event on an equal basis with, and on the same day
as, holders of Common Shares (or other securities purchasable upon
exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less an amount equal to the Exercise
Price.
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Upon receipt of such payment, if any, the rights of a Holder shall
terminate and cease and such Holder's Warrants shall expire. If the
Company has made a Repurchase Offer that has not expired at the time of
such transaction, the holders of the Warrants will be entitled to
receive the higher of (i) the amount payable to the holders of the
Warrants described above and (ii) the Repurchase Price payable to the
holders of the Warrants pursuant to such Repurchase Offer. In case of
any such merger, consolidation or sale of assets, the surviving or
acquiring Person or, in the event of any dissolution, liquidation or
winding up of the Company, the Company shall deposit promptly with the
Warrant Agent the funds or other consideration, if any, necessary to
pay the Holders of the Warrants. After receipt of such deposit from
such Person or the Company and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment by delivering a
check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is
appropriate) to such Person or Persons as it may be directed in writing
by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the Current
Market Value shall be deemed to be equal to the value set forth in the Value
Report (as defined below) as determined by an Independent Financial Expert,
which shall be selected by the Board in its sole discretion, and retained on
customary terms and conditions, using one or more valuation methods that the
Independent Financial Expert, in its best professional judgment, determines to
be most appropriate. The Company shall cause the Independent Financial Expert to
deliver to the Company, with a copy to the Warrant Agent, within 90 days of the
appointment of the Independent Financial Expert, a value report (the "VALUE
REPORT") stating the value of the Common Shares and other securities or
property, if any, being valued as of the Valuation Date and containing a brief
statement as to the nature and scope of the examination or investigation upon
which the determination of value was made. The Warrant Agent shall have no duty
with respect to the Value Report of any Independent Financial Expert, except to
keep it on file and available for inspection by the Holders. The determination
as to Current Market Value in accordance with the provisions of this Section
4.1(k) shall be conclusive on all Persons. The Independent Financial Expert
shall consult with management of the Company in order to allow management to
comment on the proposed value prior to delivery to the Company of any Value
Report.
(l) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other
exception contained in this Section 4.1, and in addition thereto, no adjustment
need be made for:
(i) grants or exercises of Rights granted, directly or
indirectly (including but not limited to through the LLC or any
subsidiary of the Company), to or for the benefit of Management
Investors or Beneficial Investors or Common Shares issued or granted,
directly or indirectly (including but not limited to through the LLC or
any Subsidiary of the Company), to or for the benefit of Management
Investors or Beneficial Investors, whether or not upon the exercise,
exchange or conversion of any
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such Rights (to the extent that (I) all such securities (other than
securities described in clause (ii) and (vi)) directly or indirectly
issued or granted to Management Investors and Beneficial Investors do
not have an aggregate value in excess of 15% and (II) all such
securities, directly or indirectly, issued or granted to Beneficial
Investors do not exceed 2%, in either case of the Common Shares of the
Company on a fully diluted basis, as determined in good faith by the
Board);
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company entered into prior to the date of
the issuance of the Warrants;
(iii) rights to purchase Common Shares pursuant to a Company
plan for reinvestment of dividends or interest;
(iv) a decrease in the par value of the Common Shares
(including a change from par value to no par value);
(v) a transaction referred to in this Section 4.1 if Holders
representing a majority of the aggregate Common Shares purchasable upon
exercise of the Warrants at such time agree to participate in any such
transaction on the same basis on which holders of Common Shares
participate in such transaction; and
(vi) Common Shares or Rights issued or granted in connection
with the Existing Equity Agreements (including any Common Shares
acquired by the LLC with the proceeds of any issuance of LLC interests
to Management Investors).
(vii) bona fide public offerings or private placements in
compliance with Section 4(2) of the Securities Act (including
transactions pursuant to Rule 144A thereunder), Regulation D or
Regulation S under the Securities Act (or any successor rule or
exemption in effect from time to time), involving at least one
investment bank of national reputation, if (i) in the case of any
security trading on any national securities exchange or in the over the
counter market, or of a security directly or indirectly convertible or
exchangeable for any such security (the latter security being a
"REFERENCE SECURITY"), such security (or the Reference Security as
applicable) is sold to investors at a price at least equal to the
closing sale, bid or ask price (whichever is customary) of such
security (or the Reference Security as applicable) on the date of the
public offering or private placement, or (ii) either (x) the security
or Reference Security is issued as part of a public offering or a
private placement of debt securities or (y) any security is issued as
part of a bona fide private placement or public offering, in each case
on a firm commitment basis; PROVIDED that any such private placement,
directly or indirectly, is to 10 or more beneficial holders.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
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SECTION 4.2. NOTICE OF ADJUSTMENT. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall cause, so far as it is
able, the Warrant Agent promptly to mail, at the expense of the Company, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of the Auditors setting forth the number of Common Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not at
any time be under any duty or responsibility to any Holders to determine whether
any facts exist which may require any adjustment of the Exercise Price or the
number of Common Shares purchasable on exercise of the Warrants or any of the
other adjustments set forth in Section 4.1, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment, or the validity or value (or the kind or amount) of
any Common Shares which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Common Shares or share
certificates upon the exercise of any Warrant.
SECTION 4.3. STATEMENT ON WARRANTS. Irrespective of any
adjustment in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrants initially purchasable pursuant to this Agreement.
SECTION 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC. In case at
any time after the date hereof and prior to 5:00 p.m., New York City time, on
the Expiration Date, there shall be any (i) consolidation or merger involving
the Company or sale, transfer or other disposition of all or substantially all
of the Company's property, assets or business (except a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares receive no consideration in respect of their shares) or
(ii) any other transaction contemplated by Section 4.1(j)(ii) above, then, in
any one or more of such cases, the Company shall cause to be mailed to the
Warrant Agent and shall cause the Warrant Agent to mail, at Company's expense,
to each Holder of a Warrant, at the earliest practicable time (and, in any
event, not less than 20 days before any date set for definitive action), notice
of the date on which such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Exercise Price and the kind and amount of the Common Shares and other
securities, money and other property deliverable upon exercise of the Warrants.
Such notice
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shall also specify the date as of which the holders of record of the Common
Shares or other securities or property purchasable upon exercise of the Warrants
shall be entitled to exchange their shares for securities, money or other
property deliverable upon such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be.
SECTION 4.5. FRACTIONAL INTERESTS. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Common Shares which shall be purchasable upon such exercise
thereof shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If any
fraction of a Common Share would, except for the provisions of this Section 4.5,
be purchasable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
SECTION 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any
case in which this Article IV shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event (i) issuing to the holder
of any Warrant exercised after such record date the Common Shares and other
shares in the capital of the Company, if any, purchasable upon such exercise
over and above the Common Shares and other shares in the capital of the Company,
if any, purchasable upon such exercise and (ii) paying such holder any amount in
cash in lieu of a fractional share; PROVIDED, HOWEVER, that the Company shall
deliver to such Holder a due bill or other appropriate instrument evidencing
such Holder's right to receive such additional Common Shares, other shares and
cash upon the occurrence of the event requiring such adjustment.
Section 4.7. PAR VALUE; VALID ISSUANCE. The Company will not
increase the par value of the Common Shares above the Exercise Price (as
adjusted hereunder from time to time), except to the extent required by
applicable law. The Company will take all such corporate action, to the extent
permitted by applicable law (including, without limitation, reducing the par
value thereof), as may be necessary or appropriate in order that the Company may
validly and legally issue stock upon the exercise of Warrants.
Section 4.8. INITIAL PUBLIC OFFERING. Notwithstanding anything
to the contrary herein contained, if the Company conducts an initial public
offering of equity securities (other than the Common Shares and
non-particpatory, nonconvertible preferred shares and Excepted Shares) or a
Parent Entity or a subsidiary of the Company conducts an initial public offering
of equity securities (other than non-participatory, nonconvertible preferred
shares and Excepted Shares), the Company will give the Holders the opportunity
to convert such Warrants into warrants to purchase such equity securities and
such Common Shares or such other securities that have been received by the
Holders upon the exercise of Warrants into such equity securities. Such
conversion opportunity will be on terms and conditions
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determined to be fair and reasonable by the Company's Board. "Excepted Shares"
means securities issued in connection with an a business combination that could
be registered on Form S-4 or F-4 under the Securities Act (or any equivalent
successor form).
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any
time, or from time to time, to decrease the Exercise Price of the Warrants
and/or increase the number of shares issuable upon the exercise of the Warrants
to the extent permitted by Luxembourg law.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance of
any new Warrant Certificate under this Article VI, 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 other expenses (including the fees and
expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Article VI in lieu of any
lost, stolen or destroyed Warrant Certificate shall constitute a contractual
obligation of the Company whether or not the allegedly lost, stolen or destroyed
Warrant Certificates shall be at any time enforceable by anyone and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
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ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall, subject to the following paragraph, at all
times reserve and keep available such number of its authorized but unissued
Common Shares deliverable upon exercise of the Warrants as will be sufficient to
permit the exercise in full of all outstanding Warrants and will cause
appropriate evidence of ownership of such Common Shares to be delivered to the
Warrant Agent upon its request for delivery thereof upon the exercise of the
Warrants. The Company covenants that all Common Shares that may be issued upon
the exercise of the Warrants will, upon issuance, be duly and validly issued,
fully paid and nonassessable, free of pre-emptive rights and free from all
taxes, liens, charges and security interests created by or through the Company.
The shareholders of the Company may be required to reauthorize
and reserve the Common Stock purchasable upon exercise of all outstanding
Warrants. To the extent such reauthorization or reservation is required by
applicable law, the Company hereby agrees (to the extent permitted by applicable
law) take any and all actions required, and Carrier One, L.L.C. will (to the
extent permitted by applicable law) to vote any shares of the Company's Common
Stock held by it, to reauthorize and reserve the Common Stock for issuance upon
exercise of the Warrants at least 31 days prior to the date such reauthorization
would be required under Luxembourg law (a "Reauthorization Date"). In connection
with any transfer by Carrier One, L.L.C. of the Company's Common Stock held by
it (other than to any Management Investor or pursuant to any public offering),
Carrier One, L.L.C. agrees to cause the transferee of such shares of Common
Stock to be bound by this paragraph. The Company will notify each Holder of
Warrants, on the date that is 30 days prior to any Reauthorization Date, if the
Common Stock has not been so reauthorized and reserved by such date.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE. The Warrant Certificates
shall be issued in registered form only. The Warrant Agent shall keep at its
office a register for the registration of Warrant Certificates and transfers or
exchanges of Warrant Certificates as herein provided and other appropriate data
as determined by the Warrant Agent. The Company shall, upon reasonable notice to
the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligations of
the Company, evidencing the same obligations, and entitled to the same benefits
under this
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Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
The Warrants shall initially be issued as part of the issuance
of the Dollar Units. Prior to the Separation Date, the Warrants may not be
transferred or exchanged separately from, but may be transferred or exchanged
only together with, the Dollar Notes issued as part of such Dollar Units.
A Holder may transfer its Warrants only by written application
to the Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Owners of a
beneficial interest in a Global Warrant will not be entitled to have Warrants
registered in their names, and will not receive or be entitled to receive
Certificated Warrants except pursuant to Section 2.4. Furthermore, any holder of
a Global Warrant shall, by acceptance of such Global Warrant, agree that
transfers of beneficial interests in such Global Warrant may be effected only
through a book-entry system maintained by the holder of such Global Warrant (or
its agent), and that ownership of a beneficial interest in the Warrants
represented thereby shall be required to be reflected in a book-entry. When
Warrant Certificates are presented to the Warrant Agent with a request to
register the transfer or to exchange them for an equal amount of Warrants of
other authorized denominations, the Warrant Agent shall register such transfer
or make such exchange as requested if its requirements for such transactions are
met. To permit registrations of transfers and exchanges, the Company shall
execute Warrant Certificates at the Warrant Agent's request. No service charge
shall be made for any registration of transfer or exchange of Warrants, 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 of Warrants.
SECTION 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS.
(a) The Global Warrants initially shall (i) be registered in the name of the
Depositary for such Global Warrant or the nominee of such Depositary, (ii) be
delivered to the Warrant Agent as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Agreement with respect to the Global
Warrants held on their behalf by the Depositary or the Warrant Agent as its
custodian, and the Depositary may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the absolute owner of such
Global Warrant for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Warrant Agent or any agent of the
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Company or the Warrant Agent, from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to
transfers of such Global Warrant in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in
the Global Warrants may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 8.3 hereof.
Certificated Warrants shall be transferred to beneficial owners in exchange for
their beneficial interests in the Restricted Global Warrant, (i) if the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Warrant and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) if there is a Default.
(c) In connection with the transfer of the entire Restricted
Global Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Global Warrants shall be surrendered to
the Warrant Agent for cancellation, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global
Warrants, Certificated Warrants of authorized denominations representing, in the
aggregate, the number of Warrants theretofore represented by the Global
Warrants, as the case may be.
(d) Any Certificated Warrant delivered in exchange for an
interest in a Global Warrant pursuant to paragraph (b) or (c) of this Section
shall, except as otherwise provided by paragraph (d) of Section 8.3 hereof bear
the legend regarding transfer restrictions applicable to the Certificated
Warrant set forth in Section 2.2.
(e) The registered holder of a Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Agreement or the Warrants.
(f) Any beneficial interest in one of the Global Warrants
that is transferred to a person who takes delivery in the form of an interest in
any other Global Warrant will, upon transfer, cease to be an interest in such
Global Warrant and become an interest in such other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
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SECTION 8.3. SPECIAL TRANSFER PROVISIONS. The following
provisions shall apply:
(a) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of Warrants to a QIB:
(i) If the Warrants to be transferred are represented by (x)
IAI Certificated Warrants, the Warrant Agent shall register the
transfer if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Warrant Certificate
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Warrant Certificate stating, or has otherwise
advised the Company and the Warrant Agent in writing, that it is
purchasing the Warrants 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 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 or (y) an interest in
the Global Warrants, the transfer of such interest may be effected only
through the book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Warrants to be transferred are represented by IAI Certificated
Warrants, upon receipt by the Warrant Agent of the documents referred
to in clause (i) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and an increase in the
amount of Warrants represented by the Restricted Global Warrant in an
amount equal to the amount of Warrants represented by the IAI
Certificated Warrants to be transferred, and the Warrant Agent shall
cancel the IAI Certificated Warrants.
(b) TRANSFERS TO NON-U.S. PERSON AT ANY TIME. The following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a Non-U.S. Person (excluding QIBs):
(i) The Warrant Agent shall register any proposed transfer of
Warrants to a Non-U.S. Person only (x) upon receipt of a certificate
substantially in the form of Exhibit B-1 from the proposed transferor
and (y) prior to February 19, 2000, if the proposed transferee has
delivered to the Warrant Agent and the Company a certificate
substantially in the form of Exhibit B-2 hereto.
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(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant, upon receipt by
the Warrant Agent and the Company of the documents referred to in
clause (i) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Company shall
execute and the Warrant Agent shall countersign Certificated Warrants
in an amount equal to the number of Warrants represented by the
Restricted Global Warrant to be transferred and the Warrant Agent shall
decrease the number of Warrants represented by the Restricted Global
Warrant so transferred.
(iii) After February 19, 2000, if the proposed transferee is
an Agent Member, and the Warrants to be transferred are represented by
Certificated Warrants, upon receipt by the Warrant Agent of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures,
the Warrant Agent shall reflect on its books and records the date and
an increase in the amount of Warrants represented by the Regulation S
Global Warrant in an amount equal to the amount of Warrants represented
by the Certificated Warrants to be transferred, and the Warrant Agent
shall cancel the Certificated Warrants.
(c) TRANSFERS TO ANY OTHER PERSON. The following provisions
shall apply with respect to the registration of any proposed transfer of
Warrants to any Person not specified in paragraphs (a) and (b) above (including
any Institutional Accredited Investor which is not a QIB):
(i) The Warrant Agent shall register any proposed transfer
of Warrants to any such Person if (x) the transferor has delivered to
the Warrant Agent and the Company a certificate substantially in the
form of Exhibit C-1 hereto and, if required by paragraph (d) thereof,
an opinion of counsel to the effect set forth therein and (y) the
proposed transferee has delivered to the Warrant Agent and the Company
a certificate substantially in the form of Exhibit C-2 hereto and an
opinion of counsel acceptable to the Company that such transfer is in
compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant, upon receipt by
the Warrant Agent and the Company of the documents referred to in
clause (i) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Company shall
execute and the Warrant Agent shall countersign Certificated Warrants
in an amount equal to the number of Warrants represented by the
Restricted Global Warrant to be transferred and the Warrant Agent shall
decrease the number of Warrants represented by the Restricted Global
Warrant so transferred.
(d) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the
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transfer, exchange or replacement of Warrant Certificates bearing the Private
Placement Legend, the Warrant Agent shall deliver only Warrant Certificates that
bear the Private Placement Legend unless there is delivered to the Warrant Agent
an opinion of counsel reasonably satisfactory to the Company and its Counsel and
the Warrant Agent to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(e) TRANSFERS OF INTERESTS IN THE LEGENDED OFFSHORE
CERTIFICATED WARRANT AND THE LEGENDED REGULATION S GLOBAL WARRANT. The following
provisions shall apply with respect to registration of any proposed transfer of
interests in the Offshore Certificated Warrants and the Regulation S Global
Warrant, each bearing the Private Placement Legend:
(i) The Registrar shall register the transfer of any Warrant
(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 B-1 hereto or (y) if the proposed transferee is
a QIB and the proposed transferor has checked the box provided for on
the form of Warrant stating, or has otherwise advised the Company and
the Warrant Agent in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant stating, or has
otherwise advised the Company and the Warrant Agent in writing, that it
is purchasing the Warrant for its own account or an account with
respect to which it exercises sole investment discretion and that 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 an Agent Member, upon
receipt by the Warrant Agent of the documents referred to in clause
(i)(y) above and instructions given in accordance with the Depositary's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and an increase in the number of
Warrants represented by the Restricted Global Warrant, in an amount
equal to the number of Warrants represented by the such Regulation S
Global Warrant or Offshore Certificated Warrant or to be transferred,
and the Warrant Agent shall decrease the number of Warrants represented
by the such Regulation S Global Warrant or cancel the legended Offshore
Certificated Warrant, as the case may be.
(f) TRANSFERS OF INTERESTS IN THE UNLEGENDED REGULATION S
GLOBAL WARRANT OR UNLEGENDED OFFSHORE CERTIFICATED WARRANTS. The Warrant Agent
shall register any transfer of interests in the unlegended Regulation S Global
Warrant or unlegended Offshore Certificated Warrants, without requiring any
additional certification.
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(g) GENERAL. (i) By its acceptance of any Warrants
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of such Warrants acknowledges the restrictions on transfer of such
Warrants set forth in this Agreement and in the Private Placement Legend and
agrees that it will transfer such Warrants only as provided in this Agreement.
The Warrant Agent shall not register a transfer of any Warrants unless such
transfer complies with the restrictions on transfer of such Warrants set forth
in this Agreement. In connection with any transfer of Warrants, each Holder
agrees by its acceptance of Warrants to furnish the Warrant Agent or the Company
such certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; PROVIDED that the Warrant Agent shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section 8.2 hereof
or this Section 8.3. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Warrant Agent.
SECTION 8.4. SURRENDER OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such cancelled Warrant Certificates as the Company may
direct in writing.
ARTICLE IX
WARRANT HOLDERS
SECTION 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER. The
Company and the Warrant Agent may deem and treat the registered Holder(s) of the
Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Accordingly,
the Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
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or other claim to or interest in the Warrants on the part of any person other
than such registered Holder, whether or not it shall have express or other
notice thereof. Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to consent to any
action of the shareholders, to receive dividends or other distributions, to
exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
SECTION 9.2. RIGHT OF ACTION. All rights of action with
respect to this Agreement are vested in the Holders of the Warrants, and any
Holder of any Warrant, without the consent of the Warrant Agent or the Holders
of any other Warrant, may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company suitable to enforce, or otherwise in respect of, such
Holder's right to exercise such Warrants in the manner provided in the Warrant
Certificate representing such Warrants and in this Agreement.
ARTICLE X
REMEDIES
SECTION 10.1. DEFAULTS. It shall be deemed to be a "DEFAULT"
with respect to the Company's (or its successor's) obligations under this
Agreement if:
(a) a Repurchase Event occurs and the Company (or its
successor or an affiliate) shall fail to make a Repurchase Offer
pursuant to Section 3.4 hereof; or
(b) the Company (or its successor or an affiliate) shall
fail to purchase the Warrants pursuant to the Repurchase Offer in
accordance with the provisions of Section 3.4 hereof.
SECTION 10.2. Omitted.
SECTION 10.3. REMEDIES; NO WAIVER. Notwithstanding any other
provision of this Agreement, if a Default occurs and is continuing, the Holders
of the Warrants may pursue any available remedy to collect the Repurchase
Obligation or to enforce the performance of any provision of this Agreement. A
delay or omission by any Holder of a Warrant in exercising, or a failure to
exercise, any right or remedy arising out of a Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Default. All
remedies are cumulative to the extent permitted by law.
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ARTICLE XI
THE WARRANT AGENT
SECTION 11.1. DUTIES AND LIABILITIES. The Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth, by all of which the Company and
the Holders of Warrants, by their acceptance thereof, shall be bound. The
Warrant Agent shall not, by countersigning Warrant Certificates or by any other
act hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any Common Shares issued upon exercise of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of Common Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the proceeds of the
exercise of any Warrant. The Warrant Agent shall not have any duty to calculate
or determine any adjustments with respect to either the Exercise Price or the
kind and amount of Common Shares receivable by Holders upon the exercise of
Warrants required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates or for any action taken,
suffered or omitted by it in good faith in the belief that any Warrant
Certificate or any other documents or any signatures are genuine or properly
authorized, (b) responsible for any failure on the part of the Company to comply
with any of its covenants and obligations contained in this Agreement or in the
Warrant Certificates or (c) liable for any act or omission in connection with
this Agreement except for its own gross negligence, bad faith or willful
misconduct. The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from a Senior Officer of the
Company and to apply to any such Senior Officer for instructions (which
instructions will be promptly given in writing when requested) and the Warrant
Agent shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with the instructions of any such Senior Officer;
PROVIDED, HOWEVER, that, in its discretion, the Warrant Agent may, in lieu
thereof, accept other evidence of such or may require such further or additional
evidence as it may deem reasonable. The Warrant Agent shall not be liable for
any action taken with respect to any matter in the event it requests
instructions from the Company as to that matter and does not receive such
instructions within a reasonable period of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys, agents or employees, and the Warrant Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees; PROVIDED that reasonable care has been
exercised with respect to the retention of any such attorney, agent or employee.
The Warrant Agent shall not be under any obligation or duty to institute, appear
in
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or defend any action, suit or legal proceeding in respect hereof, unless first
indemnified to its reasonable satisfaction. The Warrant Agent shall promptly
notify the Company in writing of any claim made or action, suit or proceeding
instituted against it arising out of or in connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or
cause to be delivered all such further acts, instruments and assurances as are
consistent with this Agreement and as may reasonably be required by the Warrant
Agent in order to enable it to carry out or perform its duties under this
Agreement.
The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement against the Warrant
Agent, whose duties and obligations shall be determined solely by the express
provisions hereof.
SECTION 11.2. RIGHT TO CONSULT COUNSEL. The Warrant Agent may
at any time consult with legal counsel (who may be legal counsel for the
Company), and the opinion or advice of such counsel shall be full and complete
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
SECTION 11.3. COMPENSATION; INDEMNIFICATION. The Company
agrees promptly to pay the Warrant Agent from time to time and in any case
within 30 days of receipt of an invoice, compensation for its services hereunder
as the Company and the Warrant Agent may agree from time to time, and to
reimburse it upon its request for reasonable fees or expenses and reasonable
counsel fees and expenses incurred in connection with the execution and
administration of this Agreement, and further agrees to indemnify the Warrant
Agent which shall include for purposes of this Section 11.3 its directors,
officers, agents or employees and save it harmless against any losses,
liabilities or expenses (including the fees and expenses of its counsel) arising
out of or in connection with the acceptance and administration of this Agreement
and under the Warrant Registration Rights Agreement, including, without
limitation, the reasonable costs and expenses of investigating or defending any
claim of such liability, except that the Company shall have no liability
hereunder to the extent that any such loss, liability or expense results from
the Warrant Agent's own gross negligence, bad faith or willful misconduct. The
obligations of the Company under this Section 11.3 shall survive the exercise
and the expiration of the Warrants, the termination of this Agreement and the
resignation or removal of the Warrant Agent in respect of services or expenses
incurred in connection with the Warrants or this Agreement.
SECTION 11.4. NO RESTRICTIONS ON ACTIONS. Nothing in this
Agreement shall be deemed to prevent the Warrant Agent and any shareholder,
director, officer or employee of
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the Warrant Agent from buying, selling or dealing in any of the Warrants or
other securities of the Company or becoming pecuniarily interested in
transactions in which the Company may be interested, or contracting with or
lending money to the Company or otherwise acting as fully and freely as though
it were not the Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
SECTION 11.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT.
The Warrant Agent may resign from its position as such and be discharged from
all further duties and liabilities hereunder (except liability arising as a
result of the Warrant Agent's own gross negligence, bad faith or willful
misconduct), after giving one month's prior written notice to the Company. The
Company may at any time remove the Warrant Agent upon one month's written notice
specifying the date when such discharge shall take effect, and the Warrant Agent
shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall mail to each
Holder of a Warrant, at the Company's expense, a copy of said notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal the Company shall appoint in writing a new warrant agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation by the resigning Warrant Agent or after
such removal, then the resigning or removed Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. After 30 days from receipt of, or giving, notice, as the
case may be, and pending appointment of a successor to the original Warrant
Agent, either by the Company or by such a court, the duties of the Warrant Agent
shall be carried out by the Company. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company doing business
under the laws of the United States or any state thereof, in good standing and
having a combined capital and surplus of not less than $25,000,000. The combined
capital and surplus of any such new warrant agent shall be deemed to be the
combined capital and surplus as set forth in the most recent annual report of
its condition published by such warrant agent prior to its appointment, PROVIDED
that such reports are published at least annually pursuant to law or to the
requirements of a federal or state supervising or examining authority. After
acceptance in writing of such appointment by the new warrant agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; however, the original Warrant Agent shall in
all events deliver and transfer to the successor Warrant Agent all property
(including, without limitation, documents and recorded information), if any, at
the time held hereunder by the original Warrant Agent and if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning or
removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file notice thereof with the resigning or removed
Warrant Agent and shall forthwith cause a copy of such notice to be mailed by
the successor Warrant Agent to each Holder of a Warrant. Failure to give any
notice provided for in this
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Section 11.5, however, or any defect therein, shall not affect the legality or
validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be. No Warrant Agent hereunder shall be liable
for any acts or omissions of any successor Warrant Agent.
SECTION 11.6. SUCCESSOR WARRANT AGENT. Any corporation into
which the Warrant Agent or any new warrant agent may be merged or converted, or
any corporation resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, PROVIDED
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 11.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. MONIES DEPOSITED WITH THE WARRANT AGENT. The
Warrant Agent shall not be required to pay interest on any monies deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any monies, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the purpose
for which such monies, securities or other property shall have been deposited;
but such monies, securities or other property need not be segregated from other
funds, securities or other property except to the extent required by law. Any
monies, securities or other property deposited with the Warrant Agent for
payment or distribution to the Holders that remains unclaimed for one year after
the date the monies, securities or other property was deposited with the Warrant
Agent shall be delivered to the Company upon its request therefor.
SECTION 12.2. PAYMENT OF TAXES. Subject to Article VI hereof,
all Common Shares purchasable upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company shall
pay any taxes and other governmental charges that may be imposed under the laws
of Luxembourg and the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery thereof
upon exercise of Warrants (other than taxes on or measured by income imposed on
any Holder). The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property
purchasable upon the exercise of the Warrants) or payment of cash to any Person
other than the Holder of a Warrant Certificate
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surrendered upon the exercise of a Warrant and in case of such transfer or
payment, the Warrant Agent and the Company shall not be required to issue any
share certificate or pay any cash until such tax or charge has been paid or it
has been established to the Warrant Agent's and the Company's satisfaction that
no such tax or charge is due.
SECTION 12.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF
THE COMPANY. Except as otherwise provided herein, the Company will not merge
into or consolidate with any other Person, or sell or otherwise transfer all or
substantially all of its property and assets to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, by supplemental agreement reasonably
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement or contained in the Warrants to be
performed and observed by the Company.
SECTION 12.4. REPORTS TO HOLDERS. At all times from and after
the earlier of (i) the Registration with respect to the Notes and (ii) the date
that is six months after the Closing Date, in either case, whether or not the
Company is then required to file reports with the Commission, the Company shall
file with the Commission to the extent then permitted by the Exchange Act and by
the Commission, all such information on an appropriate available form as it
would be required to file with the Commission by Section 13(a) or 15(d) under
the Exchange Act if it were a U.S. company and subject thereto, including
information required by annual, quarterly or current reports whether or not
required to be so filed. The Company shall supply the Warrant Agent and each
Holder or shall supply to the Warrant Agent for forwarding to all such Holders,
without cost to such Holders, copies of such reports and other information. The
Warrant Agent's receipt of such reports and other information shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Warrant Agent is
entitled to rely exclusively on Officers' Certificates). In addition, at all
times prior to the earlier of the date of the Registration and the date that is
six months after the Closing Date, the Company shall, at its cost, supply to the
Warrant Agent, for forwarding to all Holders, without cost to such Holders,
quarterly and annual reports substantially equivalent to those described above
or which would otherwise be required by the Exchange Act, commencing with the
report for the fiscal quarter ending immediately after the Closing Date;
PROVIDED that the Company may deliver copies of the registration statement
(including pre-effective amendments thereto) with respect to the exchange offer
for the Notes to the extent it contains the information that would have been
required in such reports. In addition, at all times prior to the Registration,
upon the request of any such holder or any prospective purchaser of the Warrants
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A.
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SECTION 12.5. NOTICES; PAYMENT. (a) Except as otherwise provided in
Section 12.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
With a copy to:
Carrier 1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
To the Warrant Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Payment of the Exercise Price shall be made in accordance with the
provisions of this Agreement at the office of the Warrant Agent set forth above.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing by registered mail, return receipt requested, to the
Holders at their last
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known addresses appearing on the register maintained by the Warrant Agent. The
Company hereby irrevocably authorizes the Warrant Agent, in the name and at the
expense of the Company, to mail any such notice upon receipt thereof from the
Company. Any notice that is mailed in the manner herein provided shall be
conclusively presumed to have been duly given when mailed, whether or not the
Holder receives the notice.
SECTION 12.6. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the Holders from time to time of the Warrants.
Nothing in this Agreement is intended or shall be construed to confer upon any
Person, other than the Company, the Warrant Agent and the Holders of the
Warrants, any right, remedy or claim under or by reason of this Agreement or any
part hereof.
SECTION 12.7. COUNTERPARTS. This Agreement may be executed manually or
by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
SECTION 12.8. AMENDMENTS. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; PROVIDED that in either case the Company determines
in good faith that such changes or corrections do not and will not adversely
affect, alter or change the rights, privileges or immunities of the Holders of
Warrants. Any other amendment or supplement to this Agreement may be effected
with the written consent of the Holders of a majority of the then outstanding
Warrants. In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by the
Company or any Affiliate of the Company shall be disregarded and deemed not to
be outstanding. Upon the Warrant Agent's request, the Company shall promptly
provide an Officer's Certificate and Opinion of Counsel which provide all
conditions precedent to adoption of an amendment that have been satisfied, which
Opinion of Counsel may be subject to customary or otherwise appropriate
assumptions and qualifications and may rely on such Officer's Certificate as to
any matters of fact.
SECTION 12.9. HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 12.10. COMMON SHARES LEGEND. Unless and until the Common
Shares purchasable upon the exercise of the Warrants are registered under the
Securities Act, or
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unless otherwise agreed by the Company and the Holder thereof, (a) such Common
Shares will bear a legend to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT)
(AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON
THE DATE OF SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT AND REGISTRAR) AND AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(D) TO A PERSON OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT THAT, FOR ANY
TRANSFER PRIOR TO FEBRUARY 19, 2000, FURNISHES TO THE TRANSFER AGENT
AND REGISTRAR, PRIOR TO SUCH TRANSFER, A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
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AGENT AND REGISTRAR), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON SHARES REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE WITHIN
THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT AND
REGISTRAR. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF
THE TRANSFER AGENT AND REGISTRAR AND 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 IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. 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. THE WARRANT AGREEMENT
CONTAINS A PROVISION REQUIRING THE TRANSFER AGENT AND REGISTRAR TO
REFUSE TO REGISTER ANY TRANSFER OF THE COMMON SHARES REPRESENTED BY
THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Common Share transferred pursuant to Regulation S prior to
February 19, 2000 will bear a legend to the following effect:
HEDGING TRANSACTIONS INVOLVING THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT.
SECTION 12.11. THIRD PARTY BENEFICIARIES. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be
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bound by the obligations of Holders generally as set forth herein and as such
obligations may be applicable to such Holder.
SECTION 12.12. TERMINATION. Except as otherwise specified herein, this
Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
SECTION 12.13. METHOD OF PAYMENT. The U.S. dollar is the sole currency
of account and payment for all sums payable by the Company or the Holders under
or in connection with the Warrants, including damages.
SECTION 12.13. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER
OF IMMUNITIES; GOVERNING LAW. The Company (i) irrevocably designates and
appoints CT Corporation System, 1633 Broadway, New York, NY 10019 (together with
any successor, the "Authorized Agent") as its authorized agent upon which
process may be served in any suit, action or proceeding arising out of or
relating to the Warrants or this Agreement that may be instituted in any federal
or state court in the State of New York, Borough of Manhattan, or brought under
federal or state securities laws or brought by the Warrant Agent, and represents
and warrants that the Authorized Agent has accepted such designation and (ii)
agrees that service of process upon the Authorized Agent and written notice of
said service to the Company (mailed or delivered to its General Counsel at its
executive office at Militarstrasse 36, CH-8004 Zurich, Switzerland) shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the Authorized Agent in full force and effect so long as this Agreement shall be
in full force and effect or any of the Warrants shall be outstanding.
The Company irrevocably agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby may be instituted in any federal or state court in the
Borough of Manhattan, The City of New York, the State of New York and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding and any claim of inconvenient forum, and irrevocably submits to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the Warrants, to the extent permitted by law.
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This Agreement shall be governed by the laws of the State of New York.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
CARRIER1 INTERNATIONAL S.A.
By: /s/ Glenn M. Creamer
----------------------------------------
Name: Glenn M. Creamer
Title: Director
By: /s/ Carlos Colina
----------------------------------------
Name: Carlos Colina
Title: Authorized Officer
CARRIER ONE, L.L.C.
(solely with respect to the second paragraph
of Article VII)
By: /s/ Glenn M. Creamer
----------------------------------------
Name: Glenn M. Creamer
Title: Chairman
THE CHASE MANHATTAN BANK
By: /s/ William Potes
----------------------------------------
Name: William Potes
Title: Assistant Treasurer
51
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EXHIBIT A
FORM OF DOLLAR WARRANT CERTIFICATE
CARRIER1 INTERNATIONAL S.A.
[CUSIP] [CINS] [ISIN] [COMMON CODE] No. _____
No. _____
DOLLAR WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns, is the
owner of ___________ Dollar Warrants, each of which represents the right to
purchase from CARRIER1 INTERNATIONAL S.A., a societe anonyme organized under
the laws of the Grand Duchy of Luxembourg (the "COMPANY"), after February 19,
2000 (or in connection with an initial public offering of equity securities of
the Company), 6.71013 shares of the Common Stock, par value $2.00, of the
Company (the "COMMON SHARES") at a per share exercise price (the "EXERCISE
PRICE") equal to the greater of $2.00 and the minimum par value required by
Luxembourg law (excluding any Luxembourg capital duty which is payable by the
Company) (subject to adjustment as provided in the Warrant Agreement hereinafter
referred to below), upon surrender hereof at the office of The Chase Manhattan
Bank, or to its successor, as the warrant agent under the Warrant Agreement (any
such warrant agent being herein called the "WARRANT AGENT"), with the
Subscription Form on the reverse hereof duly executed, with signature guaranteed
as therein specified and simultaneous payment in full by wire transfer or by
certified or official bank or bank cashier's check payable to the order of the
Company. At any time after one year after the Closing Date and on or before the
Expiration Date (unless redeemed as described below), any outstanding Warrants
may be exercised on any Business Day; PROVIDED that the Warrants will become
exercisable in connection with the initial public offering of equity securities
of the Company and PROVIDED FURTHER that the Warrant Registration Statement is,
at the time of exercise, effective and available for the exercise of Warrants or
the exercise of such Warrants is exempt from the registration requirements of
the Securities Act. At any time within ten days of the Expiration Date, the
Company may redeem (or cause an Affiliate of the Company to repurchase) all
unexercised Warrants at a redemption or repurchase price of $0.01 per share.
This Warrant Certificate is issued under and in accordance with a
Dollar Warrant Agreement dated as of February 19, 1999 (the "WARRANT
AGREEMENT"), between the Company and The Chase Manhattan Bank, as Warrant Agent,
and a Registration Rights Agreement dated as of February 12, 1999 (the "WARRANT
REGISTRATION RIGHTS AGREEMENT"), between the Company and The Chase Manhattan
Bank, as Warrant Agent, and is subject to the Articles of Incorporation of the
Company and to the terms and provisions contained therein, to all of which terms
and provisions the holder of this Warrant Certificate consents by
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acceptance hereof. The terms of the Warrant Agreement and the Warrant
Registration Rights Agreement are hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement and the
Warrant Registration Rights Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company and the Holders of the Warrants. The summary of the terms of the Warrant
Agreement and the Warrant Registration Rights Agreement contained in this
Warrant Certificate is subject to and qualified in its entirety by express
reference to the Warrant Agreement and the Warrant Registration Rights
Agreement. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Warrant and the terms of the Warrant
Agreement or the Warrant Registration Rights Agreement, the terms of the Warrant
Agreement or the Warrant Registration Rights Agreement, as applicable, shall
govern. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement and the Warrant Registration Rights Agreement shall have the
meanings assigned to them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Warrant Agent and may be obtained by
writing to the Warrant Agent at the following address:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
A "REPURCHASE EVENT," as defined in the Warrant Agreement, shall be
deemed to occur on, any date when the Company (i) consolidates with or merges
into or with another person (but only where the holders of Common Stock receive
consideration in exchange for all or part of such Common Stock), if the Common
Stock (or other securities) thereafter purchasable upon exercise of the Warrants
is not registered under the Exchange Act or (ii) sells all or substantially all
of its assets to another person, if the Common Stock (or other securities)
thereafter purchasable upon exercise of the Warrants is not registered under the
Exchange Act; PROVIDED that in each case a "Repurchase Event" shall not be
deemed to have occurred if the consideration for such transaction consists
solely of cash.
Following a Repurchase Event, the Company must make (or must cause an
affiliate to make) an offer to repurchase for cash all outstanding Warrants (a
"REPURCHASE OFFER") and Holders may, until the expiration date of such offer,
surrender all or part of their Warrants for repurchase by the Company (or such
affiliate).
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company (or such affiliate) at a price in cash (the
"REPURCHASE PRICE") equal to the value on
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the Valuation Date relating thereto of the Common Shares and other securities or
property which would have been delivered upon exercise of the Warrants had the
Warrants been exercised, less the Exercise Price (regardless of whether the
Warrants are then exercisable). The value of such Common Shares and other
securities will be (i) if the Common Shares (or other securities) are registered
under the Exchange Act, determined based upon the average of the closing sales
prices (as determined pursuant to Section 3.4(d)(ii)(1) of the Warrant
Agreement) of the Common Shares (or other securities) for the 20 consecutive
trading days (or fewer in certain cases) immediately preceding such Valuation
Date or (ii) if the Common Shares (or other securities) are not registered under
the Exchange Act or if the value cannot be computed under clause (i) above,
determined by the Independent Financial Expert (as defined in the Warrant
Agreement), in each case as set forth in the Warrant Agreement.
The "VALUATION DATE," as defined in the Warrant Agreement, shall be
deemed to occur on the date five Business Days prior to the date notice of the
Repurchase Offer is first given.
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive payments or distributions as of
the date of such event on an equal basis with, and on the same day as, holders
of Common Shares (or other securities purchasable upon exercise of the Warrants)
as if the Warrants had been exercised immediately prior to such event (less an
amount equal to the Exercise Price). Upon receipt of such payment, if any, the
rights of a Holder shall terminate and cease and such Holder's Warrants shall
expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph, in
the event the Company merges or consolidates with, or sells all or substantially
all of its assets to, another Person, each Warrant will, upon exercise, entitle
the Holder thereof to receive the number of shares of capital stock or other
securities or the amount of money and other property which the holder of a
Common Share (or other securities or property purchasable upon exercise of a
Warrant) is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
Subject to Article VI and VII of the Warrant Agreement, all Common
Shares purchasable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company shall
pay any taxes and other governmental charges that may be imposed under the laws
of Luxembourg and the United
A-3
<PAGE>
States of America or any political subdivision or taxing authority thereof or
therein in respect of the issue or delivery thereof upon exercise of Warrants
(other than taxes on or measured by income imposed on any Holder). The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for Common
Shares (including other securities or property purchasable upon the exercise of
the Warrants) or payment of cash to any Person other than the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant and in case of
such transfer or payment, the Warrant Agent and the Company shall not be
required to issue any share certificate or pay any cash until such tax or charge
has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set forth in
Article II and Article VIII of the Warrant Agreement, this Warrant Certificate
and all rights hereunder are transferable by the registered Holder hereof, in
whole or in part, on the register of the Company maintained by the Warrant Agent
for such purpose at the Warrant Agent's office in New York, New York, upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote or
to consent to any action of the shareholders, to receive any distributions, to
exercise any pre-emptive right or to receive any
A-4
<PAGE>
notice of meetings of shareholders, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided in the Warrant
Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on February 19, 2009, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement (including Section 3.5 thereof).
The Company (i) irrevocably designates and appoints CT Corporation
System, 1633 Broadway, New York, NY 10019 (together with any successor, the
"AUTHORIZED AGENT") as its authorized agent upon which process may be served in
any suit, action or proceeding arising out of or relating to the Warrants or the
Warrant Agreement that may be instituted in any federal or state court in the
State of New York, Borough of Manhattan, or brought under federal or state
securities laws and (ii) agrees that service of process upon the Authorized
Agent and written notice of said service to the Company (mailed or delivered to
its General Counsel at its executive office at Militarstrasse 36, CH-8004
Zurich, Switzerland), shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding.
The Company irrevocably agrees that any legal suit, action or
proceeding arising out of or relating to the Warrant Agreement and the Warrants
and the transactions contemplated thereby may be instituted in any federal or
state court in the Borough of Manhattan, The City of New York, the State of New
York and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding and any claim of inconvenient forum, and
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under the Warrant Agreement and the Warrants, to the extent permitted by law.
The Warrant Agreement and the Warrants shall be governed by the laws
of the State of New York.
A-5
<PAGE>
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
CARRIER1 INTERNATIONAL S.A.
By:
----------------------------------------
Name:
Title:
[By:
----------------------------------------
Name:
Title:]
Dated:
Countersigned:
THE CHASE MANHATTAN BANK,
as Warrant Agent
By:
------------------------
Authorized Signatory
A-6
<PAGE>
FORM OF REVERSE OF DOLLAR WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Dollar Warrant)
To: The Chase Manhattan Bank,
as Warrant Agent
450 West 33rd Street, 19th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
The undersigned irrevocably exercises ________ of the Dollar Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of Carrier1 International S.A. on
the terms and conditions specified in this Warrant Certificate and in the Dollar
Warrant Agreement and the Warrant Registration Rights Agreement referred to
herein and surrenders this Warrant Certificate and all right, title and interest
therein to and directs that the Common Shares, par value $2.00, of Carrier1
International S.A. (the "COMMON SHARES") deliverable upon the exercise of such
Dollar Warrants be registered or placed in the name and at the address specified
below and delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON CERTIFICATED DOLLAR WARRANTS TRANSFERRED UNDER REGULATION S]
The undersigned certifies that:
CHECK ONE
(a) (i) it is not a U.S. person (as defined in Rule 902 of
Regulation S under the U.S. Securities Act of 1933, as
amended) and the Dollar Warrants are not being exercised on
behalf of a U.S. person.
OR
(ii) it is furnishing to the Warrant Agent a written opinion
of counsel to the effect that the Dollar Warrants and the
Common Shares purchasable upon exercise of the Dollar
Warrants have been registered under the U.S. Securities Act
of 1933, as amended, or are exempt from registration
thereunder.
A-7
<PAGE>
and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated:
-------------------------------
(Signature of Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, 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 Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-8
<PAGE>
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Dollar Warrant by Carrier1 International S.A.)
To:
The undersigned, having received prior notice of the consideration for
which CARRIER1 INTERNATIONAL S.A. will repurchase (or cause an affiliate to
repurchase) the Dollar Warrants represented by the within Warrant Certificate,
hereby surrenders this Warrant Certificate for repurchase by CARRIER1
INTERNATIONAL S.A. (or such affiliate) of the number of Dollar Warrants
specified below for the consideration set forth in such notice.
Dated:
-------------------------
(Number of Dollar Warrants)
-------------------------
(Signature of Owner)
-------------------------
(Street Address)
-------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Warrant Agent,
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 Warrant
Agent in addition to, or in substitution
for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
Securities and/or check to be issued to:
A-9
<PAGE>
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-10
<PAGE>
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Dollar Warrants
constituting a part of the Dollar Warrants evidenced by this Warrant Certificate
not being assigned hereby) all of the right of the undersigned under this
Warrant Certificate, with respect to the number of Dollar Warrants set forth
below:
Name(s) of Assignee(s):
-------------------------------------
Address:
--------------------------------------------------
No. of Dollar Warrants:
-------------------------------------------
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
In connection with any transfer of Dollar Warrants, the
undersigned confirms that without utilizing any general solicitation or general
advertising that:
CHECK ONE
|_| (a) these Dollar Warrants are being transferred in compliance with
the exemption from registration under the U.S. Securities Act of
1933, as amended, provided by Rule 144A thereunder.
OR
|_| (b) these Dollar Warrants are being transferred other than in
accordance with (a) above and documents are being furnished which
comply with the conditions of transfer set forth in this Warrant
Certificate and the Dollar Warrant Agreement.
OR
|_| (c) these Dollar Warrants are being transferred pursuant to an
effective registration statement under the U.S. Securities Act of
1933, as amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Dollar Warrants in the name of any Person other than
the Holder hereof unless and until
A-11
<PAGE>
the conditions to any such transfer of registration set forth herein and in
Article VIII of the Dollar Warrant Agreement shall have been satisfied.
Dated:
---------------------------------
(Signature of Owner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Warrant Agent,
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 Warrant
Agent in addition to, or in substitution
for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Dollar Warrant(s) 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 U.S.
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 Carrier1 International S.A. 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:
----------------
A-12
<PAGE>
-----------------------------------------------
[NOTE: To be executed by an executive officer]
A-13
<PAGE>
EXHIBIT B-1
Form of Certificate to Be Delivered
by Transferors in Connection with
TRANSFERS PURSUANT TO REGULATION S
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
Re: Dollar Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants, we
hereby certify that such sale has been effected pursuant to and in accordance
with Regulation S under the U.S. Securities Act of 1933, as amended (the
"SECURITIES ACT"), and, accordingly, we represent that:
(1) the offer of the Warrants (and any Units of which they may form a
part) was not made to a person in the United States and not to a U.S.
Person (as defined in Regulation S under the Securities Act);
B1-1
<PAGE>
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulation S under the Securities Act) have been made by us,
any of our affiliates or any persons acting on our behalf in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act, as applicable;
and
(4) the transfer is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
The Warrant Agent 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 Transferor]
By:
--------------------------------
Authorized Signature
B1-2
<PAGE>
B2-1
EXHIBIT B-2
Form of Certificate to Be
Delivered by Transferees in Connection with
TRANSFERS PURSUANT TO REGULATION S
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
Re: Dollar Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we certify that:
1. We understand that any subsequent transfer of the
Warrants, any interest therein or the Common Shares purchasable upon
exercise of any Warrant (the "WARRANT SHARES") is subject to certain
restrictions and conditions set forth in the Dollar Warrant Agreement
dated as of February 19, 1999 relating to the Warrants (the "WARRANT
AGREEMENT") and the undersigned agrees to be bound by, and not to
resell, pledge or
<PAGE>
B2-2
otherwise transfer the Warrants or Warrant Shares except in compliance
with, such restrictions and conditions and the U.S. Securities Act of
1933, as amended (the "SECURITIES ACT").
2. We understand that the Warrants represented by this
Warrant Certificate have not been registered under the Securities Act,
and accordingly may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons (as defined in
Regulation S) except as set forth in the following sentence. We agree
that if, within the time period referred to under Rule 144(k) of the
Securities Act as in effect on the date of such transfer, we decide
(for our self or for any account for which we are acting) to resell or
otherwise transfer the Warrants or Warrant Shares, we will do so only
(a) to the Company or any subsidiary thereof, (b) to a qualified
institutional buyer in compliance with Rule 144A under the Securities
Act, (c) to an institutional accredited investor as defined in Rule
501(a)(1),(2),(3) or (7) under the Securities Act that furnishes to
the Warrant Agent, with respect to the Warrants, and to the Transfer
Agent and Registrar, with respect to the Warrant Shares, and the
Company, prior to such transfer, a signed letter containing certain
representations and agreements relating to the restrictions on
transfer of the Warrants and the Warrant Shares (the form of which
letter can be obtained from the Warrant Agent or the Transfer Agent
and Registrar, as the case may be) and an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (d) to a person outside the United States in an
offshore transaction in compliance with Regulation S under the
Securities Act that, for any transfer prior to February 19, 2000,
furnishes to the Warrant Agent, the Transfer Agent and Registrar and
the Company, prior to such transfer, a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the Warrants and Warrant Shares represented by this
Warrant Certificate (the form of which letter can be obtained from the
Warrant Agent and the Transfer Agent and Registrar), (e) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (f) pursuant to an effective
registration statement under the Securities Act. We further understand
that the Warrants purchased by us will bear a legend to the foregoing
effect during such period, which legend may be removed after such
period upon receipt of a certificate by Warrant Agent or Transfer
Agent and Registrar (the form of which can be obtained from the
Warrant Agent or Transfer Agent and Registrar, as the case may be);
3. We are purchasing the Warrants for our own account or an
account with respect to which we exercise sole investment discretion
and that we and any such account are each a foreign purchaser that is
outside the United States (or a foreign purchaser that is a dealer or
other fiduciary), and that we and any such account are not a U.S.
person (as defined in Regulation S) and we are not acquiring the
Warrants the account or benefit of any U.S. person;
<PAGE>
B2-3
4. We represent and agree that hedging transactions
involving the Warrants and the Warrant Shares may not be conducted
unless in compliance with the Securities Act and that, during the
distribution compliance period (defined as one year after the date of
the closing), the Warrants and the Warrant Shares will bear a legend
to this effect, and that we will not engage in any such hedging
transactions.
5. We understand that, prior to February 19, 2000, Warrants
sold pursuant to Regulation S under the Securities Act will be
represented solely by certificated Warrants in registered form.
6. We understand that the Company, the Warrant Agent or the
Transfer Agent and Registrar, as the case may be, will refuse to
register any transfer of Warrants or Warrant Shares not made in
accordance with Regulation S, pursuant to registration under the
Securities Act or pursuant to an available exemption from
registration.
7. We agree that we will deliver to each person to whom we
transfer any of the Warrants and Warrant Shares notice of any
restrictions on transfer of such securities.
8. We understand that the Warrants and the Warrant Shares
have not been registered under the Securities Act and that the
Warrants may not be exercised unless registered under the Securities
Act or an exemption from such registration is available and that we
will be required to make certain representations to the Warrant Agent,
the Transfer Agent and Registrar and the Company upon exercise of the
Warrants. It further understands that the Warrants will bear a legend
to the foregoing effect.
9. If we are acquiring any Warrants or Warrant Shares as a
fiduciary or agent for one or more investor accounts, we represent
that we have sole investment discretion with respect to each such
account and we have full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such account.
10. The transfer restrictions applicable to the Warrant and
the provisions of this certificate are also applicable to any Unit of
which this Warrant may form a part.
The Warrant Agent 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. We agree to notify the
Warrant Agent promptly if any of our representations herein ceases to be
accurate and complete.
<PAGE>
B2-4
Very truly yours,
[Name of Transferee]
By:
-----------------------------
Authorized Signature
<PAGE>
C1-1
EXHIBIT C-1
Form of Certificate to Be
Delivered by Transferors in Connection with
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
Re: Dollar Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and in accordance with the U.S. Securities Act of 1933,
as amended (the "SECURITIES ACT"), and accordingly we hereby further certify
that (check one):
(a) |_| such transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act; or
<PAGE>
C1-2
(b) |_| such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
(d) |_| such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than Rule 144A, Rule
144 or Rule 904 thereunder, and we hereby further certify that such transfer
complies with the transfer restrictions applicable to the Warrants or interests
therein transferred to institutional accredited investors as defined in Rule
501(a)(1), (2), (3) and (7) under the Securities Act and in accordance with the
requirements of the exemption claimed, which certification is supported by an
opinion of counsel provided by us or the transferee (a copy of which we have
attached to this certification), to the effect that such transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Dollar Warrant Agreement, the transferred
Warrants or interests therein will be subject to the restrictions on transfer
enumerated in the private placement legend printed on the Certificated Warrant
and in the Dollar Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By:
------------------------------------
Authorized Signatory
<PAGE>
EXHIBIT C-2
Form of Certificate to Be
Delivered by Transferees in Connection with
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
Re: Dollar Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we certify that:
1. We understand that any subsequent transfer of the
Warrants, any interest therein or the Common Shares purchasable upon
exercise of any Warrant (the "WARRANT SHARES") is subject to certain
restrictions and conditions set forth in the Dollar Warrant Agreement
dated as of February 19, 1999 relating to the Warrants (the
"AGREEMENT") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise
<PAGE>
C2-2
transfer the Warrants or Warrant Shares except in compliance with,
such restrictions and conditions and the U.S. Securities Act of 1933,
as amended (the "SECURITIES ACT").
2. We understand that the Warrants and the Warrant Shares
have not been registered under the Securities Act, and that the
Warrants and the Warrant Shares may not be offered or sold except as
set forth in the following sentence. We agree that if, within the time
period referred to under Rule 144(k) of the Securities Act as in
effect on the date of such transfer, we decide (for our self or for
any account for which we are acting) to resell or otherwise transfer
the Warrants or Warrant Shares, we will do so only (a) to the Company
or any subsidiary thereof, (b) to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act, (c) to an
institutional accredited investor as defined in Rule 501(a)(1),(2),(3)
or (7) under the Securities Act that furnishes to the Warrant Agent,
with respect to the Warrants, and to the Transfer Agent and Registrar,
with respect to the Warrant Shares, and the Company, prior to such
transfer, a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Warrants
and the Warrant Shares (the form of which letter can be obtained from
the Warrant Agent or the Transfer Agent and Registrar, as the case may
be) and an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (d) to a person
outside the United States in an offshore transaction in compliance
with Regulation S under the Securities Act that, for any transfer
prior to February 19, 2000, furnishes to the Warrant Agent, the
Transfer Agent and Registrar and the Company, prior to such transfer,
a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Warrants and Warrant
Shares represented by this Warrant Certificate (the form of which
letter can be obtained from the Warrant Agent and the Transfer Agent
and Registrar), (e) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (f)
pursuant to an effective registration statement under the Securities
Act. We further understand that the Warrants purchased by us will bear
a legend to the foregoing effect during such period, which legend may
be removed after such period upon receipt of a certificate by the
Warrant Agent or Transfer Agent and Registrar (the form of which can
be obtained from the Warrant Agent or Transfer Agent and Registrar, as
the case may be).
3. We understand that, on any proposed resale of any
Warrants, we will be required to furnish to the Warrant Agent and the
Company such certifications, legal opinions and other information as
the Warrant Agent and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions.
4. We are an institutional accredited investor (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
<PAGE>
C2-3
risks of our investment in the Warrants, and we and any accounts for
which we are acting are each able to bear the economic risk of our or
its investment for an indefinite period of time.
5. We are acquiring the Warrants purchased by us for our own
account or for one or more accounts (each of which is an institutional
accredited investor) as to each of which we exercise sole investment
discretion.
6. The transfer restrictions applicable to the Warrant and
the provisions of this certificate are also applicable to any Unit of
which this Warrant may form a part.
The Warrant Agent 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.
Very truly yours,
[Name of Transferee]
By:
------------------------------
Authorized Signature
<PAGE>
APPENDIX A
LIST OF FINANCIAL EXPERTS
BT Alex. Brown Incorporated
Bear, Stearns & Co., Inc.
Warburg Dillon Read LLC
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
Lehman Brothers Inc.
Chase Securities Inc.
CIBC Oppenheimer Corp.
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
<PAGE>
Exhibit 10.2
EXECUTION COPY
- -------------------------------------------------------------------------------
EURO WARRANT AGREEMENT
between
CARRIER1 INTERNATIONAL S.A.
and
THE CHASE MANHATTAN BANK
Dated as of February 19, 1999
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ISSUE OF WARRANTS
Section 2.1. FORM OF WARRANT CERTIFICATES...................................8
Section 2.2. RESTRICTIVE LEGENDS...........................................10
Section 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES................13
Section 2.4. CERTIFICATED WARRANTS.........................................13
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. EXERCISE PRICE................................................14
Section 3.2. EXERCISE; RESTRICTIONS ON EXERCISE............................14
Section 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE.................15
Section 3.4. REPURCHASE OFFERS.............................................16
Section 3.5. REDEMPTION PRIOR TO THE EXPIRATION DATE.......................20
ARTICLE IV
ADJUSTMENTS
Section 4.1. ADJUSTMENTS...................................................20
Section 4.2. NOTICE OF ADJUSTMENT..........................................29
Section 4.3. STATEMENT ON WARRANTS.........................................29
Section 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC..........................29
Section 4.5. FRACTIONAL INTERESTS..........................................30
Section 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED......................30
Section 4.7. PAR VALUE; VALID ISSUANCE.....................................30
Section 4.8. INITIAL PUBLIC OFFERING.......................................31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE.........................................33
Section 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS.................34
Section 8.3. SPECIAL TRANSFER PROVISIONS...................................35
Section 8.4. SURRENDER OF WARRANT CERTIFICATES.............................38
ARTICLE IX
WARRANT HOLDERS
Section 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER.......................39
Section 9.2. RIGHT OF ACTION...............................................39
ARTICLE X
REMEDIES
Section 10.1. DEFAULTS.....................................................39
Section 10.2. Omitted......................................................40
Section 10.3. REMEDIES; NO WAIVER..........................................40
ARTICLE XI
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
THE WARRANT AGENT
Section 11.1. DUTIES AND LIABILITIES......................................40
Section 11.2. RIGHT TO CONSULT COUNSEL....................................41
Section 11.3. COMPENSATION; INDEMNIFICATION...............................41
Section 11.4. NO RESTRICTIONS ON ACTIONS..................................42
Section 11.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT.............42
Section 11.6. SUCCESSOR WARRANT AGENT.....................................43
ARTICLE XII
MISCELLANEOUS
Section 12.1. MONIES DEPOSITED WITH THE WARRANT AGENT.....................43
Section 12.2. PAYMENT OF TAXES............................................44
Section 12.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY...44
Section 12.4. REPORTS TO HOLDERS..........................................44
Section 12.5. NOTICES; PAYMENT............................................45
Section 12.6. BINDING EFFECT..............................................46
Section 12.7. COUNTERPARTS................................................46
Section 12.8. AMENDMENTS..................................................47
Section 12.9. HEADINGS....................................................47
Section 12.10. COMMON SHARES LEGEND........................................47
Section 12.11. THIRD PARTY BENEFICIARIES...................................49
Section 12.12. TERMINATION.................................................49
Section 12.13. METHOD OF PAYMENT...........................................49
Section 12.14. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES; GOVERNING LAW...........................................49
</TABLE>
iii
<PAGE>
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFERORS IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT B-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFERORS IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS
APPENDIX A LIST OF FINANCIAL EXPERTS
iv
<PAGE>
EURO WARRANT AGREEMENT
EURO WARRANT AGREEMENT, dated as of February 19, 1999 (this
"AGREEMENT"), between CARRIER1 INTERNATIONAL S.A., a societe anonyme organized
under the laws of the Grand Duchy of Luxembourg (the "COMPANY"), and The Chase
Manhattan Bank (the "WARRANT AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated February
12, 1999 (the "PLACEMENT AGREEMENT"), among the Company, Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear,
Stearns & Co. Inc., as placement agents (collectively, the "PLACEMENT AGENTS"),
the Company has agreed to issue and sell to the Placement Agents (i) an
aggregate of 85,000 warrants (each, a "WARRANT" and collectively, the
"WARRANTS"), each Warrant initially entitling the holder thereof to purchase
7.53614 shares of Common Stock (as defined below) at a per share exercise price
equal to the greater of $2.00 and the minimum par value required by Luxembourg
law (excluding any Luxembourg capital duty which is payable by the Company),
subject to adjustment, as part of 85,000 Units (the "EURO UNITS"), each Euro
Unit consisting of one 13 1/4% Senior Euro Note due 2009 of the Company (each, a
"EURO NOTE" and collectively, the "EURO NOTES") to be issued pursuant to the
provisions of an Indenture, dated as of the date hereof, between the Company and
The Chase Manhattan Bank (the "EURO NOTES INDENTURE"), and one Warrant and (ii)
an aggregate of 160,000 warrants (each a "DOLLAR WARRANT") issued pursuant to
the Dollar Warrant Agreement (as defined below), each Dollar Warrant initially
entitling the holder thereof to purchase 6.71013 shares of Common Stock at a per
share exercise price equal to the greater of $2.00 and the minimum par value
required by Luxembourg law (excluding any Luxembourg capital duty which is
payable by the Company), subject to adjustment, as part of 160,000 Units (the
"DOLLAR UNITS"), each consisting of one 13 1/4% Senior Dollar Note due 2009 (a
"DOLLAR NOTE") to be issued pursuant to the terms of an Indenture, dated as of
the date hereof, between the Company and The Chase Manhattan Bank (the "DOLLAR
NOTES INDENTURE"), and one Dollar Warrant;
WHEREAS, the Euro Notes and the Warrants included in each Euro Unit
will become separately transferable at the close of business upon the earliest
to occur of (i) the date that is six months after the Closing Date (as defined
below), (ii) the commencement of an exchange offer with respect to the Euro
Notes undertaken pursuant to the Notes Registration Rights Agreement (as defined
below), (iii) the effectiveness of a shelf registration statement with respect
to resales of the Euro Notes and (iv) such date as determined by Morgan Stanley
& Co. Incorporated in its sole discretion (the "SEPARATION DATE"); and
WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in
<PAGE>
connection with the issuance of the Warrant Certificates (as defined below) and
the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders thereof
(together with the holders of shares of Common Stock (or other securities)
received upon exercise thereof, the "HOLDERS").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Placement Agreement, the Company and the
Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Beneficial Investor" means industry experts or other individuals
whose affiliation with the Company should, in the good faith judgment of the
Board, provide the Company with a strategic advantage.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day except a Saturday, Sunday or other day on
which commercial banks in The City of New York or in the city of the corporate
trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, societe anonyme, and any successor
thereto.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
2
<PAGE>
"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Depositary" means Chase Manhattan Bank London Branch or any of
its successors acting in the capacity of common depositary for Euroclear and
Cedel Bank.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the voting Common Stock, par value $2.00 per
share of the Company, and any other capital stock of the Company into which such
Common Stock may be converted or reclassified or that may be issued in respect
of, in exchange for or in substitution of such Common Stock by reason of any
stock splits, stock dividends, distributions, mergers, consolidations or other
like events.
"Company" means Carrier1 International S.A. and its successors under
this Warrant Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means with respect to the Global Warrants other than the
Global DTC Warrants, Euroclear and Cedel Bank, and with respect to the Global
DTC Warrants, The Depository Trust Company, its nominees and their respective
successors.
"Dollar Units" has the meaning provided in the recitals to this
Agreement.
"Dollar Notes" has the meaning provided in the recitals to this
Agreement.
"Dollar Notes Indenture" has the meaning provided in the recitals to
this Agreement.
"Dollar Warrant" has the meaning provided in the recitals to this
Agreement.
"Dollar Warrant Agreement" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, warrant agent,
relating to the Dollar Warrants, as such agreement may be amended or modified
from time to time.
"Euro Note" has the meaning provided in the recitals to this
Agreement.
3
<PAGE>
"Euro Notes Indenture" has the meaning provided in the recitals to
this Agreement.
"Euro Units" has the meaning provided in the recitals to this
Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
office) as operator of the Euroclear system and any successor thereto.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exchange Offer" has the meaning specified in Section 12.4 hereof.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Existing Equity Agreements" means the arrangements described in the
Offering Memorandum, dated February 12, 1999 relating to the Dollar Units and
the Euro Units, under the caption "Certain Relationships and Related
Transactions -- Equity Investor Agreements -- Securities Purchase and
Cancellation Agreement," "-- 1999 Share Option Plan" and "-- Securities Purchase
Agreement" and in footnote (4) to the second table set forth under the caption
"Principal Security Holders."
"Expiration Date" means February 19, 2009.
"Final Surrender Time" has the meaning specified in Section 3.4
hereof.
"Financial Expert" means one of the Persons listed in Appendix A
hereto.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Global DTC Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this Agreement.
"IAI Certificated Warrants" has the meaning provided in Section 2.1.
"Independent Financial Expert" means a Financial Expert that does not
(and whose directors, executive officers and 5% stockholders do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries
or affiliates, which has not been for at least five years and, at the time that
it is called upon to give independent financial advice to the Company, is not
(and none of its directors, executive officers or 5% stockholders is) a
promoter, director or officer of the Company or any of its subsidiaries or
affiliates. The Independent Financial Expert may be compensated and indemnified
by the Company for
4
<PAGE>
opinions and services it provides as an Independent Financial Expert. No
Financial Expert shall be deemed not to be an Independent Financial Expert
solely by reason of its having made one or more valuations hereunder, or under
the Dollar Warrant Agreement.
"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"LLC" means Carrier1 L.L.C. and its successors.
"Management Investor" means any officer, director, employee or other
member of the management of the Company or any of its Subsidiaries, or family
members or relatives thereof, or trusts or partnerships for the benefit of any
of the foregoing, or any of their heirs, executors, successors and legal
representatives.
"Non-U.S. Person" means a person who is not a U.S. person as defined
in Rule 902 of Regulation S.
"Notes Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Dollar Notes and the Euro Notes dated February 12,
1999 between the Company and the Placement Agents.
"Notice Date" has the meaning specified in Section 3.4 hereof.
"Officer" means, with respect to the Company, (i) any member of the
Board of the Company, or the Chairman, the President, the Chief Executive
Officer, any Vice President, the Chief Operating Officer or the Chief Financial
Officer of the Company, any officer of a Restricted Subsidiary designated by the
Board to act as such officer of the Company or any other person duly authorized
and empowered by the Board to execute for and on behalf and in the name of the
Company (any officer or other person described in this clause (i), a "Senior
Officer") and (ii) the Treasurer, Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company or any officer of a Restricted Subsidiary
designated by the Board to act as such officer of the Company.
"Officers' Certificate" means a certificate signed by one Senior
Officer and one other Officer or by two Senior Officers.
"Offshore Certificated Warrants " has the meaning provided in Section
2.1.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company or Carrier1 International
GmbH.
5
<PAGE>
"Parent Entity" means any Person of which the Company is a direct or
indirect subsidiary.
"Person" means an individual, general partnership, limited
partnership, corporation, trust, joint stock company, association, joint venture
or any other entity or organization, whether or not legal entities, including,
without limitation, a government or political subdivision or an agency or
instrumentality thereof.
"Placement Agreement" has the meaning specified in the recitals to
this Agreement.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a), and, in the case of
Warrants transferred pursuant to Regulation S prior to February 19, 2000,
Section 2.2(b).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Reference Security" has the meaning specified in Section 4.1(l)(iv)
hereof.
"Registration" means the date of the commencement of an exchange offer
for, or the effectiveness of a shelf registration statement with respect to, the
Euro Notes.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section 2.1
hereof.
"Relevant Value" means the value of the Warrants as set forth in the
Value Report in accordance with Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any date
when the Company (i) consolidates with or merges into or with another person
(but only where the holders of Common Stock receive consideration in exchange
for all or part of such Common Stock), if the Common Stock (or other securities)
thereafter purchasable upon exercise of the Warrants is not registered under the
Exchange Act or (ii) sells all or substantially all of its assets to another
person, if the Common Stock (or other securities) thereafter purchasable upon
exercise of the Warrants is not registered under the Exchange Act; PROVIDED that
in each case a "Repurchase Event" shall not be deemed to have occurred if the
consideration for such transaction consists solely of cash.
"Repurchase Notice" has the meaning specified in Section 3.4(a)
hereof.
"Repurchase Offer" means the Company's offer to repurchase the
Warrants in accordance with Section 3.4 hereof.
6
<PAGE>
"Repurchase Price" means the amount of cash payable in respect of the
Warrants surrendered pursuant to a Repurchase Offer determined in accordance
with Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) purchasable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"Valuation Date" means the date five Business Days prior to the Notice
Date.
"Value Certificate" has the meaning specified in Section 3.4 hereof.
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement relating to the Warrants and the Dollar Warrants, dated
February 12, 1999, between the Company and the Warrant Agent.
"Warrant Registration Statement" has the meaning specified in Section
3 of the Warrant Registration Rights Agreement.
7
<PAGE>
ARTICLE II
ISSUE OF WARRANTS
SECTION 2.1. FORM OF WARRANT CERTIFICATES. Certificates representing
the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which such Warrant
Certificates are countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed or any depositary, or to conform to
custom or usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more global Warrant Certificates in definitive,
fully registered form, substantially in the form set forth in Exhibit A
(collectively, the "RESTRICTED GLOBAL WARRANTS") registered in the name of the
nominee of the Depositary and deposited with the Common Depositary, duly
executed by the Company and countersigned by the Warrant Agent as hereinafter
provided. The aggregate number of Warrants represented by the Restricted Global
Warrants may from time to time be increased or decreased by adjustments made on
the records of the Common Depositary, as provided in Section 2.4 and Section 8.3
hereof.
Warrants offered and sold in offshore transactions in reliance on
Regulation S (a) prior to February 19, 2000 shall be in the form of permanent
certificated Warrants in registered form substantially in the form set forth in
Exhibit A (the "OFFSHORE CERTIFICATED WARRANTS") and (b) following February 19,
2000, may be in the form of one or more global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "REGULATION S GLOBAL WARRANT" and, together with the Restricted
Global Warrants, the "GLOBAL WARRANTS"), registered in the name of, the
Depositary or its nominee, deposited with the Common Depositary, duly executed
by the Company and countersigned by the Warrant Agent as hereinafter provided.
The aggregate number of Warrants represented by the Regulation S Global Warrants
may from time to time be increased or decreased by adjustments made on the
records of the Common Depositary, in accordance with instructions given by the
Holder thereof.
Warrants transferred to Institutional Accredited Investors who are not
QIBs shall be issued in registered form substantially in the form set forth in
Exhibit A ("IAI CERTIFICATED WARRANTS").
8
<PAGE>
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Regulation S Global Warrant shall be issued in the form of
Offshore Certificated Warrants.
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Restricted Global Warrants shall be issued in the form of
Warrant Certificates in registered form, substantially in the form set forth in
Exhibit A (the "RESTRICTED CERTIFICATED WARRANTS" and, together with the
Offshore Certificated Warrants and the IAI Certificated Warrants, the
"CERTIFICATED WARRANTS").
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the Officer
or Officers executing such Warrant Certificates, as evidenced by their execution
of such Warrant Certificates.
If a Holder of a Restricted Global Warrant notifies the Warrant Agent
in writing, in accordance with Section 12.5, that a holder of a beneficial
interest in such Warrant wishes to hold such interest through DTC, one or more
global Warrants in registered form, substantially in the form set forth in
Exhibit A (the "GLOBAL DTC WARRANTS") registered in the name of the nominee of
the Depositary, deposited with the Warrant Agent, as custodian for the
Depositary, duly executed by the Company and countersigned by the Warrant
Trustee shall be deposited with the Warrant Agent as custodian for the
Depositary or its nominee and the Common Depositary shall reflect on its books
and records the date and a decrease in the principal amount of the Restricted
Global Warrant. The aggregate principal amount of the Global DTC Warrants may
from time to time be increased or decreased by adjustments made on the records
of the Warrant Agent, as custodian for the Depositary or its nominee, in
accordance with the instructions given by the Holder thereof, as hereinafter
provided.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" of Euroclear and "The
General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel
Bank shall be applicable to interests in the Regulation S Global Warrants that
are held by Agent Members through Euroclear and Cedel Bank.
9
<PAGE>
SECTION 2.2. RESTRICTIVE LEGENDS. (a) The Warrant Certificates shall
bear the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THESE WARRANTS IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE
144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF SUCH TRANSFER,
RESELL OR OTHERWISE TRANSFER THESE WARRANTS EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THESE WARRANTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE WARRANT
AGENT) AND AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) TO A PERSON OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT THAT, FOR ANY TRANSFER PRIOR TO FEBRUARY 19,
2000, FURNISHES TO THE WARRANT AGENT, PRIOR TO SUCH TRANSFER, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THESE WARRANTS (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE WARRANT AGENT), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN
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EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THESE WARRANTS ARE TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THESE WARRANTS WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
WARRANT AGENT. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT
AGENT AND 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 IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 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. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE
WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THESE WARRANTS IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Warrant transferred pursuant to Regulation S prior to
February 19, 2000 shall also bear the following legend on the face thereof:
HEDGING TRANSACTIONS INVOLVING THESE WARRANTS MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT.
THE COMMON SHARES PURCHASABLE UPON EXERCISE OF THESE WARRANTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT AND THESE WARRANTS MAY NOT BE EXERCISED
BY OR ON BEHALF OF ANY U.S. PERSON EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(c) Each Global DTC Warrant shall also bear the following legend on
the face thereof:
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UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR THE
WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT.
(d) Each Global Warrant (other than a Global DTC Warrant), shall also
bear the following legend on the face thereof:
THIS WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT AGREEMENT
GOVERNING THIS WARRANT) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 8.3 OF THE WARRANT AGREEMENT, (2) THIS GLOBAL
WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 8.2
OF THE WARRANT AGREEMENT, (3) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE
WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 8.4 AND (4) THIS GLOBAL
NOTE MAY BE DELIVERED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
(e) Each Warrant Certificate issued prior to the Separation Date shall
bear the following legend on the face thereof:
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THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13 1/4% SENIOR EURO
NOTE DUE 2009 OF THE COMPANY (THE "NOTES") AND ONE WARRANT INITIALLY
ENTITLING THE HOLDER THEREOF TO PURCHASE 7.53614 COMMON SHARES, PAR VALUE
$2.00, OF THE COMPANY. PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO
OCCUR OF (i) AUGUST 19, 1999, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER
WITH RESPECT TO THE EURO NOTES, (iii) THE EFFECTIVENESS OF A SHELF
REGISTRATION STATEMENT WITH RESPECT TO THE EURO NOTES AND (vi) SUCH DATE AS
DETERMINED BY MORGAN STANLEY & CO. INCORPORATED IN ITS SOLE DISCRETION. THE
WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH,
THE EURO NOTES.
THE TRANSFER RESTRICTIONS APPLICABLE TO THIS WARRANT ARE ALSO APPLICABLE TO
THE UNIT OF WHICH THIS WARRANT IS A PART.
SECTION 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing 85,000 Warrants, each Warrant to purchase initially
7.53614 Common Shares, may be executed, on or after the date of this Agreement,
by the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the written direction of the Company signed by a Senior
Officer to the purchasers thereof on the date of issuance. The Warrant Agent is
hereby authorized to countersign and deliver Warrant Certificates as required by
this Section 2.3 or by Section 3.3, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company by
one or more Senior Officers of the Company either manually or by facsimile
signature printed thereon. The Warrant Certificates shall be countersigned by
manual signature of the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any Senior Officer of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be such Senior Officer of the Company before countersignature by the
Warrant Agent and the issuance and delivery thereof, such Warrant Certificates
may nevertheless be countersigned by the Warrant Agent and issued and delivered
with the same force and effect as though such person had not ceased to be such
Senior Officer of the Company.
SECTION 2.4. CERTIFICATED WARRANTS. Beneficial owners of interests in
Global Warrants shall receive Certificated Warrants (which, except as set forth
in Section 8.3(d), shall
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bear the Private Placement Legend) in accordance with the procedures of the
Warrant Agent and the Depositary, as and when permitted by Article VIII hereof.
In connection with the execution and delivery of such Certificated Warrants, the
Warrant Agent shall reflect on its books and records the date and a decrease in
the number of Warrants represented by the Global Warrant equal to the number of
such Certificated Warrants and the Company shall execute and the Warrant Agent
shall countersign and deliver to said beneficial owners one or more Certificated
Warrants in an equal aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
SECTION 3.1. EXERCISE PRICE. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a per share purchase price (the "EXERCISE PRICE")
equal to the greater of $2.00 and the minimum par value required by Luxembourg
law (excluding any Luxembourg capital duty which is payable by the Company),
subject to adjustment as provided in Section 4.1 and Article V hereof.
SECTION 3.2. EXERCISE; RESTRICTIONS ON EXERCISE. At any time after one
year after the Closing Date and on or before the Expiration Date (unless
redeemed pursuant to Section 3.5), any outstanding Warrants may be exercised on
any Business Day; PROVIDED that the Warrants will become exercisable in
connection with the initial public offering of equity securities of the Company,
effective upon the consummation of such offering (or, in the case of any
Warrants as to which the Holders thereof have exercised piggyback registration
rights for such offering pursuant to Section 2 of the Warrants Registration
Rights Agreement, effective at such earlier time as may be necessary to permit
such exercise of such rights), and PROVIDED FURTHER that the Warrant
Registration Statement is, at the time of exercise, effective and available for
the exercise of the Warrants or the exercise of such Warrants is exempt from the
registration requirements of the Securities Act, as reasonably determined by the
Company, and such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states or other jurisdictions in
which the various Holders reside. Any Warrants not exercised by 5:00 p.m., New
York City time, on the Expiration Date shall expire and all rights of the
Holders of such Warrants shall terminate. Additionally, pursuant to Section
4.1(j)(ii) hereof, the Warrants shall expire and all rights of the Holders of
such Warrants shall terminate in the event the Company merges or consolidates
with or sells all or substantially all of its property and assets to a Person
(other than an Affiliate of the Company) if the consideration payable to holders
of Common Stock in exchange for their Common Stock in connection with such
merger, consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
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SECTION 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. In order
to exercise all or any of the Warrants represented by a Warrant Certificate, the
Holder thereof must surrender for exercise the Warrant Certificate to the
Warrant Agent at its corporate trust office address set forth in Section 12.5
hereof, with the Subscription Form set forth on the reverse of the Warrant
Certificate duly executed, together with payment in full of the Exercise Price
then in effect for each Common Share (or other securities) purchasable upon
exercise of the Warrants as to which a Warrant is exercised; such payment may be
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company and shall be made to the Warrant Agent at its corporate
trust office address set forth in Section 12.5 hereof prior to the close of
business on the date the Warrant Certificate is surrendered to the Warrant Agent
for exercise. All payments received upon exercise of Warrants shall be delivered
to the Company by the Warrant Agent as instructed in writing by the Company. The
Warrant Agent shall transmit the entire amount that it has received, without any
deduction of any deduction of any wire, cable, service or other charges.
In connection with any exercise of Warrants represented by the
Regulation S Global Warrants or Offshore Certificated Warrants, the Holder
thereof shall be required to provide written certification to the Warrant Agent
that (i)(x) it is not a U.S. person and the Warrant is not being exercised on
behalf of a U.S. person or (y) a written opinion of counsel to the effect that
the Warrant and the Common Stock issuable upon exercise thereof have been
registered under the Securities Act or are exempt from registration thereunder
and (ii) if an opinion of counsel is not being furnished, that the Holder
exercising the Warrant is located outside the United States at the time of
exercise thereof.
If less than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant Certificate shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
exercised shall be executed by the Company and delivered to the Warrant Agent
and the Warrant Agent shall countersign the new Warrant Certificate, registered
in such name or names as may be directed in writing by the Holder, and shall
deliver the new Warrant Certificate to the Person or Persons entitled to receive
the same; PROVIDED that such Holder (x) shall be responsible for the payment of
any transfer taxes required as a result of any change in ownership of such
Warrants and (y) must comply with Article VIII, and any other provision of this
Agreement relating to transfer, with respect to any such requested registration
or delivery involving such a change in ownership. Upon the exercise of any
Warrants following the surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Warrant Agent shall instruct the Company to transfer
promptly to the Holder or, upon the written order of the Holder of such Warrant
Certificate, appropriate evidence of ownership of any Common Shares or other
security or property to which it is entitled, registered or otherwise placed in
such name or names as may be directed in writing by the Holder, and to deliver
such evidence of ownership to the Person or Persons entitled to receive the same
and fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, as provided in Section 4.5 hereof; PROVIDED that the Holder of such
Warrant (x) shall be responsible for the payment of any transfer taxes required
as the result of any change in
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ownership of such Warrants or the issuance of such Common Shares other than to
the Holder of such Warrants and (y) must comply with Article VIII, and any other
provision of this Agreement relating to transfer, with respect to any such
requested registration or delivery involving such a change in ownership.
Upon the exercise of a Warrant or Warrants, the Company shall as
promptly as practicable but not later than 14 Business Days after such exercise
enter, or cause any transfer agent of the Common Shares to enter, the name of
the person entitled to receive the Common Shares upon exercise of such Warrants
into the Company's register of shareholders. Thereupon, the Company or the
applicable transfer agent shall issue certificates (bearing the legend set forth
in Section 12.10 hereof, if applicable, unless a registration statement with the
Commission relating to such Common Shares shall then be in effect or the Company
and the Holder exercising such Warrants otherwise agree) for the necessary
number of Common Shares to which said Holder is entitled and deliver such
certificate to the Warrant Agent who in turn will deliver it to the Person
entitled to receive the Common Shares.
A Warrant shall be deemed by the Company to be exercised immediately
prior to the close of business on the date of surrender for exercise, as
provided above, of the Warrant Certificate representing such Warrant and, for
all purposes under this Agreement, the Person entitled to receive any Common
Shares upon such exercise shall receive the Common Shares such person would have
been entitled to had it been the registered holder on such date, except for
purposes of transferring the Common Shares or voting in a general shareholders'
meeting, such Person shall, in its relation with the Company, be deemed to be
the holder thereof only when such Common Shares are entered in the register of
shareholders in the name of such person; PROVIDED, HOWEVER, that, with respect
to Warrants which have been exercised but for which the corresponding Warrant
Shares have not been recorded in the register of shareholders, the provisions of
Article IV shall continue to apply as if the number of Warrants held prior to
exercise remained outstanding on the date of any action or event of the type
giving rise to an adjustment under Article IV.
SECTION 3.4. REPURCHASE OFFERS. (a) NOTICE OF REPURCHASE EVENT. Within
five Business Days following the occurrence of a Repurchase Event, the Company
shall give notice (a "REPURCHASE NOTICE") to the Holders of the Warrants and the
Warrant Agent that such event has occurred.
(b) REPURCHASE OFFERS GENERALLY. Following the occurrence of a
Repurchase Event, the Company shall make (or shall cause an Affiliate to make)
an offer to repurchase for cash all outstanding Warrants pursuant to the
provisions of this Section 3.4 (a "REPURCHASE OFFER"). The Company shall give
notice of a Repurchase Offer in accordance with Section 3.4(f) hereof. Each date
on which the Company gives any such notice is referred to as the "NOTICE DATE."
The Repurchase Offer shall commence on the Notice Date for such Repurchase Offer
and shall expire at 5:00 p.m., New York City time, on a date determined by the
Company (the "FINAL SURRENDER TIME") that is at least 30 but not more than 60
days after
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the Notice Date. Once a Repurchase Event has occurred, there is no limit on
the number of Repurchase Offers that the Company may make.
(c) REPURCHASE OFFERS. (i) In any Repurchase Offer, the Company (or
such affiliate) shall offer to purchase for cash at the Repurchase Price all
Warrants outstanding on the Notice Date for such Repurchase Offer that are
properly tendered to the Warrant Agent on or prior to the Final Surrender Time
for such Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the Final
Surrender Time for such Repurchase Offer, the Warrant Certificates evidencing
the Warrants such Holder desires to have repurchased in such offer, together
with a completed Certificate for Surrender in substantially the form attached to
the Warrant Certificate. A Holder may withdraw all or a portion of the Warrants
tendered to the Warrant Agent at any time prior to the Final Surrender Time for
such Repurchase Offer. If less than all the Warrants represented by a Warrant
Certificate shall be tendered, such Warrant Certificate shall be surrendered and
a new Warrant Certificate of the same tenor and for the number of Warrants which
shall not be tendered shall be executed by the Company and delivered to the
Warrant Agent and the Warrant Agent shall countersign the new Warrant
Certificate, registered in such name or names as may be directed in writing by
the Holder, and shall deliver the new Warrant Certificate to the Person or
Persons entitled to receive the same; PROVIDED that (x) the Holder of such
Warrants shall be responsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants and (y) must comply with
Article VIII, and any other provision of this Agreement relating to transfer,
with respect to any such requested registration or delivery involving such a
change in ownership.
(d) REPURCHASE PRICE. (i) The purchase price (the "REPURCHASE PRICE")
for each Warrant properly tendered to the Warrant Agent pursuant to a Repurchase
Offer shall be equal to the value (the "RELEVANT VALUE") on the Valuation Date
of the Common Shares issuable, and other securities or property which would have
been delivered, upon exercise of Warrants had the Warrants then been exercised
(regardless of whether the Warrants are then exercisable), less the Exercise
Price in effect on the Notice Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other securities or
property purchasable upon exercise of all the Warrants, on any Valuation Date
shall be:
(1) (A) If the Common Shares (or other securities) are registered
under the Exchange Act, deemed to be the average of the closing sales
prices (on the stock exchange that is the primary trading market for the
Common Shares (or other securities)) of the Common Shares (or other
securities) for the 20 consecutive trading days immediately preceding such
Valuation Date or, (B) if the Common Shares (or other securities) have been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the closing sales prices
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for all of the trading days before such date for which closing sales prices
are available, in the case of each of (A) and (B), as certified to the
Warrant Agent by an Officer with general responsibility for financial
matters (the "VALUE CERTIFICATE"). The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any national securities exchange, the closing sales price on
such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, (B) in the case of a security not then
listed or admitted to trading on any national securities exchange, the last
reported sale price on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange and as to which no such reported sale price or bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, City and
State of New York customarily published on each Business Day, designated by
the Company, or, if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most
recent day (not more than 30 days prior to the date in question) for which
prices have been so reported and (D) if there are no bid and asked prices
reported during the 30 days prior to the date in question, the Relevant
Value shall be determined as if the Common Shares (or other securities)
were not registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not registered
under the Exchange Act or if the value cannot be computed under clause (1)
above, deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which
shall be selected by the Board in accordance with Section 3.4(e) hereof,
and retained on customary terms and conditions, using one or more valuation
methods that the Independent Financial Expert, in its best professional
judgment, determines to be most appropriate but without giving effect to
any discount for lack of liquidity, the fact that the Company has no class
of equity securities registered under the Exchange Act or the fact that the
Common Shares and other securities or property purchasable upon exercise of
the Warrants represent a minority interest in the Company. The Company
shall use its best efforts (including by selecting another Independent
Financial Expert) to cause the Independent Financial Expert to deliver to
the Company, with a copy to the Warrant Agent, within 90 days of the
appointment of the Independent Financial Expert in accordance with Section
3.4(e) hereof, a value report (the "VALUE REPORT") stating the Relevant
Value of the Common Shares and other securities or property, if any, being
valued as of the Valuation Date and containing a brief statement as to the
nature and scope of the methodologies upon which the determination of
Relevant Value was made. The Warrant Agent shall have no duty with respect
to the Value Report of any Independent Financial Expert, except to keep it
on file and available for inspection by the Holders. The determination as
to Relevant Value in accordance with the provisions of this Section 3.4(d)
shall be
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conclusive on all Persons. The Independent Financial Expert shall
consult with management of the Company in order to allow management to
comment on the proposed Relevant Value prior to delivery to the Company
of any Value Report of the Independent Financial Expert.
(e) SELECTION OF INDEPENDENT FINANCIAL EXPERT. If clause (d)(ii)(2) is
applicable, the Board of the Company shall select an Independent Financial
Expert not more than five Business Days following a Repurchase Event. Within two
days after the selection of any Independent Financial Expert, the Company shall
deliver to the Warrant Agent a notice setting forth the name of such Independent
Financial Expert.
(f) NOTICE OF REPURCHASE OFFER. Each notice of a Repurchase Offer (an
"OFFER NOTICE") given by the Company pursuant to Section 3.4(b)(i) shall be
given by the Company directly to all Holders of the Warrants, with a copy to the
Warrant Agent, shall be given simultaneously with the Repurchase Notice (or, in
the event that the Relevant Value of the Common Shares or other securities or
property purchasable upon exercise of all the Warrants cannot be determined
pursuant to Section 3.4(d)(ii)(1), then such Offer Notice shall be given within
five Business Days after the Company receives the Value Report with respect to
such offer), but in no event later than 60 days following the Repurchase Event,
and shall specify (A) the Final Surrender Time for such Repurchase Offer, (B)
the manner in which Warrants may be surrendered to the Warrant Agent for
repurchase by the Company, (C) the Repurchase Price at which the Warrants will
be repurchased by the Company, (D) if applicable, the name of the Independent
Financial Expert whose valuation of the Common Shares and other securities or
property was utilized in connection with determining such Repurchase Price and
(E) that payment of the Repurchase Price will be made by the Warrant Agent. Each
such notice shall be accompanied by a Certificate for Surrender for Repurchase
Offer in substantially the form attached to the Warrant Certificate and a copy
of the Value Report, if any.
(g) PAYMENT FOR WARRANTS. Upon surrender for repurchase of any
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company and any purchasing affiliate
of such surrender. On or before the Final Surrender Time for any Repurchase
Offer, the Company (or such affiliate) shall deposit with the Warrant Agent
funds sufficient to make payment for the Warrants tendered to the Warrant Agent
and not withdrawn. After receipt of such deposit from the Company (or such
affiliate), the Warrant Agent shall make payment, by delivering a check in such
amount as is appropriate, to such Person or Persons as it may be directed in
writing by the Holder surrendering such Warrants, net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than the Holder.
(h) COMPLIANCE WITH LAWS. Notwithstanding anything contained in this
Section 3.4, if the Company is required to comply with laws or regulations in
connection with
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making any Repurchase Offer, such laws or regulations shall govern the making of
such Repurchase Offer.
SECTION 3.5. REDEMPTION PRIOR TO THE EXPIRATION DATE. At any time
within ten days of the Expiration Date, the Company may redeem (or cause an
Affiliate of the Company to repurchase) all unexercised Warrants at a redemption
or repurchase price of $0.01 per share. Upon payment of such amount, such
unexercised Warrants shall be deemed to become the property of the Company or
such Affiliate, as the case may be, and may thereafter be exercised by the
Company or such Affiliate as the case may be. At its option, the Company or such
Affiliate may extend the Expiration Date of any Warrants so purchased.
ARTICLE IV
ADJUSTMENTS
SECTION 4.1. ADJUSTMENTS. The Exercise Price and the number of Common
Shares purchasable upon exercise of each Warrant shall be subject to adjustment
from time to time as follows (subject in each case to Section 4.1(l) hereof):
(a) DIVISIONS; CONSOLIDATIONS; RECLASSIFICATIONS. In case the Company
shall, on or before the Expiration Date, (i) issue any Common Shares in payment
of a dividend or other distribution with respect to its Common Shares, (ii)
subdivide its issued and outstanding Common Shares, (iii) consolidate its issued
and outstanding Common Shares into a smaller number of shares, or (iv)
reclassify or convert the Common Shares (other than a reclassification in
connection with a merger, consolidation or other business combination which will
be governed by Section 4.1(j)), then the number of Common Shares purchasable
upon exercise of each Warrant immediately prior to the record date for such
issue or distribution or the effective date of such subdivision, consolidation,
reclassification or conversion shall be adjusted so that the Holder of each
Warrant shall thereafter be entitled to receive the kind and number of Common
Shares which such Holder would have been entitled to receive after the happening
of any of the events described above had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this Section 4.1(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall issue rights,
options, warrants or convertible or exchangeable securities (other than an
issuance of convertible or exchangeable securities subject to Section 4.1(a)) to
all holders of its Common Shares, entitling them to subscribe for or purchase
Common Shares at a price per share which is lower (at the record date for such
issuance) than the then Current Market Value per Common Share, then the Company
shall ensure that at the time of such issuance, the same or a
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like offer or invitation is made to the Holders of the Warrants as if their
Warrants had been exercised on the day immediately preceding the record date of
such offer or invitation on the terms (subject to any adjustment pursuant to
Section 4.1(a) for a prior event) on which such Warrants could have been
exercised on such date; PROVIDED that if the Board so resolves, the Company
shall not be required to ensure that the same offer or invitation is made to the
Holders of the Warrants, but the number of Common Shares thereafter purchasable
upon the exercise of each Warrant shall instead be adjusted and shall be
determined by multiplying the number of Common Shares theretofore purchasable
upon exercise of each Warrant by a fraction, the numerator of which shall be the
sum of (i) the number of Common Shares outstanding immediately prior to the
issuance of such rights, options, warrants or convertible or exchangeable
securities plus (ii) the number of additional Common Shares which may be
purchased or subscribed for upon exercise, exchange or conversion of such
rights, options, warrants or convertible or exchangeable securities and the
denominator of which shall be the sum of (x) the number of Common Shares
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible or exchangeable securities plus (y) the number of shares which
the total consideration received by the Company for such rights, options,
warrants or convertible or exchangeable securities so offered would purchase at
the then Current Market Value per Common Share.
Except as otherwise provided above, such adjustment shall be made
whenever such rights, options, warrants or convertible or exchangeable
securities are issued and shall become effective retroactively immediately after
the record date for the determination of shareholders entitled to receive such
rights, options, warrants or convertible or exchangeable securities.
(c) ISSUANCE OF COMMON SHARES AT LOWER VALUES. In case the Company
shall sell and issue any Common Share or Right (as defined below) (excluding (i)
any Right issued in any of the transactions described in Section 4.1(a) or (b)
above, (ii) Common Shares issued pursuant to (x) the Warrants or any Rights
outstanding on the date of this Agreement or any Right issued in any transaction
described in Section 4.1(a) or (b) above and (y) a Right, if on the date such
Right was issued, the exercise, conversion or exchange price per Common Share
with respect thereto was at least equal to the then Current Market Value per
Common Share and (iii) any Common Shares or Right issued as consideration (A)
when any corporation or business is acquired, merged into or becomes part of the
Company or a subsidiary of the Company or (B) in good faith in connection with
any other business collaboration, in each case under this clause (iii) in an
arm's-length transaction between the Company and a Person other than an
Affiliate of the Company) at a price per Common Share (determined in the case of
any such Right, by dividing (x) the total consideration receivable by the
Company in consideration of the sale and issuance of such Right, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Common Shares covered by such Right) that is
lower than the Current Market Value per Common Share in effect immediately prior
to such sale or issuance, then the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
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the number of Common Shares theretofore purchasable upon exercise of such
Warrant by a fraction, the numerator of which shall be the number of Common
Shares outstanding immediately after such sale or issuance and the denominator
of which shall be the number of Common Shares outstanding immediately prior to
such sale or issuance plus the number of Common Shares which the aggregate
consideration received (determined as provided below) for such sale or issuance
would purchase at such Current Market Value per Common Share. For purposes of
the calculation provided for in this Section 4.1(c), the Common Shares which the
holder of any such Right shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale and issuance of
such Right and the consideration received by the Company therefor shall be
deemed to be the consideration received by the Company for such Right, plus the
consideration or premiums stated in such Right to be paid for the Common Shares
covered thereby. In case the Company shall sell and issue any Right together
with one or more other securities as part of a unit at a price per unit, then in
determining the "price per Common Share" and the "consideration received by the
Company" for purposes of this Section 4.1(c), the Board shall determine, in good
faith, the fair value of the Right then being sold as part of such unit. For
purposes of this paragraph, a "RIGHT" shall mean any right, option, warrant or
convertible or exchangeable security containing the Right to subscribe for or
acquire one or more Common Shares, excluding the Warrants.
(d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR CONVERTIBLE
SECURITIES. In case the Company shall make a distribution to all holders of its
Common Shares of evidences of its indebtedness, or assets, or other
distributions (excluding any issuance of Common Shares referred to in Section
4.1(a) above and excluding distributions in connection with the dissolution,
liquidation or winding-up of the Company which shall be governed by Section
4.1(j) and distributions of securities referred to in Section 4.1(a), Section
4.1(b) or Section 4.1(c)), then, in each case, the number of Common Shares
purchasable after the record date for such distribution upon the exercise of
each Warrant shall be determined by multiplying the number of Common Shares
purchasable upon the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Value per
Common Share immediately prior to the record date for such distribution and the
denominator of which shall be the Current Market Value per Common Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the evidences of its
indebtedness, or assets or other distributions so distributed attributable to
one Common Share; PROVIDED, HOWEVER, that in lieu of making the foregoing
adjustment the Company may make the same or a like distribution to the Holders
of the Warrants as if their Warrants had been exercised on the day immediately
preceding the record date of such distribution on the terms (subject to any
adjustment pursuant to Section 4.1(a) for a prior event) on which such Warrants
could have been exercised on such date.
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Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution.
(e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon the
expiration of any rights, options, warrants or conversion or exchange privileges
(including, without limitation, any Rights) that have previously resulted in an
adjustment hereunder, if any thereof shall not have been exercised, exchanged or
converted, the Exercise Price and the number of Common Shares purchasable upon
the exercise of each Warrant shall, upon such expiration, be readjusted and
shall thereafter, upon any future exercise, be such as they would have been had
they been originally adjusted (or had the original adjustment not been required,
as the case may be) as if (i) the only Common Shares so issued were the Common
Shares, if any, actually issued or sold upon the exercise, exchange or
conversion of such rights, options, warrants or conversion or exchange rights
(including, without limitation, any Rights) and (ii) such Common Shares, if any,
were issued or sold for the consideration actually received by the Company upon
such exercise, exchange or conversion plus the consideration, if any, actually
received by the Company for issuance, sale or grant of all such rights, options,
warrants or conversion or exchange rights (including, without limitation, any
Rights) whether or not exercised.
(f) CURRENT MARKET VALUE. For the purposes of any computation under
this Article IV, the "CURRENT MARKET VALUE" per Common Share or of any other
security (herein collectively referred to as a "security") at any date herein
specified shall be:
(i) if the security is not registered under the Exchange Act, the
value of the security (1) most recently determined as of a date within the
six months preceding such date by an Independent Financial Expert selected
by the Company in accordance with the criteria for such valuation set out
in Section 4.1(k), or (2) if no such determination shall have been made
within such six-month period or if the Company so chooses, determined as of
such date by an Independent Financial Expert selected by the Company in
accordance with the criteria for such valuation set out in Section 4.1(k);
(PROVIDED that no Financial Expert shall be deemed not to be an Independent
Financial Expert solely by reason of having made one or more such
valuations), or
(ii) if the security is registered under the Exchange Act, the average
of the closing sales prices of the security for the 20 consecutive trading
days immediately preceding such date or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the closing sales prices for all of
the trading days before such date for which closing sales prices are
available. The closing sales price for each such trading day shall be: (A)
in the case of a security listed or admitted to trading on any national
securities exchange, the closing sales price, regular way, on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day on the principal national
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securities exchange on which such security is listed or admitted,
as determined by the Board in good faith, (B) in the case of a
security not then listed or admitted to trading on any national
securities exchange, the last reported sale price on such day,
or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not
then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or a newspaper of
general circulation in the Borough of Manhattan, City and State of New York
customarily published on each Business Day, designated by the Company, or,
if there shall be no bid and asked prices on such day, the average of the
high bid and low asked prices, as so reported, on the most recent day (not
more than 30 days prior to the date in question) for which prices have been
so reported and (D) if there are no bid and asked prices reported during
the 30 days prior to the date in question, the Current Market Value of the
security shall be determined as if the security were not registered under
the Exchange Act.
(g) CONSIDERATION RECEIVED. For purposes of any computation respecting
consideration received pursuant to this Section 4.1, the following shall apply:
(i) in the case of the issuance of Common Shares for cash, the
consideration shall be the amount of such cash;
(ii) in the case of the issuance of Common Shares for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof as determined in good
faith by the Board (irrespective of the accounting treatment thereof),
whose determination shall be conclusive and described in reasonable detail
in a board resolution which shall be provided as soon as practicable
thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options, warrants or
securities convertible into or exchangeable for Common Shares (including,
without limitation, any Rights), the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company
for the issuance of such rights, options, warrants or securities
convertible into or exchangeable for Common Shares, plus the additional
minimum consideration, if any, to be received by the Company upon the
exercise, conversion or exchange thereof (the consideration in each case to
be determined in the same manner as provided in clauses (i) and (ii) of
this Section 4.1(g));
PROVIDED that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith.
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(h) DE MINIMIS ADJUSTMENTS. No adjustment in the number of Common
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Common Shares purchasable upon the exercise of each Warrant; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 4.1(h) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-thousandth of a
share.
(i) ADJUSTMENT OF EXERCISE PRICE. (i) Whenever the number of Common
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Common Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.01) so that it shall
equal the price determined by multiplying such Exercise Price immediately
prior to such adjustment by a fraction the numerator of which shall be the
number of Common Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the denominator of which shall be
the number of Common Shares so purchasable immediately thereafter.
(ii) Following any adjustment to the Exercise Price pursuant to this
Article IV, the Adjusted Exercise Price shall never be less than an amount
(such amount per Common Share, the "Minimum Price") equal to the greater of
the par value per Common Share and the minimum par value required by
Luxembourg law at the time of such adjustment, except to the extent
permitted by applicable law. "Adjusted Exercise Price" means the Exercise
Price payable per Common Share, when adjusted pursuant to this Article IV.
(iii) If, following any adjustment to the Exercise Price pursuant to
this Article IV, the Minimum Price is payable at the time of exercise by
Holders, and but for the provisions of the preceding clause (ii), the
Adjusted Exercise Price would (except to the extent permitted by applicable
law) equal an amount that is less than the Minimum Price at the time of
such adjustment (such lesser amount, the "Sub-Par Price"), the Company will
take such action that the Board of Directors may in good faith determine is
fair and appropriate to protect the rights of the Holders against dilution
or other impairment as contemplated by this Article IV; PROVIDED, HOWEVER,
that no such action shall cause the aggregate amount payable per Warrant,
after giving effect to this clause (iii) (and taking into account any
payments to be received hereunder) to be greater than the aggregate amount
payable per Warrant which would have been payable but for the preceding
clause (ii). Such action may include, without limitation:
(A) payment to the Holder of each Warrant of liquidated damages
per Common Share purchasable upon Exercise equal to the Minimum Price
less the Sub-Par Price; or
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(B) reduction, if permitted by applicable law, of the par value
per Common Share.
Any such payment shall be made or any other such action shall be
consummated not later than the earlier of (a) 180 days following the
consummation of the transaction giving rise to such adjustment and (b) with
respect to each Warrant, on the date such Warrant is exercised. If such
transaction is annulled, rescinded, revoked, or reversed or otherwise
canceled, or any subsequent adjustment is made pursuant to this Article IV
such that the adjusted Exercise Price is greater than or equal to the
Minimum Price (without applying the preceding clause (ii) to that or any
preceding adjustment pursuant to this Article IV), then (x) in the case of
such a payment, if such payment has not yet been made to a Holder by the
Company (or by any agent of the Company, including for this purpose the
Warrant Agent), such payment may be annulled, rescinded, revoked or
otherwise canceled and any deposit made in respect thereof returned to the
Company and (y) in the case of any such other action, such other action may
be annulled, rescinded, revoked, reversed or otherwise canceled.
(iv) If after an adjustment, a Holder of a Warrant upon exercise of it
may receive shares of two or more classes in the capital of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between such classes of shares in a manner that the Board deems fair and
equitable to the Holders. After such allocation, the exercise privilege and
the Exercise Price of each class of shares shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Shares in this
Article IV.
(v) Such adjustment shall be made successively whenever any event
listed above shall occur.
(j) CONSOLIDATION, MERGER, ETC. (i) Subject to the provisions of
Subsection (ii) below of this Section 4.1(j), in case of the consolidation of
the Company with, or merger of the Company with or into, or of the sale of all
or substantially all of the properties and assets of the Company to, any Person,
and in connection therewith consideration is payable to holders of Common Shares
(or other securities or property purchasable upon exercise of Warrants) in
exchange therefor, the Warrants shall remain subject to the terms and conditions
set forth in this Agreement and each Warrant shall, after such consolidation,
merger or sale, entitle the Holder to receive upon exercise the number of shares
in the capital or other securities or property (including cash) of or from the
Person resulting from such consolidation or surviving such merger or to which
such sale shall be made or of the parent of such Person, as the case may be,
that would have been distributable or payable on account of the Common Shares if
such Holder's Warrants had been exercised immediately prior to such merger,
consolidation or sale (or, if applicable, the record date therefor); and in any
such case the provisions of this Agreement with respect to the rights and
interests thereafter of the Holders of Warrants shall be appropriately adjusted
by the Board in good faith so as to be applicable,
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as nearly as may reasonably be, to any shares, other securities or any property
thereafter deliverable on the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Common Shares in exchange for their
Common Shares in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive payments or distributions as of the date of
such event on an equal basis with, and on the same day as, holders of
Common Shares (or other securities purchasable upon exercise of the
Warrants) as if the Warrants had been exercised immediately prior to such
event, less an amount equal to the Exercise Price. Upon receipt of such
payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire. If the Company has made a Repurchase Offer
that has not expired at the time of such transaction, the holders of the
Warrants will be entitled to receive the higher of (i) the amount payable
to the holders of the Warrants described above and (ii) the Repurchase
Price payable to the holders of the Warrants pursuant to such Repurchase
Offer. In case of any such merger, consolidation or sale of assets, the
surviving or acquiring Person or, in the event of any dissolution,
liquidation or winding up of the Company, the Company shall deposit
promptly with the Warrant Agent the funds or other consideration, if any,
necessary to pay the Holders of the Warrants. After receipt of such deposit
from such Person or the Company and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment by delivering a check in
such amount as is appropriate (or, in the case of consideration other than
cash, such other consideration as is appropriate) to such Person or Persons
as it may be directed in writing by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the Current Market
Value shall be deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which shall be
selected by the Board in its sole discretion, and retained on customary terms
and conditions, using one or more valuation methods that the Independent
Financial Expert, in its best professional judgment, determines to be most
appropriate. The Company shall cause the Independent Financial Expert to deliver
to the Company, with a copy to the Warrant Agent, within 90 days of the
appointment of the Independent Financial Expert, a value report (the "VALUE
REPORT") stating the value of the Common Shares and other securities or
property, if any, being valued as of the Valuation Date and containing a brief
statement as to the nature and scope of the examination or investigation upon
which the determination of value was made. The Warrant Agent shall have no duty
with respect to the Value Report of any Independent Financial Expert, except to
keep it on file and available for inspection by the Holders. The determination
as to Current Market Value in accordance with the provisions of this Section
4.1(k) shall be conclusive on all Persons. The
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Independent Financial Expert shall consult with management of the Company in
order to allow management to comment on the proposed value prior to delivery to
the Company of any Value Report.
(l) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other exception
contained in this Section 4.1, and in addition thereto, no adjustment need be
made for:
(i) grants or exercises of Rights granted, directly or indirectly
(including but not limited to through the LLC or any subsidiary of the
Company), to or for the benefit of Management Investors or Beneficial
Investors or Common Shares issued or granted, directly or indirectly
(including but not limited to through the LLC or any Subsidiary of the
Company), to or for the benefit of Management Investors or Beneficial
Investors, whether or not upon the exercise, exchange or conversion of any
such Rights (to the extent that (I) all such securities (other than
securities described in clause (ii) and (vi)) directly or indirectly issued
or granted to Management Investors and Beneficial Investors do not have an
aggregate value in excess of 15% and (II) all such securities, directly or
indirectly, issued or granted to Beneficial Investors do not exceed 2%, in
either case of the Common Shares of the Company on a fully diluted basis,
as determined in good faith by the Board);
(ii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of the issuance
of the Warrants;
(iii) rights to purchase Common Shares pursuant to a Company plan for
reinvestment of dividends or interest;
(iv) a decrease in the par value of the Common Shares (including a
change from par value to no par value);
(v) a transaction referred to in this Section 4.1 if Holders
representing a majority of the aggregate Common Shares purchasable upon
exercise of the Warrants at such time agree to participate in any such
transaction on the same basis on which holders of Common Shares participate
in such transaction; and
(vi) Common Shares or Rights issued or granted in connection with the
Existing Equity Agreements (including any Common Shares acquired by the LLC
with the proceeds of any issuance of LLC interests to Management
Investors).
(vii) bona fide public offerings or private placements in compliance
with Section 4(2) of the Securities Act (including transactions pursuant to
Rule 144A thereunder), Regulation D or Regulation S under the Securities
Act (or any successor rule or exemption in effect from time to time),
involving at least one investment bank of national reputation, if (i) in
the case of any security trading on any national
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securities exchange or in the over the counter market, or of a
security directly or indirectly convertible or exchangeable for any such
security (the latter security being a "REFERENCE SECURITY"), such security
(or the Reference Security as applicable) is sold to investors at a price
at least equal to the closing sale, bid or ask price (whichever is
customary) of such security (or the Reference Security as applicable) on
the date of the public offering or private placement, or (ii) either (x)
the security or Reference Security is issued as part of a public offering
or a private placement of debt securities or (y) any security is issued as
part of a bona fide private placement or public offering, in each case on a
firm commitment basis; PROVIDED that any such private placement, directly
or indirectly, is to 10 or more beneficial holders.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
SECTION 4.2. NOTICE OF ADJUSTMENT. Whenever the number of Common
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause, so far as it is able, the
Warrant Agent promptly to mail, at the expense of the Company, to each Holder
notice of such adjustment or adjustments and shall deliver to the Warrant Agent
a certificate of the Auditors setting forth the number of Common Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not at
any time be under any duty or responsibility to any Holders to determine whether
any facts exist which may require any adjustment of the Exercise Price or the
number of Common Shares purchasable on exercise of the Warrants or any of the
other adjustments set forth in Section 4.1, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment, or the validity or value (or the kind or amount) of
any Common Shares which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Common Shares or share
certificates upon the exercise of any Warrant.
SECTION 4.3. STATEMENT ON WARRANTS. Irrespective of any adjustment in
the Exercise Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrants initially purchasable pursuant to this Agreement.
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SECTION 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC. In case at any time
after the date hereof and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares receive no consideration in respect of their shares) or
(ii) any other transaction contemplated by Section 4.1(j)(ii) above, then, in
any one or more of such cases, the Company shall cause to be mailed to the
Warrant Agent and shall cause the Warrant Agent to mail, at Company's expense,
to each Holder of a Warrant, at the earliest practicable time (and, in any
event, not less than 20 days before any date set for definitive action), notice
of the date on which such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Exercise Price and the kind and amount of the Common Shares and other
securities, money and other property deliverable upon exercise of the Warrants.
Such notice shall also specify the date as of which the holders of record of the
Common Shares or other securities or property purchasable upon exercise of the
Warrants shall be entitled to exchange their shares for securities, money or
other property deliverable upon such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
SECTION 4.5. FRACTIONAL INTERESTS. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Common Shares which shall be purchasable upon such exercise thereof
shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If any
fraction of a Common Share would, except for the provisions of this Section 4.5,
be purchasable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
SECTION 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in
which this Article IV shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, the Company may elect
to defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Common Shares and other shares in
the capital of the Company, if any, purchasable upon such exercise over and
above the Common Shares and other shares in the capital of the Company, if any,
purchasable upon such exercise and (ii) paying such holder any amount in cash in
lieu of a fractional share; PROVIDED, HOWEVER, that the Company shall deliver to
such Holder a due bill or other appropriate instrument evidencing such Holder's
right to receive such additional Common Shares, other shares and cash upon the
occurrence of the event requiring such adjustment.
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Section 4.7. PAR VALUE; VALID ISSUANCE. The Company will not increase
the par value of the Common Shares above the Exercise Price (as adjusted
hereunder from time to time), except to the extent required by applicable law.
The Company will take all such corporate action, to the extent permitted by
applicable law (including, without limitation, reducing the par value thereof),
as may be necessary or appropriate in order that the Company may validly and
legally issue stock upon the exercise of Warrants.
Section 4.8. INITIAL PUBLIC OFFERING. Notwithstanding anything to the
contrary herein contained, if the Company conducts an initial public offering of
equity securities (other than the Common Shares and non-particpatory,
nonconvertible preferred shares and Excepted Shares) or a Parent Entity or a
subsidiary of the Company conducts an initial public offering of equity
securities (other than non-participatory, nonconvertible preferred shares and
Excepted Shares), the Company will give the Holders the opportunity to convert
such Warrants into warrants to purchase such equity securities and such Common
Shares or such other securities that have been received by the Holders upon the
exercise of Warrants into such equity securities. Such conversion opportunity
will be on terms and conditions determined to be fair and reasonable by the
Company's Board. "Excepted Shares" means securities issued in connection with an
a business combination that could be registered on Form S-4 or F-4 under the
Securities Act (or any equivalent successor form).
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants to the
extent permitted by Luxembourg law.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance of
any new Warrant Certificate under this Article VI, the
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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 other expenses
(including the fees and expenses of the Warrant Agent) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this Article VI
in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a
contractual obligation of the Company whether or not the allegedly lost, stolen
or destroyed Warrant Certificates shall be at any time enforceable by anyone and
shall be entitled to the benefits of this Agreement equally and proportionately
with any and all other Warrant Certificates duly executed and delivered
hereunder. The provisions of this Article VI are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall, subject to the following paragraph, at all times
reserve and keep available such number of its authorized but unissued Common
Shares deliverable upon exercise of the Warrants as will be sufficient to permit
the exercise in full of all outstanding Warrants and will cause appropriate
evidence of ownership of such Common Shares to be delivered to the Warrant Agent
upon its request for delivery thereof upon the exercise of the Warrants. The
Company covenants that all Common Shares that may be issued upon the exercise of
the Warrants will, upon issuance, be duly and validly issued, fully paid and
nonassessable, free of pre-emptive rights and free from all taxes, liens,
charges and security interests created by or through the Company.
The shareholders of the Company may be required to reauthorize and
reserve the Common Stock purchasable upon exercise of all outstanding Warrants.
To the extent such reauthorization or reservation is required by applicable law,
the Company hereby agrees (to the extent permitted by applicable law) take any
and all actions required, and Carrier One, L.L.C. will (to the extent permitted
by applicable law) to vote any shares of the Company's Common Stock held by it,
to reauthorize and reserve the Common Stock for issuance upon exercise of the
Warrants at least 31 days prior to the date such reauthorization would be
required under Luxembourg law (a "Reauthorization Date"). In connection with any
transfer by Carrier One, L.L.C. of the Company's Common Stock held by it (other
than to any Management Investor or pursuant to any public offering), Carrier
One, L.L.C. agrees to cause the transferee of such shares of Common Stock to be
bound by this paragraph. The Company will notify each Holder of Warrants, on the
date that is 30 days prior to any Reauthorization Date, if the Common Stock has
not been so reauthorized and reserved by such date.
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ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE. The Warrant Certificates shall be
issued in registered form only. The Warrant Agent shall keep a register for the
registration of Warrant Certificates and transfers or exchanges of Warrant
Certificates as herein provided and other appropriate data as determined by the
Warrant Agent at the office of the Common Depositary (in the case of all
Warrants other than the Global DTC Warrants) or the Warrant Agent (in the case
of the Global DTC Notes). The Company shall, upon reasonable notice to the
Warrant Agent, have access to such register during the Warrant Agent's or the
Common Depositary's regular business hours, as applicable. All Warrant
Certificates issued upon any registration of transfer or exchange of Warrant
Certificates shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrant Certificates surrendered for such registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance of the
Euro Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately from, but may be transferred or exchanged only together
with, the Euro Notes issued as part of such Euro Units.
A Holder may transfer its Warrants only by written application to the
Warrant Agent and the Common Depositary stating the name of the proposed
transferee and otherwise complying with the terms of this Agreement. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration of the transfer
by the Warrant Agent in the register. Prior to the registration of any transfer
of Warrants by a Holder as provided herein, the Company, the Warrant Agent, the
Common Depositary and any agent of the Company may treat the person in whose
name the Warrants are registered as the owner thereof for all purposes and as
the person entitled to exercise the rights represented thereby, any notice to
the contrary notwithstanding. Owners of a beneficial interest in a Global
Warrant will not be entitled to have Warrants registered in their names, and
will not receive or be entitled to receive Certificated Warrants except pursuant
to Section 2.4. Furthermore, any holder of a Global Warrant shall, by acceptance
of such Global Warrant, agree that transfers of beneficial interests in such
Global Warrant may be effected only through a book-entry system maintained by
the holder of such Global Warrant (or its agent), and that ownership of a
beneficial interest in the Warrants represented thereby shall be required to be
reflected in a book-entry. When Warrant Certificates are presented to the Common
Depositary with a request to register the transfer or to exchange them for an
equal amount of Warrants of other authorized denominations, the Common
Depositary shall register such transfer or make such exchange as requested if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall execute Warrant Certificates at the
Warrant Agent's or the Common Depositary's request. No
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service charge shall be made for any registration of transfer or exchange of
Warrants, 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 of Warrants.
SECTION 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS. (a) The
Global Warrants initially shall (i) be registered in the name of the Depositary
for such Global Warrant or the nominee of such Depositary, (ii) be delivered to
the Warrant Agent (acting through its London branch) as Common Depositary and
(iii) bear legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Agreement with respect to the Global Warrants held on
their behalf by the Depositary or the Warrant Agent (acting through its London
branch) as Common Depositary , and the Common Depositary or other Depositary (in
the case of the Global DTC Warrants) may be treated by the Company, the Warrant
Agent and any agent of the Company or the Warrant Agent as the absolute owner of
such Global Warrant or Global DTC Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to transfers of
such Global Warrant in whole, but not in part, to the Depositary, its successors
or their respective nominees or transfers between the Depositary for the Global
DTC Warrants and the Depositary for the other Global Warrants. Interests of
beneficial owners in the Global Warrants may be transferred in accordance with
the rules and procedures of each Depositary and the provisions of Section 8.3
hereof. Certificated Warrants shall be transferred to beneficial owners in
exchange for their beneficial interests in the relevant Global Warrant, (i) if
the Depositary, with respect to such Global Warrant, notifies the Company that
it is unwilling or unable to continue as Depositary for such Global Warrant and
a successor depositary is not appointed by the Company within 90 days of such
notice or (ii) if there is a Default.
(c) In connection with the transfer of the entire Restricted Global
Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Global Warrants shall be surrendered to
the Warrant Agent for cancellation, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global
Warrants, Certificated Warrants of authorized denominations representing, in the
aggregate, the number of Warrants theretofore represented by the Global
Warrants.
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(d) Any Certificated Warrant delivered in exchange for an interest in
a Global Warrant pursuant to paragraph (b) or (c) of this Section shall, except
as otherwise provided by paragraph (d) of Section 8.3 hereof bear the legend
regarding transfer restrictions applicable to the Certificated Warrant set forth
in Section 2.2.
(e) The registered holder of a Global Warrant may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Warrants.
(f) Any beneficial interest in one of the Global Warrants that is
transferred to a person who takes delivery in the form of an interest in any
other Global Warrant will, upon transfer, cease to be an interest in such Global
Warrant and become an interest in such other Global Warrant and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Warrant for
as long as it remains such an interest.
SECTION 8.3. SPECIAL TRANSFER PROVISIONS. The following provisions
shall apply:
(a) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of Warrants to a QIB:
(i) If the Warrants to be transferred are represented by IAI
Certificated Warrants, the Common Depositary shall register the transfer if
such transfer is being made by a proposed transferor who has checked the
box provided for on the form of Warrant Certificate stating, or has
otherwise advised the Company and the Warrant Agent in writing, that the
sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Warrant Certificate stating, or has otherwise advised the Company and the
Warrant Agent in writing, that it is purchasing the Warrants 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 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 or (y) an interest in the Global
Warrants or the Global DTC Warrants, the transfer of such interest may be
effected only through the book entry system maintained by either or both
Depositaries.
(ii) If the proposed transferee is an Agent Member, and the Warrants
to be transferred are represented by IAI Certificated Warrants, upon
receipt by the Warrant
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Agent of the documents referred to in clause (i) above and instructions
given in accordance with the Depositary's and the Common Depositary's
procedures, the Common Depositary shall reflect on its books and records
the date and an increase in the amount of Warrants represented by the
Restricted Global Warrants or Global DTC Warrants in an amount equal to the
amount of Warrants represented by the IAI Certificated Warrants to be
transferred, and the Common Depositary shall cancel the IAI Certificated
Warrants.
(b) TRANSFERS TO NON-U.S. PERSON AT ANY TIME. The following provisions
shall apply with respect to the registration of any proposed transfer of
Warrants to a Non-U.S. Person (excluding QIBs):
(i) The Common Depositary shall register any proposed transfer of
Warrants to a Non-U.S. Person only (x) upon receipt of a certificate
substantially in the form of Exhibit B-1 from the proposed transferor and
(y) prior to February 19, 2000, if the proposed transferee has delivered to
the Common Depositary and the Company a certificate substantially in the
form of Exhibit B-2 hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant, upon receipt by the
Warrant Agent and the Company of the documents referred to in clause (i)
above and instructions given in accordance with the Depositary's and the
Common Depositary's procedures, the Company shall execute and the Warrant
Agent shall countersign Certificated Warrants in an amount equal to the
number of Warrants represented by the Restricted Global Warrant to be
transferred and the Common Depositary shall decrease the number of Warrants
represented by the Restricted Global Warrant so transferred.
(iii) After February 19, 2000, if the proposed transferee is an Agent
Member, and the Warrants to be transferred are represented by Certificated
Warrants, upon receipt by the Warrant Agent of the documents referred to in
clause (i) above and instructions given in accordance with the Depositary's
and the Common Depositary's procedures, the Common Depositary shall reflect
on its books and records the date and an increase in the amount of Warrants
represented by the Regulation S Global Warrant in an amount equal to the
amount of Warrants represented by the Certificated Warrants to be
transferred, and the Common Depositary shall cancel the Certificated
Warrants.
(c) TRANSFERS TO ANY OTHER PERSON. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
any Person not specified in paragraphs (a) and (b) above (including any
Institutional Accredited Investor which is not a QIB):
(i) The Common Depositary shall register any proposed transfer of
Warrants to any such Person if (x) the transferor has delivered to the
Warrant Agent
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and the Company a certificate substantially in the form of Exhibit C-1
hereto and, if required by paragraph (d) thereof, an opinion of counsel to
the effect set forth therein and (y) the proposed transferee has delivered
to the Warrant Agent and the Company a certificate substantially in the
form of Exhibit C-2 hereto and an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant or the Global DTC
Warrant, upon receipt by the Warrant Agent and the Company of the documents
referred to in clause (i) above and instructions given in accordance with
the Depositary's and the Common Depositary's procedures, the Company shall
execute and the Warrant Agent shall countersign Certificated Warrants in an
amount equal to the number of Warrants represented by the Restricted Global
Warrant or Global DTC Warrant to be transferred and the Common Depositary
shall decrease the number of Warrants represented by the Restricted Global
Warrant or Global DTC Warrant so transferred.
(d) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Common Depositary shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of Warrant
Certificates bearing the Private Placement Legend, the Common Depositary shall
deliver only Warrant Certificates that bear the Private Placement Legend unless
there is delivered to the Warrant Agent an opinion of counsel reasonably
satisfactory to the Company and its Counsel and the Warrant Agent to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(e) TRANSFERS OF INTERESTS IN THE LEGENDED OFFSHORE CERTIFICATED
WARRANT AND THE LEGENDED REGULATION S GLOBAL WARRANT. The following provisions
shall apply with respect to registration of any proposed transfer of interests
in the Offshore Certificated Warrants and the Regulation S Global Warrant, each
bearing the Private Placement Legend:
(i) The Common Depositary shall register the transfer of any Warrant
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Warrant Agent a certificate substantially
in the form of Exhibit B-1 hereto or (y) if the proposed transferee is a
QIB and the proposed transferor has checked the box provided for on the
form of Warrant stating, or has otherwise advised the Company and the
Warrant Agent in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant stating, or has otherwise
advised the Company and the Warrant Agent in writing, that it is purchasing
the Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that 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
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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 an Agent Member, upon receipt by
the Warrant Agent of the documents referred to in clause (i)(y) above and
instructions given in accordance with the Depositary's and the Common
Depositary's procedures, the Common Depositary shall reflect on its books
and records the date and an increase in the number of Warrants represented
by the Restricted Global Warrant or Global DTC Warrant, in an amount equal
to the number of Warrants represented by the such Regulation S Global
Warrant or Offshore Certificated Warrant or to be transferred, and the
Common Depositary shall decrease the number of Warrants represented by the
such Regulation S Global Warrant or cancel the legended Offshore
Certificated Warrant, as the case may be.
(f) TRANSFERS OF INTERESTS IN THE UNLEGENDED REGULATION S GLOBAL
WARRANT OR UNLEGENDED OFFSHORE CERTIFICATED WARRANTS. The Common Depositary
shall register any transfer of interests in the unlegended Regulation S Global
Warrant or unlegended Offshore Certificated Warrants, without requiring any
additional certification.
(g) GENERAL. (i) By its acceptance of any Warrants represented by a
Warrant Certificate bearing the Private Placement Legend, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the Private Placement Legend and agrees that it will
transfer such Warrants only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrants unless such transfer complies with
the restrictions on transfer of such Warrants set forth in this Agreement. In
connection with any transfer of Warrants, each Holder agrees by its acceptance
of Warrants to furnish the Warrant Agent or the Company such certifications,
legal opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act;
PROVIDED that the Warrant Agent shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters, notices and
other written communications received pursuant to Section 8.2 hereof or this
Section 8.3. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
SECTION 8.4. SURRENDER OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented
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thereby shall, if surrendered to the Company, be delivered to the Warrant Agent,
and all Warrant Certificates surrendered or so delivered to the Warrant Agent
shall be promptly cancelled by the Warrant Agent and shall not be reissued by
the Company and, except as provided in this Article VIII in case of an exchange,
Article III hereof in case of the exercise of less than all the Warrants
represented thereby or Article VI in case of a mutilated Warrant Certificate, no
Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent
shall deliver to the Company from time to time or otherwise dispose of such
cancelled Warrant Certificates as the Company may direct in writing.
ARTICLE IX
WARRANT HOLDERS
SECTION 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER. The Company and
the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such registered Holder, whether or not it shall have express or other
notice thereof. Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote or to consent to any
action of the shareholders, to receive dividends or other distributions, to
exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
SECTION 9.2. RIGHT OF ACTION. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to exercise such Warrants in the manner provided in the Warrant Certificate
representing such Warrants and in this Agreement.
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ARTICLE X
REMEDIES
SECTION 10.1. DEFAULTS. It shall be deemed to be a "DEFAULT" with
respect to the Company's (or its successor's) obligations under this Agreement
if:
(a) a Repurchase Event occurs and the Company (or its successor or an
affiliate) shall fail to make a Repurchase Offer pursuant to Section 3.4
hereof; or
(b) the Company (or its successor or an affiliate) shall fail to
purchase the Warrants pursuant to the Repurchase Offer in accordance with
the provisions of Section 3.4 hereof.
SECTION 10.2. Omitted.
SECTION 10.3. REMEDIES; NO WAIVER. Notwithstanding any other provision
of this Warrant Agreement, if a Default occurs and is continuing, the Holders of
the Warrants may pursue any available remedy to collect the Repurchase
Obligation or to enforce the performance of any provision of this Warrant
Agreement. A delay or omission by any Holder of a Warrant in exercising, or a
failure to exercise, any right or remedy arising out of a Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Default. All remedies are cumulative to the extent permitted by law.
ARTICLE XI
THE WARRANT AGENT
SECTION 11.1. DUTIES AND LIABILITIES. The Warrant Agent hereby accepts
the agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth, by all of which the Company and the
Holders of Warrants, by their acceptance thereof, shall be bound. The Warrant
Agent shall not, by countersigning Warrant Certificates or by any other act
hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any Common Shares issued upon exercise of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of Common Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the proceeds of the
exercise of any Warrant. The Warrant Agent shall not have any duty to calculate
or determine any adjustments with respect to either the Exercise Price or the
kind and amount of Common Shares receivable by Holders upon the exercise of
Warrants required from
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time to time and the Warrant Agent shall have no duty or responsibility in
determining the accuracy or correctness of such calculation. The Warrant Agent
shall not be (a) liable for any recital or statement of fact contained herein or
in the Warrant Certificates or for any action taken, suffered or omitted by it
in good faith in the belief that any Warrant Certificate or any other documents
or any signatures are genuine or properly authorized, (b) responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in the Warrant Certificates or (c)
liable for any act or omission in connection with this Agreement except for its
own gross negligence, bad faith or willful misconduct. The Warrant Agent is
hereby authorized to accept instructions with respect to the performance of its
duties hereunder from a Senior Officer of the Company and to apply to any such
Senior Officer for instructions (which instructions will be promptly given in
writing when requested) and the Warrant Agent shall not be liable for any action
taken or suffered to be taken by it in good faith in accordance with the
instructions of any Senior Officer; PROVIDED, HOWEVER, that, in its discretion,
the Warrant Agent may, in lieu thereof, accept other evidence of such or may
require such further or additional evidence as it may deem reasonable. The
Warrant Agent shall not be liable for any action taken with respect to any
matter in the event it requests instructions from the Company as to that matter
and does not receive such instructions within a reasonable period of time after
the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees; PROVIDED that reasonable care has been
exercised with respect to the retention of any such attorney, agent or employee.
The Warrant Agent shall not be under any obligation or duty to institute, appear
in or defend any action, suit or legal proceeding in respect hereof, unless
first indemnified to its reasonable satisfaction. The Warrant Agent shall
promptly notify the Company in writing of any claim made or action, suit or
proceeding instituted against it arising out of or in connection with this
Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
SECTION 11.2. RIGHT TO CONSULT COUNSEL. The Warrant Agent may at any
time consult with legal counsel (who may be legal counsel for the Company), and
the opinion or
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advice of such counsel shall be full and complete authorization and protection
to the Warrant Agent and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
SECTION 11.3. COMPENSATION; INDEMNIFICATION. The Company agrees
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request for reasonable fees or expenses and reasonable counsel fees and
expenses incurred in connection with the execution and administration of this
Agreement, and further agrees to indemnify the Warrant Agent which shall include
for purposes of this Section 11.3 its directors, officers, agents or employees
and save it harmless against any losses, liabilities or expenses (including the
fees and expenses of its counsel) arising out of or in connection with the
acceptance and administration of this Agreement and under the Warrant
Registration Rights Agreement, including, without limitation, the reasonable
costs and expenses of investigating or defending any claim of such liability,
except that the Company shall have no liability hereunder to the extent that any
such loss, liability or expense results from the Warrant Agent's own gross
negligence, bad faith or willful misconduct. The obligations of the Company
under this Section 11.3 shall survive the exercise and the expiration of the
Warrants, the termination of this Agreement and the resignation or removal of
the Warrant Agent in respect of services or expenses incurred in connection with
the Warrants or this Agreement.
SECTION 11.4. NO RESTRICTIONS ON ACTIONS. Nothing in this Agreement
shall be deemed to prevent the Warrant Agent and any shareholder, director,
officer or employee of the Warrant Agent from buying, selling or dealing in any
of the Warrants or other securities of the Company or becoming pecuniarily
interested in transactions in which the Company may be interested, or
contracting with or lending money to the Company or otherwise acting as fully
and freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
SECTION 11.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. The
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own gross negligence, bad faith or willful misconduct),
after giving one month's prior written notice to the Company. The Company may at
any time remove the Warrant Agent upon one month's written notice specifying the
date when such discharge shall take effect, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall mail to each Holder of a
Warrant, at the Company's expense, a copy of said notice of resignation or
notice of removal, as the case may be. Upon such resignation or removal the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 30 days after it
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has been notified in writing of such resignation by the resigning Warrant Agent
or after such removal, then the resigning or removed Warrant Agent or the Holder
of any Warrant may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. After 30 days from receipt of, or giving,
notice, as the case may be, and pending appointment of a successor to the
original Warrant Agent, either by the Company or by such a court, the duties of
the Warrant Agent shall be carried out by the Company. Any new warrant agent,
whether appointed by the Company or by such a court, shall be a bank or trust
company doing business under the laws of the United States or any state thereof,
in good standing and having a combined capital and surplus of not less than
$25,000,000. The combined capital and surplus of any such new warrant agent
shall be deemed to be the combined capital and surplus as set forth in the most
recent annual report of its condition published by such warrant agent prior to
its appointment, PROVIDED that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment by the new
warrant agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; however, the original
Warrant Agent shall in all events deliver and transfer to the successor Warrant
Agent all property (including, without limitation, documents and recorded
information), if any, at the time held hereunder by the original Warrant Agent
and if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning or removed Warrant Agent. Not later than the effective date of
any such appointment, the Company shall file notice thereof with the resigning
or removed Warrant Agent and shall forthwith cause a copy of such notice to be
mailed by the successor Warrant Agent to each Holder of a Warrant. Failure to
give any notice provided for in this Section 11.5, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be. No
Warrant Agent hereunder shall be liable for any acts or omissions of any
successor Warrant Agent.
SECTION 11.6. SUCCESSOR WARRANT AGENT. Any corporation into which the
Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, PROVIDED
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 11.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.1. MONIES DEPOSITED WITH THE WARRANT AGENT. The Warrant
Agent shall not be required to pay interest on any monies deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any monies, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
monies, securities or other property shall have been deposited; but such monies,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any monies, securities
or other property deposited with the Warrant Agent for payment or distribution
to the Holders that remains unclaimed for one year after the date the monies,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
SECTION 12.2. PAYMENT OF TAXES. Subject to Article VI hereof, all
Common Shares purchasable upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of
Luxembourg and the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery thereof
upon exercise of Warrants (other than taxes on or measured by income imposed on
any Holder). The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for Common Shares (including other securities or property
purchasable upon the exercise of the Warrants) or payment of cash to any Person
other than the Holder of a Warrant Certificate surrendered upon the exercise of
a Warrant and in case of such transfer or payment, the Warrant Agent and the
Company shall not be required to issue any share certificate or pay any cash
until such tax or charge has been paid or it has been established to the Warrant
Agent's and the Company's satisfaction that no such tax or charge is due.
SECTION 12.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. Except as otherwise provided herein, the Company will not merge into or
consolidate with any other Person, or sell or otherwise transfer all or
substantially all of its property and assets to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, by supplemental agreement reasonably
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement or contained in the Warrants to be
performed and observed by the Company.
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SECTION 12.4. REPORTS TO HOLDERS. At all times from and after the
earlier of (i) the Registration with respect to the Notes and (ii) the date that
is six months after the Closing Date, in either case, whether or not the Company
is then required to file reports with the Commission, the Company shall file
with the Commission to the extent then permitted by the Exchange Act and by the
Commission, all such information on an appropriate available form as it would be
required to file with the Commission by Section 13(a) or 15(d) under the
Exchange Act if it were a U.S. company and subject thereto, including
information required by annual, quarterly or current reports whether or not
required to be so filed. The Company shall supply the Warrant Agent and each
Holder or shall supply to the Warrant Agent for forwarding to all such Holders,
without cost to such Holders, copies of such reports and other information. The
Warrant Agent's receipt of such reports and other information shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Warrant Agent is
entitled to rely exclusively on Officers' Certificates). In addition, at all
times prior to the earlier of the date of the Registration and the date that is
six months after the Closing Date, the Company shall, at its cost, supply to the
Warrant Agent, for forwarding to all Holders, without cost to such Holders,
quarterly and annual reports substantially equivalent to those described above
or which would otherwise be required by the Exchange Act, commencing with the
report for the fiscal quarter ending immediately after the Closing Date;
PROVIDED that the Company may deliver copies of the registration statement
(including pre-effective amendments thereto) with respect to the exchange offer
for the Notes to the extent it contains the information that would have been
required in such reports. In addition, at all times prior to the Registration,
upon the request of any such holder or any prospective purchaser of the Warrants
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A.
SECTION 12.5. NOTICES; PAYMENT. (a) Except as otherwise provided in
Section 12.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
With a copy to:
45
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Carrier 1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
To the Warrant Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
To the Common Depositary:
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Payment of the Exercise Price shall be made in accordance with the
provisions of this Agreement at the office of the Warrant Agent set forth above.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing by registered mail, return receipt requested, to the
Holders at their last known addresses appearing on the register maintained by
the Warrant Agent. The Company hereby irrevocably authorizes the Warrant Agent,
in the name and at the expense of the Company, to mail any such notice upon
receipt thereof from the Company. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
SECTION 12.6. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and
46
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assigns, and the Holders from time to time of the Warrants. Nothing in this
Agreement is intended or shall be construed to confer upon any Person, other
than the Company, the Warrant Agent and the Holders of the Warrants, any right,
remedy or claim under or by reason of this Agreement or any part hereof.
SECTION 12.7. COUNTERPARTS. This Agreement may be executed manually or
by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
SECTION 12.8. AMENDMENTS. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; PROVIDED that in either case the Company determines
in good faith that such changes or corrections do not and will not adversely
affect, alter or change the rights, privileges or immunities of the Holders of
Warrants. Any other amendment or supplement to this Agreement may be effected
with the written consent of the Holders of a majority of the then outstanding
Warrants. In determining whether the Holders of the required number of Warrants
have concurred in any direction, waiver or consent, Warrants owned by the
Company or any Affiliate of the Company shall be disregarded and deemed not to
be outstanding. Upon the Warrant Agent's request, the Company shall promptly
provide an Officer's Certificate and Opinion of Counsel which provide all
conditions precedent to adoption of an amendment that have been satisfied, which
Opinion of Counsel may be subject to customary or otherwise appropriate
assumptions and qualifications and may rely on such Officer's Certificate as to
any matters of fact.
SECTION 12.9. HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 12.10. COMMON SHARES LEGEND. Unless and until the Common
Shares purchasable upon the exercise of the Warrants are registered under the
Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, (a) such Common Shares will bear a legend to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET
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<PAGE>
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF SUCH TRANSFER, RESELL OR
OTHERWISE TRANSFER THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT AND REGISTRAR) AND AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) TO A
PERSON OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT THAT, FOR ANY TRANSFER PRIOR TO
FEBRUARY 19, 2000, FURNISHES TO THE TRANSFER AGENT AND REGISTRAR, PRIOR TO
SUCH TRANSFER, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT AND REGISTRAR), (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE COMMON
48
<PAGE>
SHARES REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRANSFER AGENT AND
REGISTRAR AND 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 IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. 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. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF THE
COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Common Share transferred pursuant to Regulation S prior to
February 19, 2000 will bear a legend to the following effect:
HEDGING TRANSACTIONS INVOLVING THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.
SECTION 12.11. THIRD PARTY BENEFICIARIES. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
SECTION 12.12. TERMINATION. Except as otherwise specified herein, this
Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
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SECTION 12.13. METHOD OF PAYMENT. The U.S. dollar is the sole currency
of account and payment for all sums payable by the Company or the Holders under
or in connection with the Warrants, including damages.
SECTION 12.14. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER
OF IMMUNITIES; GOVERNING LAW. The Company (i) irrevocably designates and
appoints CT Corporation System, 1633 Broadway, New York, NY 10019 (together with
any successor, the "Authorized Agent") as its authorized agent upon which
process may be served in any suit, action or proceeding arising out of or
relating to the Warrants or this Agreement that may be instituted in any federal
or state court in the State of New York, Borough of Manhattan, or brought under
federal or state securities laws or brought by the Warrant Agent, and represents
and warrants that the Authorized Agent has accepted such designation and (ii)
agrees that service of process upon the Authorized Agent and written notice of
said service to the Company (mailed or delivered to its General Counsel at its
executive office at Militarstrasse 36, CH-8004 Zurich, Switzerland) shall be
deemed in every respect effective service of process upon the Company in any
such suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
the Authorized Agent in full force and effect so long as this Agreement shall be
in full force and effect or any of the Warrants shall be outstanding.
The Company irrevocably agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby may be instituted in any federal or state court in the
Borough of Manhattan, The City of New York, the State of New York and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding and any claim of inconvenient forum, and irrevocably submits to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the Warrants, to the extent permitted by law.
This Agreement shall be governed by the laws of the State of New York.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
CARRIER1 INTERNATIONAL S.A.
By: /s/ Glenn M. Creamer
-------------------------------------
Name: Glenn M. Creamer
Title: Director
By: /s/ Carlos Colina
-------------------------------------
Name: Carlos Colina
Title: Authorized Officer
CARRIER ONE, L.L.C.
(solely with respect to the second paragraph of Article
VII)
By: /s/ Glenn M. Creamer
-------------------------------------
Name: Glenn M. Creamer
Title: Chairman
THE CHASE MANHATTAN BANK
By: /s/ William Potes
-------------------------------------
Name: William Potes
Title: Assistant Treasurer
51
<PAGE>
FORM OF EURO WARRANT CERTIFICATE
CARRIER1 INTERNATIONAL S.A.
CUSIP No.
No.
EURO WARRANTS TO PURCHASE COMMON SHARES
This certifies that [_________________________], or its registered
assigns, is the owner of ________________ Euro Warrants, each of which
represents the right to purchase from CARRIER 1 INTERNATIONAL S.A., a societe
anonyme organized under the laws of the Grand Duchy of Luxembourg (the
"COMPANY"), after February 19, 2000 (or in connection with an initial public
offering of equity securities of the Company), 7.53614 shares of the Common
Stock, par value $2.00, of the Company (the "COMMON SHARES") at a per share
exercise price (the "EXERCISE PRICE") equal to the greater of $2.00 and the
minimum par value required by Luxembourg law (excluding any Luxembourg capital
duty which is payable by the Company) (subject to adjustment as provided in the
Warrant Agreement hereinafter referred to below), upon surrender hereof at the
office of The Chase Manhattan Bank, or to its successor, as the warrant agent
under the Warrant Agreement (any such warrant agent being herein called the
"WARRANT AGENT"), with the Subscription Form on the reverse hereof duly
executed, with signature guaranteed as therein specified and simultaneous
payment in full by wire transfer or by certified or official bank or bank
cashier's check payable to the order of the Company. At any time after one year
after the Closing Date and on or before the Expiration Date (unless redeemed as
described below), any outstanding Warrants may be exercised on any Business Day;
PROVIDED that the Warrants will become exercisable in connection with the
initial public offering of equity securities of the Company and PROVIDED FURTHER
that the Warrant Registration Statement is, at the time of exercise, effective
and available for the exercise of Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act. At any time
within ten days of the Expiration Date, the Company may redeem (or cause an
Affiliate of the Company to repurchase) all unexercised Warrants at a redemption
or repurchase price of $0.01 per share.
This Warrant Certificate is issued under and in accordance with a Euro
Warrant Agreement dated as of February 19, 1999 (the "WARRANT AGREEMENT"),
between the Company and The Chase Manhattan Bank, as Warrant Agent, and a
Registration Rights Agreement dated as of February 12, 1999 (the "WARRANT
REGISTRATION RIGHTS AGREEMENT"), between the Company and The Chase Manhattan
Bank, as Warrant Agent, and is subject to the Articles of Incorporation of the
Company and to the terms and provisions contained therein, to all of which terms
and provisions the holder of this Warrant Certificate consents by acceptance
hereof. The terms of the Warrant Agreement and the Warrant Registration Rights
Agreement
<PAGE>
are hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement and the Warrant Registration Rights
Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Company and the Holders of
the Warrants. The summary of the terms of the Warrant Agreement and the Warrant
Registration Rights Agreement contained in this Warrant Certificate is subject
to and qualified in its entirety by express reference to the Warrant Agreement
and the Warrant Registration Rights Agreement. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this
Warrant and the terms of the Warrant Agreement or the Warrant Registration
Rights Agreement, the terms of the Warrant Agreement or the Warrant Registration
Rights Agreement, as applicable, shall govern. All terms used in this Warrant
Certificate that are defined in the Warrant Agreement and the Warrant
Registration Rights Agreement shall have the meanings assigned to them in such
agreements.
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Warrant Agent and may be obtained by
writing to the Warrant Agent at the following address:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
A "REPURCHASE EVENT," as defined in the Warrant Agreement, shall be
deemed to occur on, any date when the Company (i) consolidates with or merges
into or with another person (but only where the holders of Common Stock receive
consideration in exchange for all or part of such Common Stock), if the Common
Stock (or other securities) thereafter purchasable upon exercise of the Warrants
is not registered under the Exchange Act or (ii) sells all or substantially all
of its assets to another person, if the Common Stock (or other securities)
thereafter purchasable upon exercise of the Warrants is not registered under the
Exchange Act; PROVIDED that in each case a "Repurchase Event" shall not be
deemed to have occurred if the consideration for such transaction consists
solely of cash.
Following a Repurchase Event, the Company must make (or must cause an
affiliate to make) an offer to repurchase for cash all outstanding Warrants (a
"REPURCHASE OFFER") and Holders may, until the expiration date of such offer,
surrender all or part of their Warrants for repurchase by the Company (or such
affiliate).
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company (or such affiliate) at a price in cash (the
"REPURCHASE PRICE") equal to the value on
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the Valuation Date relating thereto of the Common Shares and other securities or
property which would have been delivered upon exercise of the Warrants had the
Warrants been exercised, less the Exercise Price (regardless of whether the
Warrants are then exercisable). The value of such Common Shares and other
securities will be (i) if the Common Shares (or other securities) are registered
under the Exchange Act, determined based upon the average of the closing sales
prices (as determined pursuant to Section 3.4(d)(ii)(1) of the Warrant
Agreement) of the Common Shares (or other securities) for the 20 consecutive
trading days (or fewer, in certain cases) immediately preceding such Valuation
Date or (ii) if the Common Shares (or other securities) are not registered under
the Exchange Act or if the value cannot be computed under clause (i) above,
determined by the Independent Financial Expert (as defined in the Warrant
Agreement), in each case as set forth in the Warrant Agreement.
The "VALUATION DATE," as defined in the Warrant Agreement, shall be
deemed to occur on the date five Business Days prior to the date notice of the
Repurchase Offer is first given.
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive payments or distributions as of
the date of such event on an equal basis with, and on the same day as, holders
of Common Shares (or other securities purchasable upon exercise of the Warrants)
as if the Warrants had been exercised immediately prior to such event (less an
amount equal to the Exercise Price). Upon receipt of such payment, if any, the
rights of a Holder shall terminate and cease and such Holder's Warrants shall
expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph, in
the event the Company merges or consolidates with, or sells all or substantially
all of its assets to, another Person, each Warrant will, upon exercise, entitle
the Holder thereof to receive the number of shares of capital stock or other
securities or the amount of money and other property which the holder of a
Common Share (or other securities or property purchasable upon exercise of a
Warrant) is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
Subject to Article VI and VII of the Warrant Agreement, all Common
Shares purchasable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company shall
pay any taxes and other
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<PAGE>
governmental charges that may be imposed under the laws of Luxembourg and the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than taxes on or measured by income imposed on any Holder). The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
Common Shares (including other securities or property purchasable upon the
exercise of the Warrants) or payment of cash to any Person other than the Holder
of a Warrant Certificate surrendered upon the exercise of a Warrant and in case
of such transfer or payment, the Warrant Agent and the Company shall not be
required to issue any share certificate or pay any cash until such tax or charge
has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set forth in
Article II and Article VIII of the Warrant Agreement, this Warrant Certificate
and all rights hereunder are transferable by the registered Holder hereof, in
whole or in part, on the register of the Company maintained by the Warrant Agent
for such purpose at the Warrant Agent's office in New York, New York, upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote or
to consent to any action of the shareholders, to receive any distributions, to
exercise any pre-emptive right or to receive any
A-4
<PAGE>
notice of meetings of shareholders, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided in the Warrant
Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on February 19, 2009, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement (including Section 3.5 thereof).
The Company (i) irrevocably designates and appoints CT Corporation
System, 1633 Broadway, New York, NY 10019 (together with any successor, the
"AUTHORIZED AGENT") as its authorized agent upon which process may be served in
any suit, action or proceeding arising out of or relating to the Warrants or the
Warrant Agreement that may be instituted in any federal or state court in the
State of New York, Borough of Manhattan, or brought under federal or state
securities laws and (ii) agrees that service of process upon the Authorized
Agent and written notice of said service to the Company (mailed or delivered to
its General Counsel at its executive office at Militarstrasse 36, CH-8004
Zurich, Switzerland), shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding.
The Company irrevocably agrees that any legal suit, action or
proceeding arising out of or relating to the Warrant Agreement and the Warrants
and the transactions contemplated thereby may be instituted in any federal or
state court in the Borough of Manhattan, The City of New York, the State of New
York and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding and any claim of inconvenient forum, and
irrevocably submits to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under the Warrant Agreement and the Warrants, to the extent permitted by law.
The Warrant Agreement and the Warrants shall be governed by the laws
of the State of New York.
A-5
<PAGE>
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
CARRIER1 INTERNATIONAL S.A.
By:
-------------------------------------
Name:
Title:
[By:
-------------------------------------
Name:
Title:]
Dated:
Countersigned:
THE CHASE MANHATTAN BANK,
as Warrant Agent
By:
-------------------------------
Authorized Signatory
A-6
<PAGE>
FORM OF REVERSE OF EURO WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Euro Warrant)
To: The Chase Manhattan Bank Capital Markets Fiduciary Services,
as Warrant Agent
450 West 33rd Street, 19th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
with a copy to:
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
The undersigned irrevocably exercises ________ of the Euro Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of Carrier1 International S.A. on
the terms and conditions specified in this Warrant Certificate and in the Euro
Warrant Agreement and the Warrant Registration Rights Agreement referred to
herein and surrenders this Warrant Certificate and all right, title and interest
therein to and directs that the Common Shares, par value $2.00, of Carrier1
International S.A. (the "COMMON SHARES") deliverable upon the exercise of such
Euro Warrants be registered or placed in the name and at the address specified
below and delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON CERTIFICATED WARRANTS TRANSFERRED UNDER REGULATION S]
The undersigned certifies that:
CHECK ONE
A-7
<PAGE>
(a) (i) it is not a U.S. person (as defined in Rule 902 of
Regulation S under the U.S. Securities Act of 1933, as amended)
and the Euro Warrants are not being exercised on behalf of a
U.S. person.
OR
(ii) it is furnishing to the Warrant Agent a written opinion of
counsel to the effect that the Euro Warrants and the Common
Shares purchasable upon exercise of the Euro Warrants have been
registered under the U.S. Securities Act of 1933, as amended,
or are exempt from registration thereunder.
and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated: -------------------------------
(Signature of Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-------------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Warrant Agent,
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 Warrant Agent in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Securities and/or check or other property to be issued or delivered to:
A-8
<PAGE>
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-9
<PAGE>
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Euro Warrant by Carrier1 International S.A.)
To:
The undersigned, having received prior notice of the consideration for
which CARRIER1 INTERNATIONAL S.A. will repurchase (or cause an affiliate to
repurchase) the Euro Warrants represented by the within Warrant Certificate,
hereby surrenders this Warrant Certificate for repurchase by CARRIER1
INTERNATIONAL S.A. (or such affiliate) of the number of Euro Warrants specified
below for the consideration set forth in such notice.
Dated:
-------------------------
(Number of Euro Warrants)
-------------------------
(Signature of Owner)
-------------------------
(Street Address)
-------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Euro Warrant
Agent, 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 Warrant Agent in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-10
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-11
<PAGE>
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Euro Warrants
constituting a part of the Euro Warrants evidenced by this Warrant Certificate
not being assigned hereby) all of the right of the undersigned under this
Warrant Certificate, with respect to the number of Euro Warrants set forth
below:
Name(s) of Assignee(s):
-----------------------------
Address:
--------------------------------------------
No. of Euro Warrants:
-------------------------------
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
In connection with any transfer of Euro Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
CHECK ONE
(a) these Euro Warrants are being transferred in compliance with the
exemption from registration under the U.S. Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
OR
(b) these Euro Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Euro Warrant Agreement.
OR
(c) these Euro Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Euro Warrants in the name of any Person other than the
Holder hereof unless and until the
A-12
<PAGE>
conditions to any such transfer of registration set forth herein and in Article
VIII of the Euro Warrant Agreement shall have been satisfied.
Dated:
-------------------------
(Signature of Owner)
-------------------------
(Street Address)
-------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Warrant Agent,
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 Warrant Agent in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the Euro
Warrant(s) 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 U.S. 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 Carrier1 International S.A. 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:
-------------------------
A-13
<PAGE>
-----------------------------------------------
[NOTE: To be executed by an executive officer]
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE TO BE DELIVERED
BY TRANSFERORS IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
Re: Euro Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Ladies and Gentlemen:
<PAGE>
In connection with our proposed sale of _______________ Warrants, we
hereby certify that such sale has been effected pursuant to and in accordance
with Regulation S under the U.S. Securities Act of 1933, as amended (the
"SECURITIES ACT"), and, accordingly, we represent that:
(1) the offer of the Warrants (and any Units of which they may form a
part) was not made to a person in the United States and not to a U.S.
Person (as defined in Regulation S under the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulation S under the Securities Act) have been made by us,
any of our affiliates or any persons acting on our behalf in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act, as applicable;
and
(4) the transfer is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
The Warrant Agent 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 Transferor]
By:
-----------------------
Authorized Signature
B1-2
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE TO BE
DELIVERED BY TRANSFEREES IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
Re: Euro Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Dear Sirs:
B2-1
<PAGE>
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we certify that:
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Common Shares purchasable upon exercise of any
Warrant (the "WARRANT SHARES") is subject to certain restrictions and
conditions set forth in the Euro Warrant Agreement dated as of February 19,
1999 relating to the Warrants (the "WARRANT AGREEMENT") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Warrants or Warrant Shares except in compliance with, such restrictions and
conditions and the U.S. Securities Act of 1933, as amended (the "SECURITIES
ACT").
2. We understand that the Warrants represented by this Warrant
Certificate have not been registered under the Securities Act, and
accordingly may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons (as defined in Regulation S)
except as set forth in the following sentence. We agree that if, within the
time period referred to under Rule 144(k) of the Securities Act as in
effect on the date of such transfer, we decide (for our self or for any
account for which we are acting) to resell or otherwise transfer the
Warrants or Warrant Shares, we will do so only (a) to the Company or any
subsidiary thereof, (b) to a qualified institutional buyer in compliance
with Rule 144A under the Securities Act, (c) to an institutional accredited
investor as defined in Rule 501(a)(1),(2),(3) or (7) under the Securities
Act that furnishes to the Warrant Agent, with respect to the Warrants, and
to the Transfer Agent and Registrar, with respect to the Warrant Shares,
and the Company, prior to such transfer, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Warrants and the Warrant Shares (the form of which letter can be
obtained from the Warrant Agent or the Transfer Agent and Registrar, as the
case may be) and an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, (d) to a person outside
the United States in an offshore transaction in compliance with Regulation
S under the Securities Act that, for any transfer prior to February 19,
2000, furnishes to the Warrant Agent, the Transfer Agent and Registrar and
the Company, prior to such transfer, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Warrants and Warrant Shares represented by this Warrant Certificate
(the form of which letter can be obtained from the Warrant Agent and the
Transfer Agent and Registrar), (e) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
or (f) pursuant to an effective registration statement under the Securities
Act. We further understand that the Warrants purchased by us will bear a
legend to the foregoing effect during such period, which legend may be
removed after such period upon receipt of a certificate by Warrant Agent or
Transfer Agent and Registrar (the form of which can be obtained from the
Warrant Agent or Transfer Agent and Registrar, as the case may be);
B2-2
<PAGE>
3. We are purchasing the Warrants for our own account or an account
with respect to which we exercise sole investment discretion and that we
and any such account are each a foreign purchaser that is outside the
United States (or a foreign purchaser that is a dealer or other fiduciary),
and that we and any such account are not a U.S. person (as defined in
Regulation S) and we are not acquiring the Warrants the account or benefit
of any U.S. person;
4. We represent and agree that hedging transactions involving the
Warrants and the Warrant Shares may not be conducted unless in compliance
with the Securities Act and that, during the distribution compliance period
(defined as one year after the date of the closing), the Warrants and the
Warrant Shares will bear a legend to this effect, and that we will not
engage in any such hedging transactions.
5. We understand that, prior to February 19, 2000, Warrants sold
pursuant to Regulation S under the Securities Act will be represented
solely by certificated Warrants in registered form.
6. We understand that the Company, the Warrant Agent or the Transfer
Agent and Registrar, as the case may be, will refuse to register any
transfer of Warrants or Warrant Shares not made in accordance with
Regulation S, pursuant to registration under the Securities Act or pursuant
to an available exemption from registration.
7. We agree that we will deliver to each person to whom we transfer
any of the Warrants and Warrant Shares notice of any restrictions on
transfer of such securities.
8. We understand that the Warrants and the Warrant Shares have not
been registered under the Securities Act and that the Warrants may not be
exercised unless registered under the Securities Act or an exemption from
such registration is available and that we will be required to make certain
representations to the Warrant Agent, the Transfer Agent and Registrar and
the Company upon exercise of the Warrants. It further understands that the
Warrants will bear a legend to the foregoing effect.
9. If we are acquiring any Warrants or Warrant Shares as a fiduciary
or agent for one or more investor accounts, we represent that we have sole
investment discretion with respect to each such account and we have full
power to make the foregoing acknowledgments, representations and agreements
on behalf of each such account.
10. The transfer restrictions applicable to the Warrant and the
provisions of this certificate are also applicable to any Unit of which
this Warrant may form a part.
B2-3
<PAGE>
The Warrant Agent 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. We agree to notify the
Warrant Agent promptly if any of our representations herein ceases to be
accurate and complete.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Authorized Signature
B2-4
<PAGE>
EXHIBIT C-1
FORM OF CERTIFICATE TO BE
DELIVERED BY TRANSFERORS IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
Re: Euro Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and
C1-1
<PAGE>
in accordance with the U.S. Securities Act of 1933, as amended (the "SECURITIES
ACT"), and accordingly we hereby further certify that (check one):
(a) such transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act;
or
(b) such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such transfer is being effected pursuant to an effective registration
statement under the Securities Act;
or
(d) such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904 thereunder, and we hereby further certify that such transfer
complies with the transfer restrictions applicable to the Warrants or interests
therein transferred to institutional accredited investors as defined in Rule
501(a)(1), (2), (3) and (7) under the Securities Act and in accordance with the
requirements of the exemption claimed, which certification is supported by an
opinion of counsel provided by us or the transferee (a copy of which we have
attached to this certification), to the effect that such transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Warrant Agreement, the transferred Warrants
or interests therein will be subject to the restrictions on transfer enumerated
in the private placement legend printed on the Certificated Warrant and in the
Euro Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By:
-----------------------------------
Authorized Signatory
C1-2
<PAGE>
EXHIBIT C-2
FORM OF CERTIFICATE TO BE
DELIVERED BY TRANSFEREES IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
[Date]
Carrier1 International S.A.
L-8009, Strassen
Route D'Arlon 3
Luxembourg
Telecopier No.: 011-352-451-452-408
Carrier1 International GmbH
Militarstrasse 36
CH-8004 Zurich
Switzerland
Telecopier No.: 011-41-1-297-2601
Attention: General Counsel
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2097
Telecopier No.: (212) 946-8177 or 8178
Attention: Corporate Trust Department
The Chase Manhattan Bank London branch
Trinity Tower
9 Thomas More Street
London E1 9YT
Telecopier No.: 011-44-1202-34-7945
Attention: Capital Markets Fiduciary Services
Re: Euro Warrants (the "WARRANTS") to Purchase
Common Shares of Carrier1 International S.A. (the "COMPANY")
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we certify that:
C2-1
<PAGE>
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Common Shares purchasable upon exercise of any
Warrant (the "WARRANT SHARES") is subject to certain restrictions and
conditions set forth in the Euro Warrant Agreement dated as of February 19,
1999 relating to the Warrants (the "WARRANT AGREEMENT") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Warrants or Warrant Shares except in compliance with, such restrictions and
conditions and the U.S. Securities Act of 1933, as amended (the "SECURITIES
ACT").
2. We understand that the Warrants and the Warrant Shares have not
been registered under the Securities Act, and that the Warrants and the
Warrant Shares may not be offered or sold except as set forth in the
following sentence. We agree that if, within the time period referred to
under Rule 144(k) of the Securities Act as in effect on the date of such
transfer, we decide (for our self or for any account for which we are
acting) to resell or otherwise transfer the Warrants or Warrant Shares, we
will do so only (a) to the Company or any subsidiary thereof, (b) to a
qualified institutional buyer in compliance with Rule 144A under the
Securities Act, (c) to an institutional accredited investor as defined in
Rule 501(a)(1),(2),(3) or (7) under the Securities Act that furnishes to
the Warrant Agent, with respect to the Warrants, and to the Transfer Agent
and Registrar, with respect to the Warrant Shares, and the Company, prior
to such transfer, a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Warrants and the
Warrant Shares (the form of which letter can be obtained from the Warrant
Agent or the Transfer Agent and Registrar, as the case may be) and an
opinion of counsel acceptable to the Company that such transfer is in
compliance with the Securities Act, (d) to a person outside the United
States in an offshore transaction in compliance with Regulation S under the
Securities Act that, for any transfer prior to February 19, 2000, furnishes
to the Warrant Agent, the Transfer Agent and Registrar and the Company,
prior to such transfer, a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Warrants and
Warrant Shares represented by this Warrant Certificate (the form of which
letter can be obtained from the Warrant Agent and the Transfer Agent and
Registrar), (e) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (f) pursuant to an
effective registration statement under the Securities Act. We further
understand that the Warrants purchased by us will bear a legend to the
foregoing effect during such period, which legend may be removed after such
period upon receipt of a certificate by the Warrant Agent or Transfer Agent
and Registrar (the form of which can be obtained from the Warrant Agent or
Transfer Agent and Registrar, as the case may be);
3. We understand that, on any proposed resale of any Warrants, we will
be required to furnish to the Warrant Agent and the Company such
certifications, legal opinions and other information as the Warrant Agent
and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions.
C2-2
<PAGE>
4. We are an institutional accredited investor (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment for an indefinite period of
time.
5. We are acquiring the Warrants purchased by us for our own account
or for one or more accounts (each of which is an institutional accredited
investor) as to each of which we exercise sole investment discretion.
6. The transfer restrictions applicable to the Warrant and the
provisions of this certificate are also applicable to any Unit of which
this Warrant may form a part.
The Warrant Agent 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.
Very truly yours,
[Name of Transferee]
By:
---------------------------------
Authorized Signature
C2-3
<PAGE>
APPENDIX A
LIST OF FINANCIAL EXPERTS
BT Alex. Brown Incorporated
Bear, Stearns & Co., Inc.
Warburg Dillon Read LLC
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
Lehman Brothers Inc.
Chase Securities Inc.
CIBC Oppenheimer Corp.
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
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Exhibit 10.3
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WARRANTS REGISTRATION RIGHTS AGREEMENT
between
CARRIER1 INTERNATIONAL S.A.
(a Luxembourg societe anonyme)
and
THE CHASE MANHATTAN BANK,
as Dollar Warrant Agent and
as Euro Warrant Agent
Dated as of February 12, 1999
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WARRANTS REGISTRATION RIGHTS AGREEMENT
WARRANTS REGISTRATION RIGHTS AGREEMENT, dated as of February 12, 1999 (this
"AGREEMENT"), between CARRIER1 INTERNATIONAL S.A., a societe anonyme organized
under the laws of the Grand Duchy of Luxembourg (the "COMPANY"), and THE CHASE
MANHATTAN BANK, as warrant agent under the Dollar Warrant Agreement (the "DOLLAR
WARRANT AGENT") and as warrant agent under the Euro Warrant Agreement (the "EURO
WARRANT AGENT").
Pursuant to the terms of a Placement Agreement dated the date hereof, (the
"PLACEMENT AGREEMENT"), among the Company, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc., Warburg Dillon Read LLC and Bear, Stearns & Co. Inc.
(the "PLACEMENT AGENTS"), the Company has agreed to issue and sell to the
Placement Agents an (i) aggregate of 160,000 Warrants (each, a "DOLLAR
WARRANT"), each Dollar Warrant initially entitling the holder thereof to
purchase 6.71013 Common Shares (as defined below) of the Company at a per share
exercise price equal to the greater of $2.00 and the minimum par value required
by Luxembourg law, as part of the issuance of 160,000 Dollar Units (the "DOLLAR
UNITS"), each consisting of one 13 1/4% Senior Dollar Note due 2009 of the
Company with a principal amount of $1,000 (each, a "DOLLAR NOTE" and
collectively, the "DOLLAR NOTES") to be issued pursuant to the provisions of a
Dollar Notes Indenture to be dated as of the Closing Date (the "DOLLAR NOTES
INDENTURE") between the Company, as issuer, and The Chase Manhattan Bank, as
trustee, and one Dollar Warrant and (ii) an aggregate of 85,000 Warrants (each,
a "EURO Warrant"), each Euro Warrant initially entitling the holder thereof to
purchase 7.53614 Common Shares of the Company at a per share exercise price
equal to the greater of $2.00 and the minimum par value required by Luxembourg
law, as part of the issuance of 85,000 Euro Units (the "EURO UNITS"), each
consisting of one 13 1/4% Senior Euro Note due 2009 of the Company with a
principal amount of Euro 1,000 (each, a "EURO NOTE" and collectively, the "EURO
NOTES") to be issued pursuant to the provisions of an Euro Notes Indenture to be
dated as of the Closing Date (the "EURO NOTES INDENTURE" and, together with the
Dollar Notes Indenture, the "INDENTURES") between the Company, as issuer, and
The Chase Manhattan Bank, as trustee, and one Euro Warrant. The Dollar Units and
the Euro Units are collectively referred to as the "Units". The Dollar Notes and
the Euro Notes are collectively referred to as the "NOTES". The Dollar Warrants
and the Euro Warrants are collectively referred to as the "WARRANTS". The Dollar
Note and the Dollar Warrant included in each Dollar Unit, and the Euro Note and
Euro Warrant included in each Euro Unit, will become separately transferable at
the close of business upon the earliest to occur of (i) the date that is six
months after the Closing Date (as defined below), (ii) the commencement of an
exchange offer with respect to the Notes undertaken pursuant to the Notes
Registration Rights Agreement (as defined below), (iii) the effectiveness of a
shelf registration statement with respect to resales of the Notes and (iv) such
date as determined by Morgan Stanley & Co. Incorporated in its sole discretion.
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In consideration of the foregoing and of the mutual agreements contained
herein and in the Placement Agreement, the Company and the Warrant Agents hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Affiliates" 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, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Auditors" means, at any time, the independent auditors of the Company at
such time.
"Beneficial Investors" means industry experts or other individuals whose
affiliation with the Company should, in the good faith judgment of the Board,
provide the Company with a strategic advantage.
"Board" means the board of directors of the Company from time to time.
"Closing Date" means the date of issuance of the Units.
"Comfort Letter" has the meaning specified in Section 3 hereof.
"Commission" means the United States Securities and Exchange Commission.
"Common Shares" means the shares of common stock, par value $2.00 per
share, of the Company and any other capital stock of the Company into which such
Common Shares may be converted or reclassified or that may be issued in respect
of, in exchange for or in substitution of such Common Shares by reason of any
stock splits, stock dividends, distributions, mergers, consolidations or other
like events.
"Company" has the meaning specified in the preamble to this Agreement.
"Company IPO Shares" has the meaning specified in Section 2 hereof.
"Cutback Notice" has the meaning specified in Section 2 hereof.
"Dollar Warrant" has the meaning specified in the recitals to this
Agreement.
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"Dollar Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Dollar Warrant Agreement" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, relating to the
Dollar Warrants.
"Euro Warrant" has the meaning specified in the recitals to this Agreement.
"Euro Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Euro Warrant Agreement" means the Warrant Agreement dated as of the
Closing Date between the Company and The Chase Manhattan Bank, relating to the
Euro Warrants.
"Existing Registration Rights Agreement" means the Registration Rights
Agreement, as described in the Final Offering Memorandum under the caption
"Certain Relationships and Related Transactions--Equity Investor
Agreements--Registration Rights Agreement," as it may be amended, waived,
supplemented, modified, restated, renewed or extended from time to time.
"Expiration Date" means the tenth anniversary of the Closing Date.
"Holders" means the record holders of the Warrants and the holders of
Common Shares (or other securities) received upon exercise thereof.
"Includible Secondary Shares" has the meaning specified in Section 2
hereof.
"Indentures" shall mean the Dollar Notes Indenture and the Euro Notes
Indenture.
"LLC" means Carrier One, LLC, a Delaware limited liability company, and its
successors.
"Management Investor" means any officer, director, employee or other member
of the management of the Company or any of its subsidiaries, or family members
or relatives thereof, or trusts or partnerships for the benefit of any of the
foregoing, or any of their heirs, executors, successors and legal
representatives.
"managing underwriter" has the meaning specified in Section 2 hereto.
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4
"Notes" has the meaning specified in the recitals to this Agreement.
"Opinion" has the meaning specified in Section 3 hereof.
"Other IPO Shares" has the meaning specified in Section 2 hereof.
"Permitted Holder" means any of the following: any of Providence Equity
Partners L.P., Providence Equity Partners II L.P., Providence Equity Partners
III L.P., Primus Capital Fund IV Limited Partnership and Primus Executive Fund
Limited Partnership and any of the respective Affiliates or successors of the
foregoing.
"Person" means an individual, general partnership, limited partnership,
corporation, trust, joint stock company, association, joint venture or any other
entity or organization, whether or not legal entities, including, without
limitation, a government or political subdivision or an agency or
instrumentality thereof.
"Piggy-back Registration Rights" has the meaning specified in Section 2
hereof.
"Placement Agents" has the meaning specified in the recitals to this
Agreement.
"Placement Agreement" has the meaning specified in the recitals to this
Agreement.
"Registration Statement" has the meaning specified in Section 2 hereof.
"Resale Shelf" has the meaning specified in Section 3 hereof.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Units" has the meaning specified in the recitals to this Agreement.
"Warrants" has the meaning specified in the recitals to this Agreement.
"Warrant Agents" means the Dollar Warrant Agent and the Euro Warrant Agent.
"Warrant Agreements" means the Dollar Warrant Agreement and the Euro
Warrant Agreement.
"Warrant Shares" means the Common Shares (or other securities) issued or
purchasable upon exercise of the Warrants.
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"Warrant Registration Statement" has the meaning specified in Section 3
hereof.
2. PIGGY-BACK REGISTRATION RIGHTS.
(a) If, prior to the date that is ten days prior to the expiration of the
Warrants, the Company proposes to file a Registration Statement with the
Commission respecting an offering of any Common Shares (or other securities)
purchasable upon exercise of the Warrants (other than (x) an offering that could
be registered solely on Form S-4, S-8, or F-4 or any successor form thereto, (y)
securities offered or issued pursuant to any employment or benefit plan or
arrangement to any employee, director, partner, trustee or consultant or advisor
of or to the Company or any subsidiary of the Company, and (z) the initial
public offering of Common Shares (or other securities) purchasable upon exercise
of the Warrants if no shareholder of the Company participates therein as a
selling shareholder), the Company shall give prompt written notice to all the
Holders of Warrants or Warrant Shares at least 30 days prior to the initial
filing of the registration statement relating to such offering (the
"REGISTRATION STATEMENT"). Each such Holder shall have the right, within 20 days
after delivery of such notice, to request in writing that the Company include
all or a portion of such of the Warrant Shares in such Registration Statement
("PIGGY-BACK REGISTRATION RIGHTS"). The Company shall include in the public
offering all of the Warrant Shares that a Holder has requested be included,
unless the underwriter for the public offering or the underwriter managing the
public offering (in either case, the "MANAGING UNDERWRITER") delivers a notice
(a "CUTBACK NOTICE") pursuant to Section 2(b) or 2(c) hereof. The managing
underwriter may deliver one or more Cutback Notices at any time prior to the
execution of the underwriting agreement for the public offering. If the Company
conducts any public offering outside the United States in which any of its
shareholders participate as a selling shareholder (which if conducted in the
United States would be subject to the registration rights provisions of this
Section 2), the provisions of this Section 2, mutatis mutandi, and any other
applicable provisions of this Agreement relating to this Section 2 shall apply
with respect to such offering.
(b) If a proposed public offering includes both securities to be offered
for the account of the Company ("COMPANY IPO SHARES") and shares to be sold by
shareholders, the provisions of this Section 2(b) shall be applicable if the
managing underwriter delivers a Cutback Notice stating that, in its opinion, the
number of Common Shares that selling shareholders propose to sell therein,
whether or not such selling shareholders have the right to include shares
therein (the "OTHER IPO SHARES"), plus the number of Warrant Shares that the
Holders have requested to be sold therein, plus the Company IPO Shares, exceeds
the maximum number of shares specified by the managing underwriter in such
Cutback Notice that may be distributed without adversely affecting the price,
timing or distribution of the Company IPO Shares. Such maximum number of shares
that may be so sold, excluding the Company IPO Shares, are referred to as the
"INCLUDIBLE SHARES."
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6
If the managing underwriter delivers such Cutback Notice, the Company shall
be entitled to include all of the Company IPO Shares in the public offering and
each requesting Holder, together with each party (or beneficiary) exercising its
registration rights (or privileges) under the Existing Registration Rights
Agreement, shall be entitled to include in the public offering up to its pro
rata portion of the Includible Shares and in priority to the inclusion of any
Other IPO Shares that are proposed to be sold in such public offering. No
shareholder that proposes to sell Other IPO Shares in the proposed initial
public offering, other than as specified above, may sell any such shares therein
unless all Warrant Shares requested by the Holders to be sold therein are so
included.
(c) If a proposed public offering is entirely a secondary offering, the
provisions of this Section 2(c) shall be applicable if the managing underwriter
delivers a Cutback Notice stating that, in its opinion, the aggregate number of
Warrant Shares and Other IPO Shares proposed to be sold therein exceeds the
maximum number of shares (the "INCLUDIBLE SECONDARY SHARES") specified by the
managing underwriter in such Cutback Notice that may be distributed without
adversely affecting the price, timing or distribution of the Common Shares being
distributed.
(i) If the managing underwriter delivers such Cutback Notice, in the
case of a demand registration pursuant to the Existing Registration Rights
Agreement, FIRST each party exercising such demand registration rights, the
LLC and each other Permitted Holder, Management Investor or Beneficial
Investor from time to time party to or beneficiary of the Existing
Registration Rights Agreement shall be entitled to include all of its
Includible Secondary Shares, and SECOND each requesting Holder, together
with each other party exercising its registration rights under the Existing
Registration Rights Agreement, shall be entitled to include up to its pro
rata portion of the remaining Includible Secondary Shares and in priority
to the inclusion of any Other IPO Shares, other than as specified above,
that are proposed to be sold in such public offering ;
(ii) If the managing underwriter delivers such Cutback Notice in the
case of any other demand registration, first each party exercising such
demand registration rights shall be entitled to include all of its
Includible Secondary Shares, then each requesting Holder, together with the
LLC and each Permitted Holder, Management Investor or Beneficial Investor
from time to time party to or beneficiary of the Existing Registration
Rights Agreement, shall be entitled to include up to its pro rata portion
of the remaining Includible Secondary Shares and in priority to the
inclusion of any Other IPO Shares, other than as specified above, that are
proposed to be sold in such public offering.
No shareholder that proposes to sell Other IPO Shares in the proposed public
offering, other than as specified above, may sell any such shares therein unless
all Warrant Shares requested by the Holders to be sold therein are so included.
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(d) The underwriting agreement for such public offering shall provide that
each requesting Holder shall have the right to sell its Warrant Shares to the
underwriters and that the underwriters shall purchase the Warrant Shares at the
price paid by the underwriters for the Common Shares sold by the Company and/or
selling shareholders, as the case may be.
3. SHELF REGISTRATION.
(a) If only the Company sells Common Shares in an initial public offering
or all of the Warrant Shares (or other securities) purchasable upon exercise of
the Warrants have not been sold in a public offering, the Company shall use its
best efforts to cause to be filed pursuant to Rule 415 under the Securities Act
a shelf registration statement on the appropriate form (the "WARRANT
REGISTRATION STATEMENT") covering the issuance of the Warrant Shares upon
exercise of the Warrants and shall use its best efforts to cause the Warrant
Registration Statement to become effective under the Securities Act within six
months after the closing date of the initial public offering; PROVIDED, HOWEVER,
that (1) in no event may the Warrant Registration Statement be declared
effective prior to the first anniversary of the Closing Date and (2) if the
Commission shall request that the Company register the resale of the Warrant
Shares instead of the issuance thereof, the Warrant Registration Statement shall
register such resale as opposed to such issuance. The Company shall use
reasonable efforts to keep the Warrant Registration Statement continuously
effective, subject to Section 4 hereof, until such time as all Warrants have
been exercised or have expired and, in the case of clause (2), until such time
as all Warrant Shares have been resold thereunder. Prior to filing the Warrant
Registration Statement or any amendment thereto, the Company shall provide a
copy thereof to Morgan Stanley & Co. Incorporated and its counsel and afford
them a reasonable time to comment thereon.
(b) If the Warrant Registration Statement shall register the sale of the
Warrant Shares (a "RESALE SHELF") as provided in Section 3(a)(2) above, the
Company agrees to:
(i) make available for inspection by a representative of the Holders,
any underwriter participating in any disposition pursuant to such Resale
Shelf and attorneys and accountants designated by the Holders (upon
execution of customary confidentiality agreements reasonably satisfactory
to the Company and its counsel), at reasonable times and in a reasonable
manner, financial and other records, documents and properties of the
Company that are pertinent to the conduct of due diligence customary for an
underwritten offering, and cause the officers, directors and employees of
the Company to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with a
Resale Shelf as shall be necessary to enable such persons to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act of 1933, as amended from time to time;
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(ii) use its reasonable best efforts to cause all Warrant Shares sold
under a Resale Shelf to be listed on any securities exchange or any
automated quotation system on which similar securities issued by the
Company are then listed if requested by the Holders of Warrant Shares
representing a majority of the Warrants originally issued, to the extent
such Warrant Shares satisfy applicable listing requirements;
(iii) provide a reasonable number of copies of the prospectus included
in such Resale Shelf to Holders that are selling Warrant Shares pursuant to
such Resale Shelf;
(iv) use its reasonable best efforts to cause to be provided to the
Warrant Agent, on behalf of the Holders and beneficial owners of Warrant
Shares, upon the effectiveness of such Resale Shelf, a customary "10b-5"
opinion of independent counsel (an "OPINION") and a customary "cold
comfort" letter of independent auditors (a "COMFORT LETTER");
(v) use its reasonable best efforts to cause to be provided to Holders
and beneficial owners of Warrant Shares an Opinion and Comfort Letter with
respect to each document, including any amendments thereto, that is
incorporated by reference in such Resale Shelf; and
(vi) notify the Warrant Agent in writing, for distribution to the
Holders, (A) when the Resale Shelf has become effective and when any
post-effective amendment thereto has been filed and becomes effective, (B)
of any request by the Commission or any state securities authority for
amendments and supplements to the Resale Shelf or of any material request
by the Commission or any state securities authority for additional
information after the Resale Shelf has become effective, (C) of the
issuance by the Commission or any state securities authority of any stop
order suspending the effectiveness of the Resale Shelf or the initiation of
any proceedings for that purpose, (D) if, between the effective date of the
Resale Shelf and the closing of any sale of Warrant Shares covered thereby,
the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar
agreement, including this Agreement, relating to disclosure cease to be
true and correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of the
Warrant Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (E) of the happening of any event during the
period the Resale Shelf is effective such that such Resale Shelf or the
related prospectus contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
statements therein not misleading (in the case of a prospectus, in light of
circumstances under which they were made) and (F) of any determination by
the Company that a post-effective amendment to a Registration Statement
would be appropriate. The Holders hereby agree to suspend use of the
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9
prospectus contained in a Resale Shelf upon receipt of such notice under
clause (C), (E) or (F) above until, in the case of clause (C), such stop
order is removed or rescinded or, in the case of clauses (E) and (F), the
Company has amended or supplemented such prospectus to correct such
misstatement or omission or otherwise.
4. SUSPENSION.
Notwithstanding the foregoing, during any consecutive 365-day period while
the Warrants are exercisable, the Company shall have the ability to suspend the
availability of such Warrant Registration Statement for (a) up to two
30-consecutive-day periods (except during the 30 days immediately prior to the
expiration of the Warrants) if the Company's Board determines in good faith that
there is a valid purpose for the suspension and provides notice of such
determination to the Holders at their addresses appearing in the register of
Warrants maintained by the Warrant Agent and (b) five additional,
non-consecutive three-day periods (except during the 30 days immediately prior
to the expiration of the Warrants) if the Company's Board determines in good
faith that the Company cannot provide adequate disclosure during such period due
to circumstances beyond its control. Notice of such suspension shall be given in
writing, in the case of clause (a) above, promptly to each applicable Holder
and, in the case of clause (b) above, promptly to the Warrant Agent and the
Warrant Agent shall give such notice promptly to each Holder.
5. BLUE SKY.
The Company shall use its reasonable best efforts to register or qualify
the Warrant Shares proposed to be sold or issued pursuant to the Registration
Statement or the Warrant Registration Statement under all applicable securities
or "blue sky" laws of all jurisdictions in the United States in which any Holder
of Warrants may or may be deemed to purchase Warrant Shares upon the exercise of
Warrants or resale of the Warrant Shares, as the case may be, and shall use its
reasonable best efforts to maintain such registration or qualification through
the earlier of (A) the date upon which all Warrants have been exercised or all
Warrant Shares have been resold, as the case may be, under the Warrant
Registration Statement and (B) the Expiration Date; PROVIDED, HOWEVER, that the
Company shall not be required to (i) qualify as a foreign corporation or as a
broker or a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5, (ii) file any general
consent to service of process or (iii) subject itself to taxation in any
jurisdiction if it is not otherwise so subject.
6. ACCURACY OF DISCLOSURE.
The Company (and its successors) represents and warrants to each Holder
(and each beneficial owner of a Warrant or Warrant Share) and agrees for the
benefit of each Holder (and each beneficial owner of a Warrant or Warrant Share)
that, except during any period in
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10
which the availability of the Warrant Registration Statement has been suspended,
(i) the Warrant Registration Statement and the documents incorporated by
reference therein will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading; and (ii) the prospectus delivered to such Holder upon its exercise
of Warrants or pursuant to which such Holder sells its Warrant Shares, as the
case may be, and the documents incorporated by reference therein will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that representations,
warranties and agreements set forth in this Section 6 do not apply to statements
or omissions in the Warrant Registration Statement or any such prospectus based
upon information relating to any Holder furnished to the Company (or its
successors) in writing by such Holder expressly for use therein.
7. INDEMNITY.
The Company hereby agrees to indemnify each beneficial owner of a Warrant
and each person, if any, who controls any beneficial owner of a Warrant within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934 (the "EXCHANGE ACT"), or is under common control
with, or is controlled by, any beneficial owner of a Warrant (whether or not it
is, at the time the indemnity provided for in this Section 7 is sought, such a
beneficial owner), from and against all losses, damages or liabilities which
such beneficial owner or any such controlling or affiliated person suffers as a
result of any breach, on the date of any exercise of a Warrant by such
beneficial owner or the resale of any Warrant Share by such Holder, in either
case pursuant to the Warrant Registration Statement, of the representations,
warranties or agreements contained in Section 6. Each beneficial owner of a
Warrant Share sold pursuant to a Resale Shelf, by accepting its beneficial
ownership of a Warrant, hereby (i) agrees to provide the Company with
information with respect to it that the Company reasonably requests in
connection with any Resale Shelf and (ii) agrees, severally and not jointly, to
indemnify the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act against any liability incurred by it or
such controlling person as a result of any misstatement of information provided
by such beneficial owner to the Company in writing expressly for inclusion in
the Resale Shelf or any omission of a material fact from any such information
provided by such beneficial owner to the Company. In addition, the foregoing
indemnity with respect to any preliminary Prospectus shall not inure to the
benefit of any Holder to the extent that any such losses, claims, damages or
liabilities result from the fact that such Holder sold securities to a person to
whom there was not sent or given by or on behalf of such Holder (if required by
law so to have been delivered) a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) at or prior to the written confirmation of the sale of the Warrant
Shares to such person, and if the losses, claims, damages or liabilities result
from an untrue statement or alleged untrue statement
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or an omission or alleged omission contained in such preliminary Prospectus that
was corrected in the Prospectus (as so amended or supplemented), unless such
failure is the result of noncompliance by the Company with its obligations to
deliver copies of the Prospectus to the Holders, nor shall this indemnity
agreement inure to the benefit of any Holder from whom the person asserting any
such losses, claims, damages or liabilities purchased the Warrant Shares
concerned to the extent that at the time of such purchase such Holder had
received written notice from the Company that the use of such Prospectus,
amendment, supplement or preliminary Prospectus was suspended as provided in
Section 3(vi) or Section 4.
8. EXPENSES.
All expenses incident to the Company's performance of or compliance with
its obligations under this Agreement will be borne by the Company, regardless of
whether a Registration Statement or Warrant Registration Statement becomes
effective, including without limitation (i) all Commission or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
reasonable fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws, (iii) all reasonable expenses of any persons
incurred by or on behalf of the Company in preparing or assisting in preparing,
word processing, printing and distributing any registration statement, any
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Agreement, (iv) the reasonable
fees (including legal fees and expenses) and disbursements of the Warrant Agent,
(v) the reasonable fees and disbursements of counsel for the Company and (vi)
the fees and disbursements, if any, of the Auditors, but excluding (x) the
reasonable fees and disbursements of counsel retained by the participating
Holders and (y) the Holders' share of underwriting discounts and commissions.
9. "MARKET STAND OFF" AGREEMENT.
Each Holder hereby agrees that during the 180 day period following the
effective date of an initial public offering of Common Shares (or other
securities) purchasable upon exercise of the Warrants, it shall not, to the
extent requested by the Company or the managing underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Shares of the Company held by it at any time during such period
except Common Shares included in such registration; PROVIDED, HOWEVER, that all
directors of the Company, the LLC and Permitted Holders party to or
beneficiaries of, from time to time, the Existing Registration Rights Agreement
and, if required by the managing underwriter, the Management Investors,
Beneficial Investors and others party thereto, or beneficiaries thereof, from
time to time, enter into or are bound by similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Warrant Shares until the end of
such period.
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10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company represents and the Warrant
Agent represents to the best of its knowledge to the other that it has not
entered into, and agrees that on or after the date of this Agreement it will not
enter into, any agreement which is inconsistent with the rights granted to the
Holders of Warrants or Warrant Shares in this Agreement or otherwise conflicts
with the provisions hereof. The Company represents that the rights granted to
the Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's other issued and
outstanding securities under any agreements (after giving effect to any waiver,
consent, amendment, resolution or other instrument in full force and effect on
the date hereof).
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company and the Warrant Agent have obtained the written consent of
Holders of at least a majority of the outstanding Warrants affected by such
amendment, modification, supplement, waiver or consent; PROVIDED that any
amendment, modification or supplement to this Agreement which, in the good faith
opinion of the Board of Directors of the Company (and evidenced by a resolution
of such board), does not adversely affect any Holder, shall not be subject to
such requirement for written consent.
(c) NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 10(c);
(ii) if to the Company, initially at the Company's address set forth in the
Indentures and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 10(c); and (iii) if to the
Warrant Agents, initially at the Warrant Agents' addresses set forth in the
Warrant Agreements and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 10(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
<PAGE>
13
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation, subsequent Holders; PROVIDED that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Warrants in violation of the terms of the Placement Agreement or
the Warrant Agreements. If any transferee of any Holder shall acquire Warrants,
in any manner, whether by operation of law or otherwise, such Warrants shall be
held subject to all of the terms of this Agreement and the Warrant Agreements,
and by taking and holding such Warrants such person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement or the Warrant Agreements and such person shall be entitled to
receive the benefits hereof.
(e) PURCHASES AND SALES OF WARRANTS. The Company shall not, and shall use
its best efforts to cause its affiliates (as defined in Rule 405 under the
Securities Act) not to, purchase and then resell or otherwise transfer (other
than to the Company or any subsidiary thereof) any Warrants other than Warrants
acquired and cancelled.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third party beneficiaries
to the agreements made hereunder between the Company and the Warrant Agents, and
each Holder shall have the right to enforce such agreements directly to the
extent it deems such enforcement necessary or advisable to protect its rights or
the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE. The
Company irrevocably agrees that any legal suit, action or proceeding brought by
any Placement Agent or by any person who controls any Placement Agent arising
out of or relating to this Agreement and the transactions contemplated thereby
may be instituted in any federal or state court in the Borough of Manhattan, The
City of New York, the State of New York and
<PAGE>
14
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding and any claim of inconvenient forum, and irrevocably submits to
the non-exclusive jurisdiction of any such court in any such suit, action or
proceeding.
The Company (i) irrevocably designates and appoints CT Corporation System,
1633 Broadway, New York, NY 10019 (together with any successor, the "AUTHORIZED
AGENT"), as its authorized agent upon which process may be served in any suit,
action or proceeding described in Section 11 of the Placement Agreement and
represents and warrants that the Authorized Agent has accepted such designation
and (ii) agrees that service of process upon the Authorized Agent and written
notice of said service to the Company (mailed or delivered to Carrier1
International S.A., c/o Carrier1 International GmbH, at Militarstrasse 36,
CH-8004 Zurich, Switzerland, Attention: General Counsel), shall be deemed in
every respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all action, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of the Authorized Agent
in full force and effect so long as any of the Units, Notes or Warrants shall be
outstanding.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CARRIER1 INTERNATIONAL S.A.
By /s/ Stig Johansson
-----------------------------
Name: Stig Johansson
Title: Director
By /s/ Eugene A. Rizzo
-----------------------------
Name: Eugene A. Rizzo
Title: Authorized Officer
THE CHASE MANHATTAN BANK,
as Dollar Warrant Agent and
Euro Warrant Agent
By /s/ William Potes
-----------------------------
Name: William Potes
Title: Assistant Treasurer
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated March 4, 1998, by and between Carrier One AG,
a company duly incorporated under the laws of Switzerland, having its registered
offices at Regus Building, Stockerhof, Dreikonigstrasse 31A, 8002 Zurich,
Switzerland (the "Company") and Stig Johansson ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to assure itself of the Executive's services,
and the Executive desires to be employed by the Company;
WHEREAS, the Company's parent, Carrier One, LLC, a Delaware (USA) limited
liability company ("Carrier One"), the Executive, Joachim Bauer ("Bauer"),
Eugene A. Rizzo ("Rizzo"), Kees Van Ophem ("Van Ophem"), Neil Craven ("Craven"),
Providence Equity Partners L.P. ("PEP") and Providence Equity Partners II, L.P.
("PEP II" and collectively with PEP, "Providence") have entered into that
certain Securities Purchase Agreement (as amended from time to time, the "
Purchase Agreement") dated as of March 4, 1998 whereby they shall acquire
certain securities of Carrier One and Executive, Bauer, Rizzo, Van Ophem,
Craven, Providence and Carrier One have entered into the Securityholders'
Agreement (as defined in the Purchase Agreement);
WHEREAS, Providence wishes to protect the value of their investment in
Carrier One and the Company from the risk of competition posed by the Executive
and it is a condition to the Providence's performance under the Purchase
Agreement that Executive enter into this Agreement in order to assure the
Company that the Executive will continue to provide his expertise in the conduct
of the Company's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of the Company.
1.02 CODE. "Code" means the Swiss Code of Obligations.
1.03 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information, in any form or medium, that relates to the business, products,
services, research or development of
<PAGE>
the Company or any of the Related Corporations, and its and their suppliers or
customers, including: (a) compilations of data (whether in whole or in part) and
all analyses, processes, methods, techniques, systems, formulae, research,
records, reports, manuals, documentation and models relating thereto; (b)
computer software, documentation and databases (whether existing or in various
stages of research and development); (c) identities of and information about the
Company's and the Related Corporations' suppliers and customers and their
confidential information, suppliers and customers; (d) inventions, designs,
developments, devices, methods and processes (whether or not reduced to
practice); (e) internal business information, including, without limitation,
information relating to strategic and staffing plans and practices (including
information with respect to potential acquisition targets), marketing,
promotional and sales plans, practices or programs, training practices and
programs, cost and pricing structure, and accounting and business methods; (f)
all copyrightable works; and (g) all similar or related information.
Notwithstanding the immediately foregoing sentence, the term "Confidential
Information" shall not include information which (i) becomes generally available
to the public other than as a result of disclosure by Executive, or (ii) becomes
available to Executive on a non-confidential basis from a source other than the
Company or the Related Corporations, or (iii) which is generally known in the
telecommunications industry and pertains to activities or business not specific
to the Company or any of the Related Corporations. Information shall not be
deemed to be excluded from the meaning of "Confidential Information" merely
because individual portions or components of such information are publicly known
or available.
1.04 EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement or such later date that Executive has obtained any valid work permits
or registration documents as required by the relevant Swiss authorities.
1.05 NON-COMPETE PERIOD. "Non-Compete Period" shall mean the period
commencing on the date hereof and continuing until the end of the eighteenth
month following the date the Executive's employment is terminated or such
shorter period as may be set forth in this Agreement.
1.06. PERSON. "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, trust or other entity.
1.07 RELATED CORPORATIONS. "Related Corporations" shall mean (a) Carrier
One; (b) any corporation of which Carrier One, directly or indirectly, owns more
than fifty percent (50%) of the outstanding equity securities having general
voting power under ordinary circumstances to elect at least a majority of the
directors of such corporation; (c) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which Carrier
One, directly or indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint venture or other
unincorporated organization or entity; and (d) any corporation, partnership,
association, joint venture or other unincorporated organization or entity in
which Carrier One, directly or indirectly, has more than a fifty percent (50%)
equity interest.
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<PAGE>
ARTICLE II
CAPACITY AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Executive as the
President and Chief Executive Officer of the Company, and Executive hereby
accepts such employment, for the Contract Term (as defined in Section 2.03) and
upon the other terms and conditions set forth in this Agreement. During the
Contract Term, Executive shall devote his professional attention and energies on
a full-time basis to the business and affairs of the Company and the Related
Corporations and use his best efforts to promote its interests. The Executive
may not undertake any public office or any kind of activity in connection with
associations without the prior written approval of the Company, if this activity
could influence the contractual activities.
2.02 DUTIES. The Executive shall have such duties and responsibilities as
shall be assigned from time to time by the Board of Directors and as are
consistent with the duties of a President and Chief Executive Officer of an
international long distance telecommunications company.
2.03 CONTRACT TERM. The present Employment Agreement is concluded for an
unspecified period and may be terminated by either party provided that six (6)
months notice of termination is given in writing to the end of a month, but not
before August 31, 1999 (notice to be given before February 28, 1999) (the period
until the Executive's employment with the Company terminates being referred to
as the "Contract Term").
ARTICLE III
COMPENSATION; BENEFITS
3.01 BASE SALARY. The Company shall pay Executive a base salary at the
rate of 425,000 SFr per annum, payable in arrears on a monthly basis, for the
services rendered by Executive to the Company during the Contract Term (the
"Base Salary"). Overtime is not remunerated and time off is not given in lieu;
compensation for any overtime worked is included in the Base Salary. The Base
Salary and all other remuneration paid to the Executive shall be subject to
normal deductions for personal taxation and legally required contributions. The
Board of Directors shall review the Base Salary on a yearly basis for purposes
of determining any increase thereof, whether due to cost of living adjustments
or merit, but any such determination shall be made in the sole discretion of the
Board of Directors without regard to past practice.
3.02 BONUS PLAN. In addition to the Base Salary, during each year of the
Contract Term the Executive will be eligible to receive a bonus (the "Annual
Bonus") in an amount up to 25% of Base Salary subject to meeting the criteria
established from time to time by the Board of Directors. The Board of Directors,
in its discretion, shall determine the amount of the Annual Bonus. The Board of
Directors and the Company's senior officers will work in good faith
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<PAGE>
promptly after the Effective Date to develop the criteria for earning the Annual
Bonus in 1998 and will meet at least annually to develop the criteria for future
years.
3.03 AUTOMOBILE. During the Contract Term the Company will ensure that
there will be made available to the Executive a motor vehicle of a type suitable
to his position for use by him in the performance of his duties hereunder and
for his private purposes and that the Executive's tax, insurance, maintenance
and running costs thereon and all fuel expenses reasonably incurred by the
Executive will be promptly reimbursed to the Executive.
3.04 TELEPHONE; FACSIMILE EQUIPMENT. During the Contract Term the Company
will provide the Executive a cellular telephone and a facsimile machine (or
equipment serving a comparable function), and will pay, or reimburse Executive
for, all telephone charges and associated costs thereof related to his duties
hereunder.
3.05 PENSION. The Company will establish a pension plan for its executive
officers in compliance with Swiss law (the "Pension Plan"). The total
contribution to the Pension Plan (Company plus Executive) in each year will be
Sfr 95,550.2 of which the Company shall pay two-thirds and the Executive shall
pay one-third.
3.06 HEALTH INSURANCE. The Executive is obligated to have a private health
insurance which provides full cover in Switzerland and while Executive is on
business trips outside Switzerland. The Company will contribute 50% of the
related private health insurance for each of the family members, not to exceed
SFr 200 per month per family member.
3.07 BUSINESS EXPENSES. During the Contract Term, the Company will pay the
Executive SFr 1500 per month as compensation for out of pocket expenses.
3.08 OPTIONS. On the Effective Date, the Company's parent, Carrier One,
LLC, will grant Executive options pursuant to and in accordance with the terms
of the Carrier One, LLC 1998 Unit Option Plan and the Option Agreement attached
hereto as EXHIBIT A.
3.09 HOLIDAYS. The Executive shall be entitled to a vacation of 25 working
days per annum. In the calendar year in which Executive reaches the age of 60
and thereafter he is entitled to a vacation of 30 working days.
ARTICLE IV
CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION
4.01 CONFIDENTIALITY. Executive acknowledges that in the course of
providing services to the Company and the Related Corporations, Executive will
become familiar with the trade secrets, Confidential Information and other
intellectual property concerning the Company and the Related Corporations.
Executive shall not at any time or in any manner, whether directly or
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<PAGE>
indirectly, use for his own benefit or the benefit of any other Person, nor
disclose, divulge, render or offer, any Confidential Information, except on
behalf of the Company or the Related Corporations in the course of the proper
performance of his duties hereunder. Executive acknowledges and agrees that any
and all such Confidential Information will be received and held by him in a
confidential capacity.
4.02 NONCOMPETITION AND NONSOLICITATION COVENANTS.
Executive acknowledges that (i) the services of the Executive are of
special, unique and extraordinary value to the Company and the Related
Corporations and (ii) the Company's and the Related Corporations' ability to
accomplish their purposes and to successfully compete in the marketplace depend
substantially on the skills and expertise of the Executive. Executive
acknowledges and agrees that the Company and the Related Corporations would be
irreparably damaged if Executive were to not devote substantially all of his
business time and efforts to the business and affairs of the Company and the
Related Corporations during the Contract Term or were to provide directly or
indirectly services to any Person competing directly or indirectly with the
Company or any of the Related Corporations or were to engage in a similar a
business other than as specifically permitted by this Section 4.02. Accordingly,
in further consideration of the compensation to be paid by the Company to the
Executive and to induce Providence to enter into the Purchase Agreement,
Executive agrees, that from and after the date hereof and during the applicable
Non-Compete Period, Executive will not, singly, jointly, or as an employee,
agent or partner of any partnership or as an officer, agent, employee, director,
stockholder (except of not more than one percent (1%) of the outstanding stock
of any company listed on a national securities exchange or actively traded in
the over the counter market) or investor in any other Person, or as a
consultant, advisor, or independent contractor to any such Person, or in any
other capacity, directly, indirectly or beneficially, anywhere in the world:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit
the use of his name by, or provide financial or other assistance to, or be
connected in any manner with, any Person, which is in the international
long distance telecommunications business or other business which is in
direct or indirect competition with any business conducted by the Company
or any of the Related Corporations on the date hereof or at any time
during the applicable Non-Compete Period;
(ii) induce or attempt to induce any individual who, on the date
hereof or at any time during the applicable Non-Compete Period, is an
employee of the Company or any of the Related Corporations, to terminate
his or her employment with such company or employ any such person in any
manner or capacity; or
- 5 -
<PAGE>
(iii) induce or attempt to induce any Person, which is a supplier,
distributor, or customer of the Company or any of the Related Corporations
or which otherwise is a contracting party with the Company or any of the
Related Corporations, as of the date hereof or at any time during the
applicable Non-Compete Period, to terminate or modify any written or oral
agreement or understanding with the Company or any of the Related
Corporations.
Executive acknowledges and agrees that the limitations set forth in this Section
4.02 are reasonable with respect to scope, duration and area and are properly
required for the protection of the legitimate business interests of the Company
and the Related Corporations. The Company and Executive agree that the covenants
set forth in this Section 4.02 shall be enforced to the fullest extent permitted
by law. Accordingly, if in any arbitration, judicial or similar proceeding a
court, an arbitration or any similar judicial or administrative body shall
determine that such covenant is unenforceable because it covers too extensive a
geographical area or survives too long a period of time, or for any other
reason, then the parties intend that such covenant shall be deemed to cover only
such maximum geographical area and maximum period of time and shall otherwise be
deemed to be limited in such manner as will permit enforceability by such
arbitrator, court or similar body.
4.03 INFRINGEMENT OF EXECUTIVE'S OBLIGATION. If the Executive violates or
infringes his obligations under Section 4.01 and/or 4.02, the Executive shall
pay the Company a contractual penalty in the amount of the greater of 30% of
Base Salary or 30% of the total remuneration paid to Executive by his new
employer, for each case of infringement or breach. The payment of this penalty
does not in any case release the Executive from his obligations with regard to
this Agreement.
4.04 SPECIFIC PERFORMANCE. Executive agrees that his breach of the
provisions of Sections 4.01 or 4.02 above will cause irreparable damage to the
Company and the Related Corporations and that the recovery by the Company and
the Related Corporations of money damages will not constitute an adequate remedy
for such breach. The Executive agrees that the Company may request the
elimination of a situation contrary to this Agreement.
4.05 REPRESENTATIONS. Executive hereby represents and warrants to the
Company that (i) except as otherwise previously disclosed in writing to
Providence, the execution, delivery and performance of this Agreement does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (ii) except as otherwise previously disclosed
in writing to Providence, Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
Person which, in the good faith judgment of Executive, will materially interfere
with the performance of the Executive duties and obligations hereunder or
otherwise have a material adverse affect on the Company and (iii) this Agreement
is the valid and binding obligation of Executive, enforceable in accordance with
its terms.
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<PAGE>
ARTICLE V
MISCELLANEOUS
5.01 ASSIGNMENT. This Agreement is personal to Executive and shall not be
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Executive hereunder shall be
binding upon, and inure to the benefit of, Executive's estate. This Agreement
shall be binding upon, and inure to the benefit of, the Company's successors and
assigns.
5.02 INSURANCE. The Company or any of the Related Corporations, at its
discretion, may apply for and procure in its own name and its own benefit life
and/or disability insurance on Executive in any amount or amounts considered
available. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and delivery any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance. Executive represents that he has no reason to believe that his
life is not insurable at rates now prevailing for healthy men of his age.
5.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
5.04 GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of Switzerland.
Except with respect to the enforcement of the Company's injunctive and other
equitable remedies pursuant to Section 5.04 hereof, any dispute arising under
this Agreement shall be submitted to arbitration, the determination of which
shall be final and binding on the parties hereto and which arbitration shall be
held in accordance with Article 343, paragraph 1 of the Code and the rules and
procedures of the International Chamber of Commerce applicable to commercial
transactions and conducted in English. The cost of such arbitration, unless
otherwise determined thereby, shall be borne 50% by Executive and 50% by the
Company. Executive, to the extent that he may lawfully do so, hereby consents to
the jurisdiction of the courts of Switzerland as well as to the jurisdiction of
all courts from which an appeal may be taken from such courts, for the purpose
of any suit, action or other proceeding arising out of enforcement of any such
arbitration award or any of his obligations under Article V hereof, and hereby
expressly waives any and all objections which he may have as to venue in any
such courts. It is acknowledged and agreed that all of the other agreements
referred to herein, including the Option Plan, Option Agreement, Securityholders
Agreement and Purchase Agreement are governed by and shall be construed under
the laws of Delaware (USA).
5.05 COUNTERPARTS; HEADINGS. 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. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
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<PAGE>
5.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties pertaining to the subject matter contained in it and supersedes and is
in lieu of any and all other employment arrangements between Executive and the
Company.
5.07 NOTICES. All notices given hereunder shall be in writing and shall be
delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Carrier One AG
c/o Providence Equity Partners, Inc.
Suite 900, Fleet Center
Providence, Rhode Island 02903
Attention: Glenn M. Creamer
With a copy to:
Prager Dreifuss
CH-8008 Zurich,
Zollikerstrasse 183
Attention: Urs Brunner
and
Edwards & Angell
2800 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
If to Executive:
Stig Johansson
Freudenbergstrasse 3
CH 8044 Zurich
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
5.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the day and year first above
written.
CARRIER ONE AG
By: /s/ Kees van Ophem
----------------------------------
Name: Kees van Ophem
Title: Vice President Purchase
and General Counsel
EXECUTIVE
/s/ Stig Johansson
-------------------------------------
Stig Johansson
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
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<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated March 4, 1998, by and between Carrier One AG,
a company duly incorporated under the laws of Switzerland, having its registered
offices at Regus Building, Stockerhof, Dreikonigstrasse 31A, 8002 Zurich,
Switzerland (the "Company") and Eugene A. Rizzo ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to assure itself of the Executive's services,
and the Executive desires to be employed by the Company;
WHEREAS, the Company's parent, Carrier One, LLC, a Delaware (USA) limited
liability company ("Carrier One"), the Executive, Stig Johansson ("Johansson"),
Joachim Bauer ("Bauer"), Kees Van Ophem ("Van Ophem"), Neil Craven ("Craven"),
Providence Equity Partners L.P. ("PEP") and Providence Equity Partners II, L.P.
("PEP II" and collectively with PEP, "Providence") have entered into that
certain Securities Purchase Agreement (as amended from time to time, the
"Purchase Agreement") dated as of March 4, 1998 whereby they shall acquire
certain securities of Carrier One and Executive, Johansson, Bauer, Van Ophem,
Craven, Providence and Carrier One have entered into the Securityholders'
Agreement (as defined in the Purchase Agreement);
WHEREAS, Providence wishes to protect the value of their investment in
Carrier One and the Company from the risk of competition posed by the Executive
and it is a condition to the Providence's performance under the Purchase
Agreement that Executive enter into this Agreement in order to assure the
Company that the Executive will continue to provide his expertise in the conduct
of the Company's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of the Company.
1.02 CODE. "Code" means the Swiss Code of Obligations.
1.03 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information, in any form or medium, that relates to the business, products,
services,
<PAGE>
research or development of the Company or any of the Related Corporations, and
its and their suppliers or customers, including: (a) compilations of data
(whether in whole or in part) and all analyses, processes, methods, techniques,
systems, formulae, research, records, reports, manuals, documentation and models
relating thereto; (b) computer software, documentation and databases (whether
existing or in various stages of research and development); (c) identities of
and information about the Company's and the Related Corporations' suppliers and
customers and their confidential information, suppliers and customers; (d)
inventions, designs, developments, devices, methods and processes (whether or
not reduced to practice); (e) internal business information, including, without
limitation, information relating to strategic and staffing plans and practices
(including information with respect to potential acquisition targets),
marketing, promotional and sales plans, practices or programs, training
practices and programs, cost and pricing structure, and accounting and business
methods; (f) all copyrightable works; and (g) all similar or related
information. Notwithstanding the immediately foregoing sentence, the term
"Confidential Information" shall not include information which (i) becomes
generally available to the public other than as a result of disclosure by
Executive, or (ii) becomes available to Executive on a non-confidential basis
from a source other than the Company or the Related Corporations, or (iii) which
is generally known in the telecommunications industry and pertains to activities
or business not specific to the Company or any of the Related Corporations.
Information shall not be deemed to be excluded from the meaning of "Confidential
Information" merely because individual portions or components of such
information are publicly known or available.
1.04 EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement or such later date that Executive has obtained any valid work permits
or registration documents as required by the relevant Swiss authorities.
1.05 NON-COMPETE PERIOD. "Non-Compete Period" shall mean the period
commencing on the date hereof and continuing until the end of the eighteenth
month following the date the Executive's employment is terminated or such
shorter period as may be set forth in this Agreement.
1.06. PERSON. "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, trust or other entity.
1.07 RELATED CORPORATIONS. "Related Corporations" shall mean (a) Carrier
One; (b) any corporation of which Carrier One, directly or indirectly, owns more
than fifty percent (50%) of the outstanding equity securities having general
voting power under ordinary circumstances to elect at least a majority of the
directors of such corporation; (c) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which Carrier
One, directly or indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint venture or other
unincorporated organization or entity; and (d) any corporation, partnership,
association, joint venture or other unincorporated organization or entity in
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<PAGE>
which Carrier One, directly or indirectly, has more than a fifty percent (50%)
equity interest.
ARTICLE II
CAPACITY AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Executive as the
Vice President - Sales and Services of the Company, and Executive hereby accepts
such employment, for the Contract Term (as defined in Section 2.03) and upon the
other terms and conditions set forth in this Agreement. During the Contract
Term, Executive shall devote his professional attention and energies on a
full-time basis to the business and affairs of the Company and the Related
Corporations and use his best efforts to promote its interests. The Executive
may not undertake any public office or any kind of activity in connection with
associations without the prior written approval of the Company, if this activity
could influence the contractual activities.
2.02 DUTIES. The Executive shall have such duties and responsibilities as
shall be assigned from time to time by the Board of Directors and as are
consistent with the duties of a Vice President - Sales and Services of an
international long distance telecommunications company.
2.03 CONTRACT TERM. The present Employment Agreement is concluded for an
unspecified period and may be terminated by either party provided that six (6)
months notice of termination is given in writing to the end of a month, but not
before August 31, 1999 (notice to be given before February 28, 1999) (the period
until the Executive's employment with the Company terminates being referred to
as the "Contract Term").
ARTICLE III
COMPENSATION; BENEFITS
3.01 BASE SALARY. The Company shall pay Executive a base salary at the
rate of 300,000 SFr per annum, payable in arrears on a monthly basis, for the
services rendered by Executive to the Company during the Contract Term (the
"Base Salary"). Overtime is not remunerated and time off is not given in lieu;
compensation for any overtime worked is included in the Base Salary. The Base
Salary and all other remuneration paid to the Executive shall be subject to
normal deductions for personal taxation and legally required contributions. The
Board of Directors shall review the Base Salary on a yearly basis for purposes
of determining any increase thereof, whether due to cost of living adjustments
or merit, but any such determination shall be made in the sole discretion of the
Board of Directors without regard to past practice.
3.02 BONUS PLAN. In addition to the Base Salary, during each year of the
Contract Term the Executive will be eligible to receive a bonus (the "Annual
Bonus") in
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an amount up to 25% of Base Salary subject to meeting the criteria established
from time to time by the Board of Directors. The Board of Directors, in its
discretion, shall determine the amount of the Annual Bonus. The Board of
Directors and the Company's senior officers will work in good faith promptly
after the Effective Date to develop the criteria for earning the Annual Bonus in
1998 and will meet at least annually to develop the criteria for future years.
3.03 AUTOMOBILE. During the Contract Term the Company will ensure that
there will be made available to the Executive a motor vehicle of a type suitable
to his position for use by him in the performance of his duties hereunder and
for his private purposes and that the Executive's tax, insurance, maintenance
and running costs thereon and all fuel expenses reasonably incurred by the
Executive will be promptly reimbursed to the Executive.
3.04 TELEPHONE; FACSIMILE EQUIPMENT. During the Contract Term the Company
will provide the Executive a cellular telephone and a facsimile machine (or
equipment serving a comparable function), and will pay, or reimburse Executive
for, all telephone charges and associated costs thereof related to his duties
hereunder.
3.05 PENSION. The Company will establish a pension plan for its executive
officers in compliance with Swiss law (the "Pension Plan"). The total
contribution to the Pension Plan (Company plus Executive) in each year will be
15% of Executive's Base Salary for such year, of which each of the Company and
Executive will contribute 50% (i.e. 7.5% of Base Salary each).
3.06 HEALTH INSURANCE. The Executive is obligated to have a private health
insurance which provides full cover in Switzerland and while Executive is on
business trips outside Switzerland. The Company will contribute 50% of the
related private health insurance for each of the family members, not to exceed
SFr 200 per month per family member.
3.07 BUSINESS EXPENSES. During the Contract Term, the Company will pay the
Executive SFr 1685 per month as compensation for out of pocket expenses.
3.08 OPTIONS. On the Effective Date, the Company's parent, Carrier One,
LLC, will grant Executive options pursuant to and in accordance with the terms
of the Carrier One, LLC 1998 Unit Option Plan and the Option Agreement attached
hereto as EXHIBIT A.
3.09 HOLIDAYS. The Executive shall be entitled to a vacation of 25 working
days per annum. In the calendar year in which Executive reaches the age of 60
and thereafter he is entitled to a vacation of 30 working days.
3.10 TUITION REIMBURSEMENTS. During the Contract Term the Company will
reimburse Executive, upon Executive furnishing the Company reasonable
documentary
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substantiation of the cost and his payment thereof, the tuition costs at a
private international school for his two children.
ARTICLE IV
CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION
4.01 CONFIDENTIALITY. Executive acknowledges that in the course of
providing services to the Company and the Related Corporations, Executive will
become familiar with the trade secrets, Confidential Information and other
intellectual property concerning the Company and the Related Corporations.
Executive shall not at any time or in any manner, whether directly or
indirectly, use for his own benefit or the benefit of any other Person, nor
disclose, divulge, render or offer, any Confidential Information, except on
behalf of the Company or the Related Corporations in the course of the proper
performance of his duties hereunder. Executive acknowledges and agrees that any
and all such Confidential Information will be received and held by him in a
confidential capacity.
4.02 NONCOMPETITION AND NONSOLICITATION COVENANTS.
Executive acknowledges that (i) the services of the Executive are of
special, unique and extraordinary value to the Company and the Related
Corporations and (ii) the Company's and the Related Corporations' ability to
accomplish their purposes and to successfully compete in the marketplace depend
substantially on the skills and expertise of the Executive. Executive
acknowledges and agrees that the Company and the Related Corporations would be
irreparably damaged if Executive were to not devote substantially all of his
business time and efforts to the business and affairs of the Company and the
Related Corporations during the Contract Term or were to provide directly or
indirectly services to any Person competing directly or indirectly with the
Company or any of the Related Corporations or were to engage in a similar a
business other than as specifically permitted by this Section 4.02. Accordingly,
in further consideration of the compensation to be paid by the Company to the
Executive and to induce Providence to enter into the Purchase Agreement,
Executive agrees, that from and after the date hereof and during the applicable
Non-Compete Period, Executive will not, singly, jointly, or as an employee,
agent or partner of any partnership or as an officer, agent, employee, director,
stockholder (except of not more than one percent (1%) of the outstanding stock
of any company listed on a national securities exchange or actively traded in
the over the counter market) or investor in any other Person, or as a
consultant, advisor, or independent contractor to any such Person, or in any
other capacity, directly, indirectly or beneficially, anywhere in the world:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit
the use of his name by, or provide
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financial or other assistance to, or be connected in any manner with, any
Person, which is in the international long distance telecommunications
business or other business which is in direct or indirect competition with
any business conducted by the Company or any of the Related Corporations
on the date hereof or at any time during the applicable Non-Compete
Period;
(ii) induce or attempt to induce any individual who, on the date
hereof or at any time during the applicable Non-Compete Period, is an
employee of the Company or any of the Related Corporations, to terminate
his or her employment with such company or employ any such person in any
manner or capacity; or
(iii) induce or attempt to induce any Person, which is a supplier,
distributor, or customer of the Company or any of the Related Corporations
or which otherwise is a contracting party with the Company or any of the
Related Corporations, as of the date hereof or at any time during the
applicable Non-Compete Period, to terminate or modify any written or oral
agreement or understanding with the Company or any of the Related
Corporations.
Executive acknowledges and agrees that the limitations set forth in this Section
4.02 are reasonable with respect to scope, duration and area and are properly
required for the protection of the legitimate business interests of the Company
and the Related Corporations. The Company and Executive agree that the covenants
set forth in this Section 4.02 shall be enforced to the fullest extent permitted
by law. Accordingly, if in any arbitration, judicial or similar proceeding a
court, an arbitration or any similar judicial or administrative body shall
determine that such covenant is unenforceable because it covers too extensive a
geographical area or survives too long a period of time, or for any other
reason, then the parties intend that such covenant shall be deemed to cover only
such maximum geographical area and maximum period of time and shall otherwise be
deemed to be limited in such manner as will permit enforceability by such
arbitrator, court or similar body.
4.03 INFRINGEMENT OF EXECUTIVE'S OBLIGATION. If the Executive violates or
infringes his obligations under Section 4.01 and/or 4.02, the Executive shall
pay the Company a contractual penalty in the amount of the greater of 30% of
Base Salary or 30% of the total remuneration paid to Executive by his new
employer, for each case of infringement or breach. The payment of this penalty
does not in any case release the Executive from his obligations with regard to
this Agreement.
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4.04 SPECIFIC PERFORMANCE. Executive agrees that his breach of the
provisions of Sections 4.01 or 4.02 above will cause irreparable damage to the
Company and the Related Corporations and that the recovery by the Company and
the Related Corporations of money damages will not constitute an adequate remedy
for such breach. The Executive agrees that the Company may request the
elimination of a situation contrary to this Agreement.
4.05 REPRESENTATIONS. Executive hereby represents and warrants to the
Company that (i) except as otherwise previously disclosed in writing to
Providence, the execution, delivery and performance of this Agreement does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (ii) except as otherwise previously disclosed
in writing to Providence, Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
Person which, in the good faith judgment of Executive, will materially interfere
with the performance of the Executive duties and obligations hereunder or
otherwise have a material adverse affect on the Company and (iii) this Agreement
is the valid and binding obligation of Executive, enforceable in accordance with
its terms.
ARTICLE V
MISCELLANEOUS
5.01 ASSIGNMENT. This Agreement is personal to Executive and shall not be
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Executive hereunder shall be
binding upon, and inure to the benefit of, Executive's estate. This Agreement
shall be binding upon, and inure to the benefit of, the Company's successors and
assigns.
5.02 INSURANCE. The Company or any of the Related Corporations, at its
discretion, may apply for and procure in its own name and its own benefit life
and/or disability insurance on Executive in any amount or amounts considered
available. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and delivery any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance. Executive represents that he has no reason to believe that his
life is not insurable at rates now prevailing for healthy men of his age.
5.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
5.04 GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of Switzerland.
Except
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with respect to the enforcement of the Company's injunctive and other equitable
remedies pursuant to Section 5.04 hereof, any dispute arising under this
Agreement shall be submitted to arbitration, the determination of which shall be
final and binding on the parties hereto and which arbitration shall be held in
accordance with Article 343, paragraph 1 of the Code and the rules and
procedures of the International Chamber of Commerce applicable to commercial
transactions and conducted in English. The cost of such arbitration, unless
otherwise determined thereby, shall be borne 50% by Executive and 50% by the
Company. Executive, to the extent that he may lawfully do so, hereby consents to
the jurisdiction of the courts of Switzerland as well as to the jurisdiction of
all courts from which an appeal may be taken from such courts, for the purpose
of any suit, action or other proceeding arising out of enforcement of any such
arbitration award or any of his obligations under Article V hereof, and hereby
expressly waives any and all objections which he may have as to venue in any
such courts. It is acknowledged and agreed that all of the other agreements
referred to herein, including the Option Plan, Option Agreement, Securityholders
Agreement and Purchase Agreement are governed by and shall be construed under
the laws of Delaware (USA).
5.05 COUNTERPARTS; HEADINGS. 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. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
5.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties pertaining to the subject matter contained in it and supersedes and is
in lieu of any and all other employment arrangements between Executive and the
Company.
5.07 NOTICES. All notices given hereunder shall be in writing and shall be
delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Carrier One AG
c/o Providence Equity Partners, Inc.
Suite 900, Fleet Center
Providence, Rhode Island 02903
Attention: Glenn M. Creamer
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With a copy to:
Prager Dreifuss
CH-8008 Zurich,
Zollikerstrasse 183
Attention: Urs Brunner
and
Edwards & Angell
2800 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
If to Executive:
Eugene A. Rizzo
Dettwellerstrasse 16
Deutschland - 61476 Kronberg/Ts
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
5.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the day and year first above
written.
CARRIER ONE AG
By: /s/ Stig Johansson
-----------------------------------
Name:
Title:
EXECUTIVE
/s/ Eugene A. Rizzo
--------------------------------------
Eugene A. Rizzo
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
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Exhibit 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated March 26, 1998, by and between Carrier One
AG, a company duly incorporated under the laws of Switzerland, having its
registered offices at Regus Building, Stockerhof, Dreikonigstrasse 31A, 8002
Zurich, Switzerland (the "Company") and Terje Nordahl ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to assure itself of the Executive's services,
and the Executive desires to be employed by the Company;
WHEREAS, the Company's parent, Carrier One, LLC, a Delaware (USA) limited
liability company ("Carrier One"), the Executive, Stig Johansson ("Johansson")
Eugene A. Rizzo ("Rizzo"), Kees Van Ophem ("Van Ophem"), Neil Craven ("Craven"),
Providence Equity Partners L.P. ("PEP") and Providence Equity Partners II, L.P.
("PEP II" and collectively with PEP, "Providence") have entered into that
certain Securities Purchase Agreement (as amended from time to time, the
"Purchase Agreement") dated as of March 4, 1998 whereby they acquired certain
securities of Carrier One and Executive, Johansson, Rizzo, Van Ophem, Craven,
Providence and Carrier One have entered into the Securityholders' Agreement (as
defined in the Purchase Agreement);
WHEREAS, Providence wishes to protect the value of their investment in
Carrier One and the Company from the risk of competition posed by the Executive
and it is a condition to the Providence's performance under the Purchase
Agreement that Executive enter into this Agreement in order to assure the
Company that the Executive will continue to provide his expertise in the conduct
of the Company's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of the Company.
1.02 CODE. "Code" means the Swiss Code of Obligations.
<PAGE>
1.03 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information, in any form or medium, that relates to the business, products,
services, research or development of the Company or any of the Related
Corporations, and its and their suppliers or customers, including: (a)
compilations of data (whether in whole or in part) and all analyses, processes,
methods, techniques, systems, formulae, research, records, reports, manuals,
documentation and models relating thereto; (b) computer software, documentation
and databases (whether existing or in various stages of research and
development); (c) identities of and information about the Company's and the
Related Corporations' suppliers and customers and their confidential
information, suppliers and customers; (d) inventions, designs, developments,
devices, methods and processes (whether or not reduced to practice); (e)
internal business information, including, without limitation, information
relating to strategic and staffing plans and practices (including information
with respect to potential acquisition targets), marketing, promotional and sales
plans, practices or programs, training practices and programs, cost and pricing
structure, and accounting and business methods; (f) all copyrightable works; and
(g) all similar or related information. Notwithstanding the immediately
foregoing sentence, the term "Confidential Information" shall not include
information which (i) becomes generally available to the public other than as a
result of disclosure by Executive, or (ii) becomes available to Executive on a
non-confidential basis from a source other than the Company or the Related
Corporations, or (iii) which is generally known in the telecommunications
industry and pertains to activities or business not specific to the Company or
any of the Related Corporations. Information shall not be deemed to be excluded
from the meaning of "Confidential Information" merely because individual
portions or components of such information are publicly known or available.
1.04 EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement or such later date that Executive has obtained any valid work permits
or registration documents as required by the relevant Swiss authorities.
1.05 NON-COMPETE PERIOD. "Non-Compete Period" shall mean the period
commencing on the date hereof and continuing until the end of the eighteenth
month following the date the Executive's employment is terminated or such
shorter period as may be set forth in this Agreement.
1.06. PERSON. "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, trust or other entity.
1.07 RELATED CORPORATIONS. "Related Corporations" shall mean (a) Carrier
One; (b) any corporation of which Carrier One, directly or indirectly, owns more
than fifty percent (50%) of the outstanding equity securities having general
voting power under ordinary circumstances to elect at least a majority of the
directors of such corporation; (c) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which Carrier
One, directly or indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint venture or other
unincorporated organization or entity; and (d) any corporation,
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partnership, association, joint venture or other unincorporated organization or
entity in which Carrier One, directly or indirectly, has more than a fifty
percent (50%) equity interest.
ARTICLE II
CAPACITY AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Executive as the
Chief Operating Officer of the Company, and Executive hereby accepts such
employment, for the Contract Term (as defined in Section 2.03) and upon the
other terms and conditions set forth in this Agreement. During the Contract
Term, Executive shall devote his professional attention and energies on a
full-time basis to the business and affairs of the Company and the Related
Corporations and use his best efforts to promote its interests. The Executive
may not undertake any public office or any kind of activity in connection with
associations without the prior written approval of the Company, if this activity
could influence the contractual activities.
2.02 DUTIES. The Executive shall have such duties and responsibilities as
shall be assigned from time to time by the Board of Directors and as are
consistent with the duties of a Chief Operating Officer of an international long
distance telecommunications company.
2.03 CONTRACT TERM. The present Employment Agreement is concluded for an
unspecified period and may be terminated by either party provided that six (6)
months notice of termination is given in writing to the end of a month, but not
before August 31, 1999 (notice to be given before February 28, 1999) (the period
until the Executive's employment with the Company terminates being referred to
as the "Contract Term").
ARTICLE III
COMPENSATION; BENEFITS
3.01 BASE SALARY. The Company shall pay Executive a base salary at the
rate of 260,000 SFr per annum, payable in arrears on a monthly basis, for the
services rendered by Executive to the Company during the Contract Term (the
"Base Salary"). Overtime is not remunerated and time off is not given in lieu;
compensation for any overtime worked is included in the Base Salary. The Base
Salary and all other remuneration paid to the Executive shall be subject to
normal deductions for personal taxation and legally required contributions. The
Board of Directors shall review the Base Salary on a yearly basis for purposes
of determining any increase thereof, whether due to cost of living adjustments
or merit, but any such determination shall be made in the sole discretion of the
Board of Directors without regard to past practice.
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3.02 BONUS PLAN. In addition to the Base Salary, during each year of the
Contract Term the Executive will be eligible to receive a bonus (the "Annual
Bonus") in an amount up to 25% of Base Salary subject to meeting the criteria
established from time to time by the Board of Directors. The Board of Directors,
in its discretion, shall determine the amount of the Annual Bonus. The Board of
Directors and the Company's senior officers will work in good faith promptly
after the Effective Date to develop the criteria for earning the Annual Bonus in
1998 and will meet at least annually to develop the criteria for future years.
3.03 AUTOMOBILE. During the Contract Term the Company will ensure that
there will be made available to the Executive a motor vehicle of a type suitable
to his position for use by him in the performance of his duties hereunder and
for his private purposes and that the Executive's tax, insurance, maintenance
and running costs thereon and all fuel expenses reasonably incurred by the
Executive will be promptly reimbursed to the Executive.
3.04 TELEPHONE; FACSIMILE EQUIPMENT. During the Contract Term the Company
will provide the Executive a cellular telephone and a facsimile machine (or
equipment serving a comparable function), and will pay, or reimburse Executive
for, all telephone charges and associated costs thereof related to his duties
hereunder.
3.05 PENSION. The Company will establish a pension plan for its executive
officers in compliance with Swiss law (the "Pension Plan"). The total
contribution to the Pension Plan (Company plus Executive) in each year will be
15% of Executive's Base Salary for such year, of which each of the Company and
Executive will contribute 50% (i.e. 7.5% of Base Salary each).
3.06 HEALTH INSURANCE. The Executive is obligated to have a private health
insurance which provides full cover in Switzerland and while Executive is on
business trips outside Switzerland. The Company will contribute 50% of the
related private health insurance for each of the family members, not to exceed
SFr 200 per month per family member.
3.07 BUSINESS EXPENSES. During the Contract Term, the Company will pay the
Executive SFr 1500 per month as compensation for out of pocket expenses.
3.08 OPTIONS. On the Effective Date, the Company's parent, Carrier One,
LLC, will grant Executive options pursuant to and in accordance with the terms
of the Carrier One, LLC 1998 Unit Option Plan and the Option Agreement attached
hereto as EXHIBIT A.
3.09 HOLIDAYS. The Executive shall be entitled to a vacation of 25 working
days per annum. In the calendar year in which Executive reaches the age of 60
and thereafter he is entitled to a vacation of 30 working days.
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3.10 RELOCATION EXPENSES. The Company will pay the Executive the actual
cost, up to a maximum of SFr 4,000 per month, of the rental of an apartment in
Zurich, Switzerland for a period of six months from the date hereof. The Company
will also reimburse the Executive for all relocation expenses incurred in the
move to Zurich, Switzerland including costs of moving furnishings, personal
effects, storage costs, closing costs for sale of principal residence and
closing costs for the purchase of a new residence in the Company's locale
(excluding interest due on mortgage).
ARTICLE IV
CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION
4.01 CONFIDENTIALITY. Executive acknowledges that in the course of
providing services to the Company and the Related Corporations, Executive will
become familiar with the trade secrets, Confidential Information and other
intellectual property concerning the Company and the Related Corporations.
Executive shall not at any time or in any manner, whether directly or
indirectly, use for his own benefit or the benefit of any other Person, nor
disclose, divulge, render or offer, any Confidential Information, except on
behalf of the Company or the Related Corporations in the course of the proper
performance of his duties hereunder. Executive acknowledges and agrees that any
and all such Confidential Information will be received and held by him in a
confidential capacity.
4.02 NONCOMPETITION AND NONSOLICITATION COVENANTS.
Executive acknowledges that (i) the services of the Executive are of
special, unique and extraordinary value to the Company and the Related
Corporations and (ii) the Company's and the Related Corporations' ability to
accomplish their purposes and to successfully compete in the marketplace depend
substantially on the skills and expertise of the Executive. Executive
acknowledges and agrees that the Company and the Related Corporations would be
irreparably damaged if Executive were to not devote substantially all of his
business time and efforts to the business and affairs of the Company and the
Related Corporations during the Contract Term or were to provide directly or
indirectly services to any Person competing directly or indirectly with the
Company or any of the Related Corporations or were to engage in a similar a
business other than as specifically permitted by this Section 4.02. Accordingly,
in further consideration of the compensation to be paid by the Company to the
Executive and to induce Providence to enter into the Purchase Agreement,
Executive agrees, that from and after the date hereof and during the applicable
Non-Compete Period, Executive will not, singly, jointly, or as an employee,
agent or partner of any partnership or as an officer, agent, employee, director,
stockholder (except of not more than one percent (1%) of the outstanding stock
of any company listed on a national securities exchange or actively traded in
the over the counter market) or investor in any other Person, or as a
consultant, advisor, or independent contractor to any such Person, or in any
other capacity, directly, indirectly or beneficially, anywhere in the world:
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(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit
the use of his name by, or provide financial or other assistance to, or be
connected in any manner with, any Person, which is in the international
long distance telecommunications business or other business which is in
direct or indirect competition with any business conducted by the Company
or any of the Related Corporations on the date hereof or at any time
during the applicable Non-Compete Period;
(ii) induce or attempt to induce any individual who, on the date
hereof or at any time during the applicable Non-Compete Period, is an
employee of the Company or any of the Related Corporations, to terminate
his or her employment with such company or employ any such person in any
manner or capacity; or
(iii) induce or attempt to induce any Person, which is a supplier,
distributor, or customer of the Company or any of the Related Corporations
or which otherwise is a contracting party with the Company or any of the
Related Corporations, as of the date hereof or at any time during the
applicable Non-Compete Period, to terminate or modify any written or oral
agreement or understanding with the Company or any of the Related
Corporations.
Executive acknowledges and agrees that the limitations set forth in this Section
4.02 are reasonable with respect to scope, duration and area and are properly
required for the protection of the legitimate business interests of the Company
and the Related Corporations. The Company and Executive agree that the covenants
set forth in this Section 4.02 shall be enforced to the fullest extent permitted
by law. Accordingly, if in any arbitration, judicial or similar proceeding a
court, an arbitration or any similar judicial or administrative body shall
determine that such covenant is unenforceable because it covers too extensive a
geographical area or survives too long a period of time, or for any other
reason, then the parties intend that such covenant shall be deemed to cover only
such maximum geographical area and maximum period of time and shall otherwise be
deemed to be limited in such manner as will permit enforceability by such
arbitrator, court or similar body.
4.03 INFRINGEMENT OF EXECUTIVE'S OBLIGATION. If the Executive violates or
infringes his obligations under Section 4.01 and/or 4.02, the Executive shall
pay the Company a contractual penalty in the amount of the greater of 30% of
Base Salary or 30% of the total remuneration paid to Executive by his new
employer, for each case of
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infringement or breach. The payment of this penalty does not in any case release
the Executive from his obligations with regard to this Agreement.
4.04 SPECIFIC PERFORMANCE. Executive agrees that his breach of the
provisions of Sections 4.01 or 4.02 above will cause irreparable damage to the
Company and the Related Corporations and that the recovery by the Company and
the Related Corporations of money damages will not constitute an adequate remedy
for such breach. The Executive agrees that the Company may request the
elimination of a situation contrary to this Agreement.
4.05 REPRESENTATIONS. Executive hereby represents and warrants to the
Company that (i) except as otherwise previously disclosed in writing to
Providence, the execution, delivery and performance of this Agreement does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (ii) except as otherwise previously disclosed
in writing to Providence, Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
Person which, in the good faith judgment of Executive, will materially interfere
with the performance of the Executive duties and obligations hereunder or
otherwise have a material adverse affect on the Company and (iii) this Agreement
is the valid and binding obligation of Executive, enforceable in accordance with
its terms.
ARTICLE V
MISCELLANEOUS
5.01 ASSIGNMENT. This Agreement is personal to Executive and shall not be
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Executive hereunder shall be
binding upon, and inure to the benefit of, Executive's estate. This Agreement
shall be binding upon, and inure to the benefit of, the Company's successors and
assigns.
5.02 INSURANCE. The Company or any of the Related Corporations, at its
discretion, may apply for and procure in its own name and its own benefit life
and/or disability insurance on Executive in any amount or amounts considered
available. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and delivery any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance. Executive represents that he has no reason to believe that his
life is not insurable at rates now prevailing for healthy men of his age.
5.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
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<PAGE>
5.04 GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of Switzerland.
Except with respect to the enforcement of the Company's injunctive and other
equitable remedies pursuant to Section 5.04 hereof, any dispute arising under
this Agreement shall be submitted to arbitration, the determination of which
shall be final and binding on the parties hereto and which arbitration shall be
held in accordance with Article 343, paragraph 1 of the Code and the rules and
procedures of the International Chamber of Commerce applicable to commercial
transactions and conducted in English. The cost of such arbitration, unless
otherwise determined thereby, shall be borne 50% by Executive and 50% by the
Company. Executive, to the extent that he may lawfully do so, hereby consents to
the jurisdiction of the courts of Switzerland as well as to the jurisdiction of
all courts from which an appeal may be taken from such courts, for the purpose
of any suit, action or other proceeding arising out of enforcement of any such
arbitration award or any of his obligations under Article V hereof, and hereby
expressly waives any and all objections which he may have as to venue in any
such courts. It is acknowledged and agreed that all of the other agreements
referred to herein, including the Option Plan, Option Agreement, Securityholders
Agreement and Purchase Agreement are governed by and shall be construed under
the laws of Delaware (USA).
5.05 COUNTERPARTS; HEADINGS. 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. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
5.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties pertaining to the subject matter contained in it and supersedes and is
in lieu of any and all other employment arrangements between Executive and the
Company.
5.07 NOTICES. All notices given hereunder shall be in writing and shall be
delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Carrier One AG
c/o Providence Equity Partners, Inc.
Suite 900, Fleet Center
Providence, Rhode Island 02903
Attention: Glenn M. Creamer
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<PAGE>
With a copy to:
Prager Dreifuss
CH-8008 Zurich,
Zollikerstrasse 183
Attention: Urs Brunner
and
Edwards & Angell
2800 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
If to Executive:
Terje Nordahl
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
5.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the day and year first above
written.
CARRIER ONE AG
By: /s/ Stig Johansson
------------------------------
Name:
Title:
EXECUTIVE
/s/ Terje Nordahl
---------------------------------
Terje Nordahl
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
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<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated March 4, 1998, by and between Carrier One AG,
a company duly incorporated under the laws of Switzerland, having its registered
offices at Regus Building, Stockerhof, Dreikonigstrasse 31A, 8002 Zurich,
Switzerland (the "Company") and Joachim Bauer ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to assure itself of the Executive's services,
and the Executive desires to be employed by the Company;
WHEREAS, the Company's parent, Carrier One, LLC, a Delaware (USA)
limited liability company ("Carrier One"), the Executive, Stig Johansson
("Johansson") Eugene A. Rizzo ("Rizzo"), Kees Van Ophem ("Van Ophem"), Neil
Craven ("Craven"), Providence Equity Partners L.P. ("PEP") and Providence
Equity Partners II, L.P. ("PEP II" and collectively with PEP, "Providence")
have entered into that certain Securities Purchase Agreement (as amended from
time to time, the "Purchase Agreement") dated as of March 4, 1998 whereby
they shall acquire certain securities of Carrier One and Executive,
Johansson, Rizzo, Van Ophem, Craven, Providence and Carrier One have entered
into the Securityholders' Agreement (as defined in the Purchase Agreement);
WHEREAS, Providence wishes to protect the value of their investment in
Carrier One and the Company from the risk of competition posed by the Executive
and it is a condition to the Providence's performance under the Purchase
Agreement that Executive enter into this Agreement in order to assure the
Company that the Executive will continue to provide his expertise in the conduct
of the Company's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of the Company.
1.02 CODE. "Code" means the Swiss Code of Obligations.
1.03 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information, in any form or medium, that relates to the business, products,
services,
<PAGE>
research or development of the Company or any of the Related Corporations, and
its and their suppliers or customers, including: (a) compilations of data
(whether in whole or in part) and all analyses, processes, methods, techniques,
systems, formulae, research, records, reports, manuals, documentation and models
relating thereto; (b) computer software, documentation and databases (whether
existing or in various stages of research and development); (c) identities of
and information about the Company's and the Related Corporations' suppliers and
customers and their confidential information, suppliers and customers; (d)
inventions, designs, developments, devices, methods and processes (whether or
not reduced to practice); (e) internal business information, including, without
limitation, information relating to strategic and staffing plans and practices
(including information with respect to potential acquisition targets),
marketing, promotional and sales plans, practices or programs, training
practices and programs, cost and pricing structure, and accounting and business
methods; (f) all copyrightable works; and (g) all similar or related
information. Notwithstanding the immediately foregoing sentence, the term
"Confidential Information" shall not include information which (i) becomes
generally available to the public other than as a result of disclosure by
Executive, or (ii) becomes available to Executive on a non-confidential basis
from a source other than the Company or the Related Corporations, or (iii) which
is generally known in the telecommunications industry and pertains to activities
or business not specific to the Company or any of the Related Corporations.
Information shall not be deemed to be excluded from the meaning of "Confidential
Information" merely because individual portions or components of such
information are publicly known or available.
1.04 EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement or such later date that Executive has obtained any valid work permits
or registration documents as required by the relevant Swiss authorities.
1.05 NON-COMPETE PERIOD. "Non-Compete Period" shall mean the period
commencing on the date hereof and continuing until the end of the eighteenth
month following the date the Executive's employment is terminated or such
shorter period as may be set forth in this Agreement.
1.06. PERSON. "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, trust or other entity.
1.07 RELATED CORPORATIONS. "Related Corporations" shall mean (a) Carrier
One; (b) any corporation of which Carrier One, directly or indirectly, owns more
than fifty percent (50%) of the outstanding equity securities having general
voting power under ordinary circumstances to elect at least a majority of the
directors of such corporation; (c) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which Carrier
One, directly or indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint venture or other
unincorporated organization or entity; and (d) any corporation, partnership,
association, joint venture or other unincorporated organization or entity in
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<PAGE>
which Carrier One, directly or indirectly, has more than a fifty percent (50%)
equity interest.
ARTICLE II
CAPACITY AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Executive as the
Chief Financial Officer of the Company, and Executive hereby accepts such
employment, for the Contract Term (as defined in Section 2.03) and upon the
other terms and conditions set forth in this Agreement. During the Contract
Term, Executive shall devote his professional attention and energies on a
full-time basis to the business and affairs of the Company and the Related
Corporations and use his best efforts to promote its interests. The Executive
may not undertake any public office or any kind of activity in connection with
associations without the prior written approval of the Company, if this activity
could influence the contractual activities.
2.02 DUTIES. The Executive shall have such duties and responsibilities as
shall be assigned from time to time by the Board of Directors and as are
consistent with the duties of a Chief Financial Officer of an international long
distance telecommunications company.
2.03 CONTRACT TERM. The present Employment Agreement is concluded for an
unspecified period and may be terminated by either party provided that six (6)
months notice of termination is given in writing to the end of a month, but not
before August 31, 1999 (notice to be given before February 28, 1999) (the period
until the Executive's employment with the Company terminates being referred to
as the "Contract Term").
ARTICLE III
COMPENSATION; BENEFITS
3.01 BASE SALARY. The Company shall pay Executive a base salary at the
rate of 260,000 SFr per annum, payable in arrears on a monthly basis, for the
services rendered by Executive to the Company during the Contract Term (the
"Base Salary"). Overtime is not remunerated and time off is not given in lieu;
compensation for any overtime worked is included in the Base Salary. The Base
Salary and all other remuneration paid to the Executive shall be subject to
normal deductions for personal taxation and legally required contributions. The
Board of Directors shall review the Base Salary on a yearly basis for purposes
of determining any increase thereof, whether due to cost of living adjustments
or merit, but any such determination shall be made in the sole discretion of the
Board of Directors without regard to past practice.
3.02 BONUS PLAN. In addition to the Base Salary, during each year of the
Contract Term the Executive will be eligible to receive a bonus (the "Annual
Bonus") in
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<PAGE>
an amount up to 25% of Base Salary subject to meeting the criteria established
from time to time by the Board of Directors. The Board of Directors, in its
discretion, shall determine the amount of the Annual Bonus. The Board of
Directors and the Company's senior officers will work in good faith promptly
after the Effective Date to develop the criteria for earning the Annual Bonus in
1998 and will meet at least annually to develop the criteria for future years.
3.03 AUTOMOBILE. During the Contract Term the Company will ensure that
there will be made available to the Executive a motor vehicle of a type suitable
to his position for use by him in the performance of his duties hereunder and
for his private purposes and that the Executive's tax, insurance, maintenance
and running costs thereon and all fuel expenses reasonably incurred by the
Executive will be promptly reimbursed to the Executive.
3.04 TELEPHONE; FACSIMILE EQUIPMENT. During the Contract Term the Company
will provide the Executive a cellular telephone and a facsimile machine (or
equipment serving a comparable function), and will pay, or reimburse Executive
for, all telephone charges and associated costs thereof related to his duties
hereunder.
3.05 PENSION. The Company will establish a pension plan for its executive
officers in compliance with Swiss law (the "Pension Plan"). The total
contribution to the Pension Plan (Company plus Executive) in each year will be
15% of Executive's Base Salary for such year, of which each of the Company and
Executive will contribute 50% (i.e. 7.5% of Base Salary each).
3.06 HEALTH INSURANCE. The Executive is obligated to have a private health
insurance which provides full cover in Switzerland and while Executive is on
business trips outside Switzerland. The Company will contribute 50% of the
related private health insurance for each of the family members, not to exceed
SFr 200 per month per family member.
3.07 BUSINESS EXPENSES. During the Contract Term, the Company will pay the
Executive SFr 1500 per month as compensation for out of pocket expenses.
3.08 OPTIONS. On the Effective Date, the Company's parent, Carrier One,
LLC, will grant Executive options pursuant to and in accordance with the terms
of the Carrier One, LLC 1998 Unit Option Plan and the Option Agreement attached
hereto as EXHIBIT A.
3.09 HOLIDAYS. The Executive shall be entitled to a vacation of 25 working
days per annum. In the calendar year in which Executive reaches the age of 60
and thereafter he is entitled to a vacation of 30 working days.
- 4 -
<PAGE>
ARTICLE IV
CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION
4.01 CONFIDENTIALITY. Executive acknowledges that in the course of
providing services to the Company and the Related Corporations, Executive will
become familiar with the trade secrets, Confidential Information and other
intellectual property concerning the Company and the Related Corporations.
Executive shall not at any time or in any manner, whether directly or
indirectly, use for his own benefit or the benefit of any other Person, nor
disclose, divulge, render or offer, any Confidential Information, except on
behalf of the Company or the Related Corporations in the course of the proper
performance of his duties hereunder. Executive acknowledges and agrees that any
and all such Confidential Information will be received and held by him in a
confidential capacity.
4.02 NONCOMPETITION AND NONSOLICITATION COVENANTS.
Executive acknowledges that (i) the services of the Executive are of
special, unique and extraordinary value to the Company and the Related
Corporations and (ii) the Company's and the Related Corporations' ability to
accomplish their purposes and to successfully compete in the marketplace depend
substantially on the skills and expertise of the Executive. Executive
acknowledges and agrees that the Company and the Related Corporations would be
irreparably damaged if Executive were to not devote substantially all of his
business time and efforts to the business and affairs of the Company and the
Related Corporations during the Contract Term or were to provide directly or
indirectly services to any Person competing directly or indirectly with the
Company or any of the Related Corporations or were to engage in a similar a
business other than as specifically permitted by this Section 4.02. Accordingly,
in further consideration of the compensation to be paid by the Company to the
Executive and to induce Providence to enter into the Purchase Agreement,
Executive agrees, that from and after the date hereof and during the applicable
Non-Compete Period, Executive will not, singly, jointly, or as an employee,
agent or partner of any partnership or as an officer, agent, employee, director,
stockholder (except of not more than one percent (1%) of the outstanding stock
of any company listed on a national securities exchange or actively traded in
the over the counter market) or investor in any other Person, or as a
consultant, advisor, or independent contractor to any such Person, or in any
other capacity, directly, indirectly or beneficially, anywhere in the world:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit
the use of his name by, or provide financial or other assistance to, or be
connected in any manner with, any Person, which is in the international
long distance telecommunications business or other business which is in
- 5 -
<PAGE>
direct or indirect competition with any business conducted by the Company
or any of the Related Corporations on the date hereof or at any time
during the applicable Non-Compete Period;
(ii) induce or attempt to induce any individual who, on the date
hereof or at any time during the applicable Non-Compete Period, is an
employee of the Company or any of the Related Corporations, to terminate
his or her employment with such company or employ any such person in any
manner or capacity; or
(iii) induce or attempt to induce any Person, which is a supplier,
distributor, or customer of the Company or any of the Related Corporations
or which otherwise is a contracting party with the Company or any of the
Related Corporations, as of the date hereof or at any time during the
applicable Non-Compete Period, to terminate or modify any written or oral
agreement or understanding with the Company or any of the Related
Corporations.
Executive acknowledges and agrees that the limitations set forth in this Section
4.02 are reasonable with respect to scope, duration and area and are properly
required for the protection of the legitimate business interests of the Company
and the Related Corporations. The Company and Executive agree that the covenants
set forth in this Section 4.02 shall be enforced to the fullest extent permitted
by law. Accordingly, if in any arbitration, judicial or similar proceeding a
court, an arbitration or any similar judicial or administrative body shall
determine that such covenant is unenforceable because it covers too extensive a
geographical area or survives too long a period of time, or for any other
reason, then the parties intend that such covenant shall be deemed to cover only
such maximum geographical area and maximum period of time and shall otherwise be
deemed to be limited in such manner as will permit enforceability by such
arbitrator, court or similar body.
4.03 INFRINGEMENT OF EXECUTIVE'S OBLIGATION. If the Executive violates or
infringes his obligations under Section 4.01 and/or 4.02, the Executive shall
pay the Company a contractual penalty in the amount of the greater of 30% of
Base Salary or 30% of the total remuneration paid to Executive by his new
employer, for each case of infringement or breach. The payment of this penalty
does not in any case release the Executive from his obligations with regard to
this Agreement.
4.04 SPECIFIC PERFORMANCE. Executive agrees that his breach of the
provisions of Sections 4.01 or 4.02 above will cause irreparable damage to the
Company and the Related Corporations and that the recovery by the Company and
the Related Corporations of money damages will not constitute an adequate remedy
for such breach. The
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<PAGE>
Executive agrees that the Company may request the elimination of a situation
contrary to this Agreement.
4.05 REPRESENTATIONS. Executive hereby represents and warrants to the
Company that (i) except as otherwise previously disclosed in writing to
Providence, the execution, delivery and performance of this Agreement does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (ii) except as otherwise previously disclosed
in writing to Providence, Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
Person which, in the good faith judgment of Executive, will materially interfere
with the performance of the Executive duties and obligations hereunder or
otherwise have a material adverse affect on the Company and (iii) this Agreement
is the valid and binding obligation of Executive, enforceable in accordance with
its terms.
ARTICLE V
MISCELLANEOUS
5.01 ASSIGNMENT. This Agreement is personal to Executive and shall not be
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Executive hereunder shall be
binding upon, and inure to the benefit of, Executive's estate. This Agreement
shall be binding upon, and inure to the benefit of, the Company's successors and
assigns.
5.02 INSURANCE. The Company or any of the Related Corporations, at its
discretion, may apply for and procure in its own name and its own benefit life
and/or disability insurance on Executive in any amount or amounts considered
available. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and delivery any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance. Executive represents that he has no reason to believe that his
life is not insurable at rates now prevailing for healthy men of his age.
5.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
5.04 GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of Switzerland.
Except with respect to the enforcement of the Company's injunctive and other
equitable remedies pursuant to Section 5.04 hereof, any dispute arising under
this Agreement shall be submitted to arbitration, the determination of which
shall be final and binding on the parties hereto and which arbitration shall be
held in accordance with Article 343,
- 7 -
<PAGE>
paragraph 1 of the Code and the rules and procedures of the International
Chamber of Commerce applicable to commercial transactions and conducted in
English. The cost of such arbitration, unless otherwise determined thereby,
shall be borne 50% by Executive and 50% by the Company. Executive, to the extent
that he may lawfully do so, hereby consents to the jurisdiction of the courts of
Switzerland as well as to the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of enforcement of any such arbitration award or any of
his obligations under Article V hereof, and hereby expressly waives any and all
objections which he may have as to venue in any such courts. It is acknowledged
and agreed that all of the other agreements referred to herein, including the
Option Plan, Option Agreement, Securityholders Agreement and Purchase Agreement
are governed by and shall be construed under the laws of Delaware (USA).
5.05 COUNTERPARTS; HEADINGS. 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. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
5.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties pertaining to the subject matter contained in it and supersedes and is
in lieu of any and all other employment arrangements between Executive and the
Company.
5.07 NOTICES. All notices given hereunder shall be in writing and shall be
delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Carrier One AG
c/o Providence Equity Partners, Inc.
Suite 900, Fleet Center
Providence, Rhode Island 02903
Attention: Glenn M. Creamer
- 8 -
<PAGE>
With a copy to:
Prager Dreifuss
CH-8008 Zurich,
Zollikerstrasse 183
Attention: Urs Brunner
and
Edwards & Angell
2800 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
If to Executive:
Joachim Bauer
Erlenstrasse 74
CH 8832 Wollerau
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
5.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
- 9 -
<PAGE>
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the day and year first above
written.
CARRIER ONE AG
By: /s/ Stig Johansson
---------------------------------
Name: Stig Johansson
Title:
EXECUTIVE
/s/ Joachim Bauer
------------------------------------
Joachim Bauer
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
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<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated March 4, 1998, by and between Carrier One AG,
a company duly incorporated under the laws of Switzerland, having its registered
offices at Regus Building, Stockerhof, Dreikonigstrasse 31A, 8002 Zurich,
Switzerland (the "Company") and Kees Van Ophem ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to assure itself of the Executive's services,
and the Executive desires to be employed by the Company;
WHEREAS, the Company's parent, Carrier One, LLC, a Delaware (USA) limited
liability company ("Carrier One"), the Executive, Stig Johansson ("Johansson"),
Joachim Bauer ("Bauer"), Eugene A. Rizzo ("Rizzo"), Neil Craven ("Craven"),
Providence Equity Partners L.P. ("PEP") and Providence Equity Partners II, L.P.
("PEP II" and collectively with PEP, "Providence") have entered into that
certain Securities Purchase Agreement (as amended from time to time, the
"Purchase Agreement") dated as of March 4, 1998 whereby they shall acquire
certain securities of Carrier One and Executive, Johansson, Bauer, Rizzo,
Craven, Providence and Carrier One have entered into the Securityholders'
Agreement (as defined in the Purchase Agreement);
WHEREAS, Providence wishes to protect the value of their investment in
Carrier One and the Company from the risk of competition posed by the Executive
and it is a condition to the Providence's performance under the Purchase
Agreement that Executive enter into this Agreement in order to assure the
Company that the Executive will continue to provide his expertise in the conduct
of the Company's business.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 BOARD OF DIRECTORS. "Board of Directors" shall mean the Board of
Directors of the Company.
1.02 CODE. "Code" means the Swiss Code of Obligations.
1.03 CONFIDENTIAL INFORMATION. "Confidential Information" means all
information, in any form or medium, that relates to the business, products,
services,
<PAGE>
research or development of the Company or any of the Related Corporations, and
its and their suppliers or customers, including: (a) compilations of data
(whether in whole or in part) and all analyses, processes, methods, techniques,
systems, formulae, research, records, reports, manuals, documentation and models
relating thereto; (b) computer software, documentation and databases (whether
existing or in various stages of research and development); (c) identities of
and information about the Company's and the Related Corporations' suppliers and
customers and their confidential information, suppliers and customers; (d)
inventions, designs, developments, devices, methods and processes (whether or
not reduced to practice); (e) internal business information, including, without
limitation, information relating to strategic and staffing plans and practices
(including information with respect to potential acquisition targets),
marketing, promotional and sales plans, practices or programs, training
practices and programs, cost and pricing structure, and accounting and business
methods; (f) all copyrightable works; and (g) all similar or related
information. Notwithstanding the immediately foregoing sentence, the term
"Confidential Information" shall not include information which (i) becomes
generally available to the public other than as a result of disclosure by
Executive, or (ii) becomes available to Executive on a non-confidential basis
from a source other than the Company or the Related Corporations, or (iii) which
is generally known in the telecommunications industry and pertains to activities
or business not specific to the Company or any of the Related Corporations.
Information shall not be deemed to be excluded from the meaning of "Confidential
Information" merely because individual portions or components of such
information are publicly known or available.
1.04 EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement or such later date that Executive has obtained any valid work permits
or registration documents as required by the relevant Swiss authorities.
1.05 NON-COMPETE PERIOD. "Non-Compete Period" shall mean the period
commencing on the date hereof and continuing until the end of the eighteenth
month following the date the Executive's employment is terminated or such
shorter period as may be set forth in this Agreement.
1.06. PERSON. "Person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, trust or other entity.
1.07 RELATED CORPORATIONS. "Related Corporations" shall mean (a) Carrier
One; (b) any corporation of which Carrier One, directly or indirectly, owns more
than fifty percent (50%) of the outstanding equity securities having general
voting power under ordinary circumstances to elect at least a majority of the
directors of such corporation; (c) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which Carrier
One, directly or indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint venture or other
unincorporated organization or entity; and (d) any corporation, partnership,
association, joint venture or other unincorporated organization or entity in
- 2 -
<PAGE>
which Carrier One, directly or indirectly, has more than a fifty percent (50%)
equity interest.
ARTICLE II
CAPACITY AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Executive as the
Vice President Purchase and General Counsel of the Company, and Executive hereby
accepts such employment, for the Contract Term (as defined in Section 2.03) and
upon the other terms and conditions set forth in this Agreement. During the
Contract Term, Executive shall devote his professional attention and energies on
a full-time basis to the business and affairs of the Company and the Related
Corporations and use his best efforts to promote its interests. The Executive
may not undertake any public office or any kind of activity in connection with
associations without the prior written approval of the Company, if this activity
could influence the contractual activities.
2.02 DUTIES. The Executive shall have such duties and responsibilities as
shall be assigned from time to time by the Board of Directors and as are
consistent with the duties of a Vice President Purchase and General Counsel of
an international long distance telecommunications company.
2.03 CONTRACT TERM. The present Employment Agreement is concluded for an
unspecified period and may be terminated by either party provided that six (6)
months notice of termination is given in writing to the end of a month, but not
before August 31, 1999 (notice to be given before February 28, 1999) (the period
until the Executive's employment with the Company terminates being referred to
as the "Contract Term").
ARTICLE III
COMPENSATION; BENEFITS
3.01 BASE SALARY. The Company shall pay Executive a base salary at the
rate of 260,000 SFr per annum, payable in arrears on a monthly basis, for the
services rendered by Executive to the Company during the Contract Term (the
"Base Salary"). Overtime is not remunerated and time off is not given in lieu;
compensation for any overtime worked is included in the Base Salary. The Base
Salary and all other remuneration paid to the Executive shall be subject to
normal deductions for personal taxation and legally required contributions. The
Board of Directors shall review the Base Salary on a yearly basis for purposes
of determining any increase thereof, whether due to cost of living adjustments
or merit, but any such determination shall be made in the sole discretion of the
Board of Directors without regard to past practice.
3.02 BONUS PLAN. In addition to the Base Salary, during each year of the
Contract Term the Executive will be eligible to receive a bonus (the "Annual
Bonus") in
- 3 -
<PAGE>
an amount up to 25% of Base Salary subject to meeting the criteria established
from time to time by the Board of Directors. The Board of Directors, in its
discretion, shall determine the amount of the Annual Bonus. The Board of
Directors and the Company's senior officers will work in good faith promptly
after the Effective Date to develop the criteria for earning the Annual Bonus in
1998 and will meet at least annually to develop the criteria for future years.
3.03 AUTOMOBILE. During the Contract Term the Company will ensure that
there will be made available to the Executive a motor vehicle of a type suitable
to his position for use by him in the performance of his duties hereunder and
for his private purposes and that the Executive's tax, insurance, maintenance
and running costs thereon and all fuel expenses reasonably incurred by the
Executive will be promptly reimbursed to the Executive.
3.04 TELEPHONE; FACSIMILE EQUIPMENT. During the Contract Term the Company
will provide the Executive a cellular telephone and a facsimile machine (or
equipment serving a comparable function), and will pay, or reimburse Executive
for, all telephone charges and associated costs thereof related to his duties
hereunder.
3.05 PENSION. The Company will establish a pension plan for its executive
officers in compliance with Swiss law (the "Pension Plan"). The total
contribution to the Pension Plan (Company plus Executive) in each year will be
15% of Executive's Base Salary for such year, of which each of the Company and
Executive will contribute 50% (i.e. 7.5% of Base Salary each).
3.06 HEALTH INSURANCE. The Executive is obligated to have a private health
insurance which provides full cover in Switzerland and while Executive is on
business trips outside Switzerland. The Company will contribute 50% of the
related private health insurance for each of the family members, not to exceed
SFr 200 per month per family member.
3.07 BUSINESS EXPENSES. During the Contract Term, the Company will pay the
Executive SFr 1500 per month as compensation for out of pocket expenses.
3.08 OPTIONS. On the Effective Date, the Company's parent, Carrier One,
LLC, will grant Executive options pursuant to and in accordance with the terms
of the Carrier One, LLC 1998 Unit Option Plan and the Option Agreement attached
hereto as EXHIBIT A.
3.09 HOLIDAYS. The Executive shall be entitled to a vacation of 25 working
days per annum. In the calendar year in which Executive reaches the age of 60
and thereafter he is entitled to a vacation of 30 working days.
3.10 TUITION REIMBURSEMENTS. During the Contract Term the Company will
reimburse Executive, upon Executive furnishing the Company reasonable
documentary
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<PAGE>
substantiation of the cost and his payment thereof, the tuition costs at a
private international school for his two children.
ARTICLE IV
CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION
4.01 CONFIDENTIALITY. Executive acknowledges that in the course of
providing services to the Company and the Related Corporations, Executive will
become familiar with the trade secrets, Confidential Information and other
intellectual property concerning the Company and the Related Corporations.
Executive shall not at any time or in any manner, whether directly or
indirectly, use for his own benefit or the benefit of any other Person, nor
disclose, divulge, render or offer, any Confidential Information, except on
behalf of the Company or the Related Corporations in the course of the proper
performance of his duties hereunder. Executive acknowledges and agrees that any
and all such Confidential Information will be received and held by him in a
confidential capacity.
4.02 NONCOMPETITION AND NONSOLICITATION COVENANTS.
Executive acknowledges that (i) the services of the Executive are of
special, unique and extraordinary value to the Company and the Related
Corporations and (ii) the Company's and the Related Corporations' ability to
accomplish their purposes and to successfully compete in the marketplace depend
substantially on the skills and expertise of the Executive. Executive
acknowledges and agrees that the Company and the Related Corporations would be
irreparably damaged if Executive were to not devote substantially all of his
business time and efforts to the business and affairs of the Company and the
Related Corporations during the Contract Term or were to provide directly or
indirectly services to any Person competing directly or indirectly with the
Company or any of the Related Corporations or were to engage in a similar a
business other than as specifically permitted by this Section 4.02. Accordingly,
in further consideration of the compensation to be paid by the Company to the
Executive and to induce Providence to enter into the Purchase Agreement,
Executive agrees, that from and after the date hereof and during the applicable
Non-Compete Period, Executive will not, singly, jointly, or as an employee,
agent or partner of any partnership or as an officer, agent, employee, director,
stockholder (except of not more than one percent (1%) of the outstanding stock
of any company listed on a national securities exchange or actively traded in
the over the counter market) or investor in any other Person, or as a
consultant, advisor, or independent contractor to any such Person, or in any
other capacity, directly, indirectly or beneficially, anywhere in the world:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or permit
the use of his name by, or provide financial or other assistance to, or be
connected in any manner
- 5 -
<PAGE>
with, any Person, which is in the international long distance
telecommunications business or other business which is in direct or
indirect competition with any business conducted by the Company or any of
the Related Corporations on the date hereof or at any time during the
applicable Non-Compete Period;
(ii) induce or attempt to induce any individual who, on the date
hereof or at any time during the applicable Non-Compete Period, is an
employee of the Company or any of the Related Corporations, to terminate
his or her employment with such company or employ any such person in any
manner or capacity; or
(iii) induce or attempt to induce any Person, which is a supplier,
distributor, or customer of the Company or any of the Related Corporations
or which otherwise is a contracting party with the Company or any of the
Related Corporations, as of the date hereof or at any time during the
applicable Non-Compete Period, to terminate or modify any written or oral
agreement or understanding with the Company or any of the Related
Corporations.
Executive acknowledges and agrees that the limitations set forth in this Section
4.02 are reasonable with respect to scope, duration and area and are properly
required for the protection of the legitimate business interests of the Company
and the Related Corporations. The Company and Executive agree that the covenants
set forth in this Section 4.02 shall be enforced to the fullest extent permitted
by law. Accordingly, if in any arbitration, judicial or similar proceeding a
court, an arbitration or any similar judicial or administrative body shall
determine that such covenant is unenforceable because it covers too extensive a
geographical area or survives too long a period of time, or for any other
reason, then the parties intend that such covenant shall be deemed to cover only
such maximum geographical area and maximum period of time and shall otherwise be
deemed to be limited in such manner as will permit enforceability by such
arbitrator, court or similar body.
4.03 INFRINGEMENT OF EXECUTIVE'S OBLIGATION. If the Executive violates or
infringes his obligations under Section 4.01 and/or 4.02, the Executive shall
pay the Company a contractual penalty in the amount of the greater of 30% of
Base Salary or 30% of the total remuneration paid to Executive by his new
employer, for each case of infringement or breach. The payment of this penalty
does not in any case release the Executive from his obligations with regard to
this Agreement.
4.04 SPECIFIC PERFORMANCE. Executive agrees that his breach of the
provisions of Sections 4.01 or 4.02 above will cause irreparable damage to the
Company and the
- 6 -
<PAGE>
Related Corporations and that the recovery by the Company and the Related
Corporations of money damages will not constitute an adequate remedy for such
breach. The Executive agrees that the Company may request the elimination of a
situation contrary to this Agreement.
4.05 REPRESENTATIONS. Executive hereby represents and warrants to the
Company that (i) except as otherwise previously disclosed in writing to
Providence, the execution, delivery and performance of this Agreement does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (ii) except as otherwise previously disclosed
in writing to Providence, Executive is not a party to or bound by any employment
agreement, noncompetition agreement or confidentiality agreement with any other
Person which, in the good faith judgment of Executive, will materially interfere
with the performance of the Executive duties and obligations hereunder or
otherwise have a material adverse affect on the Company and (iii) this Agreement
is the valid and binding obligation of Executive, enforceable in accordance with
its terms.
ARTICLE V
MISCELLANEOUS
5.01 ASSIGNMENT. This Agreement is personal to Executive and shall not be
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Executive hereunder shall be
binding upon, and inure to the benefit of, Executive's estate. This Agreement
shall be binding upon, and inure to the benefit of, the Company's successors and
assigns.
5.02 INSURANCE. The Company or any of the Related Corporations, at its
discretion, may apply for and procure in its own name and its own benefit life
and/or disability insurance on Executive in any amount or amounts considered
available. Executive agrees to cooperate in any medical or other examination,
supply any information, and to execute and delivery any applications or other
instruments in writing as may be reasonably necessary to obtain and continue
such insurance. Executive represents that he has no reason to believe that his
life is not insurable at rates now prevailing for healthy men of his age.
5.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
5.04 GOVERNING LAW; ARBITRATION; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed in accordance with the laws of Switzerland.
Except with respect to the enforcement of the Company's injunctive and other
equitable remedies pursuant to Section 5.04 hereof, any dispute arising under
this Agreement shall be
- 7 -
<PAGE>
submitted to arbitration, the determination of which shall be final and binding
on the parties hereto and which arbitration shall be held in accordance with
Article 343, paragraph 1 of the Code and the rules and procedures of the
International Chamber of Commerce applicable to commercial transactions and
conducted in English. The cost of such arbitration, unless otherwise determined
thereby, shall be borne 50% by Executive and 50% by the Company. Executive, to
the extent that he may lawfully do so, hereby consents to the jurisdiction of
the courts of Switzerland as well as to the jurisdiction of all courts from
which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of enforcement of any such arbitration
award or any of his obligations under Article V hereof, and hereby expressly
waives any and all objections which he may have as to venue in any such courts.
It is acknowledged and agreed that all of the other agreements referred to
herein, including the Option Plan, Option Agreement, Securityholders Agreement
and Purchase Agreement are governed by and shall be construed under the laws of
Delaware (USA).
5.05 COUNTERPARTS; HEADINGS. 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. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
5.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties pertaining to the subject matter contained in it and supersedes and is
in lieu of any and all other employment arrangements between Executive and the
Company.
5.07 NOTICES. All notices given hereunder shall be in writing and shall be
delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Carrier One AG
c/o Providence Equity Partners, Inc.
Suite 900, Fleet Center
Providence, Rhode Island 02903
Attention: Glenn M. Creamer
- 8 -
<PAGE>
With a copy to:
Prager Dreifuss
CH-8008 Zurich,
Zollikerstrasse 183
Attention: Urs Brunner
and
Edwards & Angell
2800 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
If to Executive:
Kees Van Ophem
Giessenstrasse 12A
CH - 8608 Bubikon
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
5.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
- 9 -
<PAGE>
IN WITNESS WHEREOF, Executive has executed this Agreement and the Company
has caused this Agreement to be executed as of the day and year first above
written.
CARRIER ONE AG
By: /s/ Stig Johansson
-------------------------------
Name: Stig Johansson
Title:
EXECUTIVE
/s/ Kees Van Ophem
----------------------------------
Kees Van Ophem
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
- 10 -
<PAGE>
Exhibit 21.1
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation or
Subsidiary Organization
- ---------- -----------------
<S> <C>
Carrier1 International GmbH Switzerland
Telecommunikation Carrier1 GmbH Austria
Carrier1 Belgium SPRL Belgium
Carrier1 Holding Sarl France
Carrier1 France Sarl France
Carrier1 Holding GmbH Germany
Carrier1 GmbH & Co. KG Germany
Carrier1 Beteiligungs GmbH Germany
Carrier1 Fiber Network Beteiligungs GmbH Germany
Carrier1 Fiber GmbH & Co. oHG Germany
Carrier1 UK Ltd. Great Britain
Carrier1 International Management S.A. Luxembourg
Carrier1 B.V. The Netherlands
Carrier 1, Inc. Delaware, the
United States of
America
</TABLE>
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Carrier1 International
S.A. on Form S-4 of our report dated March 17, 1999, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Consolidated
Financial Data," "Selected Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE EXPERTA AG
/s/ DAVID WILSON /s/ JERRY M. MAYER
- ----------------------------- ------------------------------
David Wilson Jerry M. Mayer
Erlenbach, Switzerland
March 26, 1999
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Joachim W. Bauer, Kees van Ophem,
Neil E. Craven, Eugene A. Rizzo and Terje Nordahl and each of them (with full
power to act alone) the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for and in the
name and on behalf of the undersigned, to execute any and all instruments and
documents, and to do any and all other acts and things, that any such
attorney-in-fact and agent may deem necessary or advisable, in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the registration
under the Securities Act of $160,000,000 aggregate principal amount of 13
1/4% Senior Dollar Notes Due 2009 of Carrier1 International S.A. and
85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes Due 2009
of Carrier1 International S.A. (collectively, the "Notes"), pursuant to a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Commission relating to an offer to exchange such Notes for Carrier1
International S.A.'s outstanding $160,000,000 aggregate principal amount of
13 1/4% Senior Dollar Notes Due 2009 and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009; including specifically, but
without limiting the generality of the foregoing, the power and authority to
execute, for and in the name and on behalf of the undersigned in any and all
capacities, the Registration Statement, and any and all supplements and
amendments (including, without limitation, post-effective amendments) to such
Registration Statement, and any and all other instruments or documents filed
as a part of, or in connection with, such Registration Statement and
supplements and amendments thereto; and the undersigned hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, shall do
or cause to be done by virtue hereof.
Signed this 26th day of March, 1999.
/s/ Glenn M. Creamer
-------------------------------
Name: Glenn M. Creamer
<PAGE>
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Joachim W. Bauer, Kees van Ophem,
Neil E. Craven, Eugene A. Rizzo and Terje Nordahl and each of them (with full
power to act alone) the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for and in the
name and on behalf of the undersigned, to execute any and all instruments and
documents, and to do any and all other acts and things, that any such
attorney-in-fact and agent may deem necessary or advisable, in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the registration
under the Securities Act of $160,000,000 aggregate principal amount of 13
1/4% Senior Dollar Notes Due 2009 of Carrier1 International S.A. and
85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes Due 2009
of Carrier1 International S.A. (collectively, the "Notes"), pursuant to a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Commission relating to an offer to exchange such Notes for Carrier1
International S.A.'s outstanding $160,000,000 aggregate principal amount of
13 1/4% Senior Dollar Notes Due 2009 and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009; including specifically, but
without limiting the generality of the foregoing, the power and authority to
execute, for and in the name and on behalf of the undersigned in any and all
capacities, the Registration Statement, and any and all supplements and
amendments (including, without limitation, post-effective amendments) to such
Registration Statement, and any and all other instruments or documents filed
as a part of, or in connection with, such Registration Statement and
supplements and amendments thereto; and the undersigned hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, shall do
or cause to be done by virtue hereof.
Signed this 26th day of March, 1999.
/s/ Jonathan E. Dick
-------------------------------
Name: Jonathan E. Dick
<PAGE>
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Joachim W. Bauer, Kees van Ophem, Neil E. Craven,
Eugene A. Rizzo and Terje Nordahl and each of them (with full power to act
alone) the undersigned's true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for and in the name and on
behalf of the undersigned, to execute any and all instruments and documents,
and to do any and all other acts and things, that any such attorney-in-fact
and agent may deem necessary or advisable, in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and any rules, regulations
and requirements of the Securities and Exchange Commission (the "Commission")
in respect thereof, in connection with the registration under the Securities
Act of $160,000,000 aggregate principal amount of 13 1/4% Senior Dollar Notes
Due 2009 of Carrier1 International S.A. and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009 of Carrier1 International S.A.
(collectively, the "Notes"), pursuant to a registration statement on Form S-4
(the "Registration Statement") to be filed with the Commission relating to an
offer to exchange such Notes for Carrier1 International S.A.'s outstanding
$160,000,000 aggregate principal amount of 13 1/4% Senior Dollar Notes Due
2009 and 85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes
Due 2009; including specifically, but without limiting the generality of the
foregoing, the power and authority to execute, for and in the name and on
behalf of the undersigned in any and all capacities, the Registration
Statement, and any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement, and
any and all other instruments or documents filed as a part of, or in
connection with, such Registration Statement and supplements and amendments
thereto; and the undersigned hereby ratifies and confirms all that such
attorneys-in-fact and agents, or any of them, shall do or cause to be done by
virtue hereof.
Signed this 26th day of March, 1999.
/s/ Stig Johansson
-------------------------------
Name: Stig Johansson
<PAGE>
Exhibit 24.4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Joachim W. Bauer, Kees van Ophem,
Neil E. Craven, Eugene A. Rizzo and Terje Nordahl and each of them (with full
power to act alone) the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for and in the
name and on behalf of the undersigned, to execute any and all instruments and
documents, and to do any and all other acts and things, that any such
attorney-in-fact and agent may deem necessary or advisable, in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the registration
under the Securities Act of $160,000,000 aggregate principal amount of 13
1/4% Senior Dollar Notes Due 2009 of Carrier1 International S.A. and
85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes Due 2009
of Carrier1 International S.A. (collectively, the "Notes"), pursuant to a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Commission relating to an offer to exchange such Notes for Carrier1
International S.A.'s outstanding $160,000,000 aggregate principal amount of
13 1/4% Senior Dollar Notes Due 2009 and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009; including specifically, but
without limiting the generality of the foregoing, the power and authority to
execute, for and in the name and on behalf of the undersigned in any and all
capacities, the Registration Statement, and any and all supplements and
amendments (including, without limitation, post-effective amendments) to such
Registration Statement, and any and all other instruments or documents filed
as a part of, or in connection with, such Registration Statement and
supplements and amendments thereto; and the undersigned hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, shall do
or cause to be done by virtue hereof.
Signed this 26th day of March, 1999.
/s/ Mark A. Pelson
-------------------------------
Name: Mark A. Pelson
<PAGE>
Exhibit 24.5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Joachim W. Bauer, Kees van Ophem,
Neil E. Craven, Eugene A. Rizzo and Terje Nordahl and each of them (with full
power to act alone) the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for and in the
name and on behalf of the undersigned, to execute any and all instruments and
documents, and to do any and all other acts and things, that any such
attorney-in-fact and agent may deem necessary or advisable, in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the registration
under the Securities Act of $160,000,000 aggregate principal amount of 13
1/4% Senior Dollar Notes Due 2009 of Carrier1 International S.A. and
85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes Due 2009
of Carrier1 International S.A. (collectively, the "Notes"), pursuant to a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Commission relating to an offer to exchange such Notes for Carrier1
International S.A.'s outstanding $160,000,000 aggregate principal amount of
13 1/4% Senior Dollar Notes Due 2009 and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009; including specifically, but
without limiting the generality of the foregoing, the power and authority to
execute, for and in the name and on behalf of the undersigned in any and all
capacities, the Registration Statement, and any and all supplements and
amendments (including, without limitation, post-effective amendments) to such
Registration Statement, and any and all other instruments or documents filed
as a part of, or in connection with, such Registration Statement and
supplements and amendments thereto; and the undersigned hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, shall do
or cause to be done by virtue hereof.
Signed this 26th day of March, 1999.
/s/ Victor A. Pelson
-------------------------------
Name: Victor A. Pelson
<PAGE>
Exhibit 24.6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Joachim W. Bauer, Kees van Ophem,
Neil E. Craven, Eugene A. Rizzo and Terje Nordahl and each of them (with full
power to act alone) the undersigned's true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for and in the
name and on behalf of the undersigned, to execute any and all instruments and
documents, and to do any and all other acts and things, that any such
attorney-in-fact and agent may deem necessary or advisable, in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and any
rules, regulations and requirements of the Securities and Exchange Commission
(the "Commission") in respect thereof, in connection with the registration
under the Securities Act of $160,000,000 aggregate principal amount of 13
1/4% Senior Dollar Notes Due 2009 of Carrier1 International S.A. and
85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes Due 2009
of Carrier1 International S.A. (collectively, the "Notes"), pursuant to a
registration statement on Form S-4 (the "Registration Statement") to be filed
with the Commission relating to an offer to exchange such Notes for Carrier1
International S.A.'s outstanding $160,000,000 aggregate principal amount of
13 1/4% Senior Dollar Notes Due 2009 and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009; including specifically, but
without limiting the generality of the foregoing, the power and authority to
execute, for and in the name and on behalf of the undersigned in any and all
capacities, the Registration Statement, and any and all supplements and
amendments (including, without limitation, post-effective amendments) to such
Registration Statement, and any and all other instruments or documents filed
as a part of, or in connection with, such Registration Statement and
supplements and amendments thereto; and the undersigned hereby ratifies and
confirms all that such attorneys-in-fact and agents, or any of them, shall do
or cause to be done by virtue hereof.
Signed this 26th day of March, 1999.
/s/ Thomas J. Wynne
-------------------------------
Name: Thomas J. Wynne
<PAGE>
Exhibit 24.7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned hereby
constitutes and appoints Stig Johansson, Kees van Ophem, Neil E. Craven,
Eugene A. Rizzo and Terje Nordahl and each of them (with full power to act
alone) the undersigned's true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for and in the name and on
behalf of the undersigned, to execute any and all instruments and documents,
and to do any and all other acts and things, that any such attorney-in-fact
and agent may deem necessary or advisable, in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and any rules, regulations
and requirements of the Securities and Exchange Commission (the "Commission")
in respect thereof, in connection with the registration under the Securities
Act of $160,000,000 aggregate principal amount of 13 1/4% Senior Dollar Notes
Due 2009 of Carrier1 International S.A. and 85,000,000 aggregate principal
amount of 13 1/4% Senior Euro Notes Due 2009 of Carrier1 International S.A.
(collectively, the "Notes"), pursuant to a registration statement on Form S-4
(the "Registration Statement") to be filed with the Commission relating to an
offer to exchange such Notes for Carrier1 International S.A.'s outstanding
$160,000,000 aggregate principal amount of 13 1/4% Senior Dollar Notes Due
2009 and 85,000,000 aggregate principal amount of 13 1/4% Senior Euro Notes
Due 2009; including specifically, but without limiting the generality of the
foregoing, the power and authority to execute, for and in the name and on
behalf of the undersigned in any and all capacities, the Registration
Statement, and any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration Statement, and
any and all other instruments or documents filed as a part of, or in
connection with, such Registration Statement and supplements and amendments
thereto; and the undersigned hereby ratifies and confirms all that such
attorneys-in-fact and agents, or any of them, shall do or cause to be done by
virtue hereof.
Signed this 23rd day of March, 1999.
/s/ Joachim Bauer
-------------------------------
Name: Joachim Bauer
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILTY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE 10017
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
------------------------
CARRIER1 INTERNATIONAL S.A.
(Exact name of obligor as specified in its charter)
LUXEMBOURG NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
L-8009
STRASSEN
ROUTE D'ARLON 3
(411-297-2600)
(Address and telephone number of principal executive offices)
------------------------
DEBT SECURITIES
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2,
33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996
(see Exhibit 1 to Form T-1 filed in connection with Registration Statement
No. 333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement
No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 19th
day of March, 1999.
THE CHASE MANHATTAN BANK
By William Potes
-----------------------
/s/ William Potes
/s/ Assistant Treasurer
-3-
<PAGE>
EXHIBIT 7 TO FORM T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Millions
--------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .......................... $ 11,951
Interest-bearing balances ................................................... 4,551
Securities:
Held to maturity securities ................................................... 1,740
Available for sale securities ................................................. 45,537
Federal funds sold and securities purchased under agreements to resell ........ 29,730
Loans and lease financing receivables:
Loans and leases, net of unearned income ......................... $ 127,379
Less: Allowance for loan and lease losses ........................ 2,719
Less: Allocated transfer risk reserve ............................ 0
---------
Loans and leases, net of unearned income, allowance, and reserve ........... 124,660
Trading Assets ............................................................... 51,549
Premises and fixed assets (including capitalized leases) ..................... 3,008
Other real estate owned ...................................................... 272
Investments in unconsolidated subsidiaries and associated companies .......... 300
Customers' liability to this bank on acceptances outstanding ................. 1,329
Intangible assets ............................................................ 1,429
Other assets ................................................................. 13,563
--------------
TOTAL ASSETS ................................................................. $ 292,620
--------------
--------------
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices ........................................................ $ 98,760
Noninterest-bearing .............................................. $ 39,071
Interest-bearing ................................................. 59,689
---------
In foreign offices, Edge and Agreement, subsidiaries and IBF's ............. 75,403
Noninterest-bearing .............................................. $ 3,877
Interest-bearing ................................................. 71,526
Federal funds purchased and securities sold under agreements to repurchase ... $ 34,471
Demand notes issued to the U.S. Treasury ..................................... 1,000
Trading liabilities .......................................................... 41,599
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
With a remaining maturity of one year or less .............................. 3,781
With a remaining maturity of more than one year through three years ........ 213
With a remaining maturity of more than three years ......................... 104
Bank's liability on acceptances executed and outstanding ..................... 1,329
Subordinated notes and debentures ............................................ 5,408
Other liabilities ............................................................ 12,011
-----------
TOTAL LIABILITIES ............................................................ 274,099
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................ 0
Common stock ................................................................. 1,211
Surplus (exclude all surplus related to preferred stock) ..................... 10,441
Undivided profits and capital reserves ....................................... 6,287
Net unrealized holding gains (losses) on available-for-sale securities ....... 566
Cumulative foreign currency translation adjustments .......................... 18
TOTAL EQUITY CAPITAL ......................................................... 18,521
-----------
TOTAL LIABILITIES AND EQUITY CAPITAL ......................................... $ 292,620
-----------
-----------
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
